Gen Kanai's blog quotes from Steve Jobs at the D: All Things Digital Conference. Basically, what Jobs said was that Apple is a software company rather than a hardware company. Jobs said, Macs are OS X contained in a beautiful box; iPod is iTunes contained in a beautiful box. Likewise, iPhone will be superb smartphone software contained in, again, a beautiful box. The full quote is here.

This led me to two thoughts.

1. Where is Sony?

Wasn't Sony supposed to be the company who understands the value of software and content? We've all read books about how Sony's bet on content (Sony Computer Entertainment games, Sony Pictures etc) helped the company grow when their hardware business struggled. I know I shouldn't simply put "content" in the same category as "software", but I'm just saying Sony seemed to thoroughly understand it's not only about pushing out the boxes.  

Perhaps Sony has to put itself together before anything else. The Japanese giant doesn't hold a top spot in any key market sector. Playstation 3 got its butt kicked big time by Nintendo Wii. Sony's fame in the computer market is not its Vaio computers but the exploding batteries. Sony Ericsson is doing well but still #4 in mobile phone market. Walkman is nowhere close to iPod. Sony is not even #1 in what it had long called its own "turf" - the TV market. The market leader there is Samsung.

Sony now seems interested in buying some web companies; Sony acquired Grouper and is in talks to buy Club Penguin. But I'm not sure if these acquisitions are coming from a clear web strategy. Of course Sony is still huge; But from the likes of GM and IBM, we all know size doesn't matter, strategy does.

Sony, can you wake up and become cool again? Please...

2. Do all hardware companies have to do software/content too?

As someone whose prior job was to develop Samsung's strategies to integrate content/software with its mobile phone manufacturing business, I can bring a lot of stories to this topic.

On one side, it's true that no companies are in a better position to provide software/content that goes along with the hardware, than the manufacturer itself. Why? Because they have control over the boxes - or, perhaps more importantly, the control over customer's box-opening experience.

Manufacturers can bundle up a service with the device, and then put leaflets and coupons for their service in the box. If the device gets sold through channels (most notably, wireless carriers in the case of mobile phones), there can be some limitations to the manufacturers' freedom of putting the in-box materials, but in general device manufacturers can lead their customers to their service relatively easily if they are smart enough.

Being able to control the box-opening experience is actually quite a significant advantage. At Samsung Mobile we've discovered (depending on the country) up to 80% of mobile content purchase takes place right after the phone purchase. For the buyers of a new gadget, the "box-opening" is almost like a sacred experience, a magic moment - that's when they are most susceptible to trying any value-add service that can go with the device.

When I put the "try and buy" games in Samsung's phones, the conversion rate was higher than 15%. This means more than 15% of people who bought Samsung phones also bought the license for the trial version games pre-installed on the phone. How many phones does Samsung sell? In the order of 150-180 million units per year.

For the same reason, Nokia can possibly become the #1 software seller in the world.

It looks like the whole world is heading to the direction of selling software and service. IBM doesn't sell computers anymore, it calls itself a service company. Even Southwest Airlines claims they are in a service business.

So can we just conclude the software/service rules and all the hardware companies in the world have to follow the suit of Apple?

Not so fast. Surely Apple's focusing on software has been what made the company great. Also, as I said, hardware companies might be in a good position to provide bundled service. But just because you can do something doesn't mean you can do it better than anyone else. And for those things you can't do better than anyone else, you better outsource or do partnership.

This means, if your company manufactures devices extremely well but cannot possibly develop software as effectively and gorgeously as Apple does, then it might actually be a good strategy to stick with your core strength and go the outsourcing/partnership route for the software business.

For a moment, let's look at the Web 2.0 landscape. In the US, web companies tend to try to do one thing very well, and then on other frontiers work with other companies through mashups and APIs. But in Korea, the top portal Naver tries to do everything well, leveraging their market dominance, thereby leaving very little room for startups to bring their best stuff to the market.

I think that the industry as a whole benefits from an environment where each player brings what it can do best, and through partnerships and mashups those "best-practices" are presented to the customers in a nice package.

So I guess what I'm saying is, if you will do software, do it like Apple; If you can't do it like Apple, then don't do it in the first place. Just build a damn good device, and you still get a chance.

This was just my Saturday morning thought. Please add yours in the comments. If you were the CEO of Sony or Samsung, would you invest more on software development, or would you hire 20 Harvard MBAs with thick Rolodex and tell them to go out and come back with some partnerships with cool software companies? :)
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