John Sculley, the former CEO of Apple was once (dis)credited quoted as saying that Apple cannot proliferate selling technology to consumers, the business sector was where the real profits were. They were two distinct markets. According to his Wikipedia bio:

"He is best known for his marketing skills, particularly in his introduction of 'the Pepsi Challenge' at PepsiCo, which allowed the company to gain market share from its primary rival, Coca Cola. Sculley used similar marketing strategies at Apple throughout the 1980s and 1990s to mass market Macintosh personal computers. During his tenure, Apple's sales increased from $800 million to $8 billion.[1]"

"Apple chose Sculley because they wanted him to apply his marketing skills to the personal computer market. Steve Jobs successfully sealed the deal with his legendary pitch to Sculley, asking him whether he preferred to "sell sugar water for the rest of your life or come with me and change the world?".[15]"

"However, his stint at Apple remains controversial due to his departure from founder Steve Jobs' sales structure, particularly regarding Sculley's decision to compete with IBM in selling computers to the same types of customers.[2] He was ultimately forced out of Apple in 1993 as the company's margins eroded, sales diminished and stock declined."

Sculley raised the initial price of the Macintosh to $2,495 from the originally planned $1,995, using the additional money for higher profit margins and expensive advertising campaigns.[16]

The Lisa shipped in January 1983, and had disastrous sales. While the Macintosh shipped in January 1984 and sold well, it did not put the IBM PC out of business, and some of the privileges of the elite development groups were trimmed, and projects were subject to stricter review for usefulness, marketability, feasibility, and reasonable cost. A power struggle between Jobs and Sculley had become readily apparent. Jobs became "non-linear": he kept meetings running past midnight, sent out lengthy faxes, then called new meetings at 7 am. After one such meeting in 1985, the Board of Directors lost patience and stripped Jobs of all operational responsibilities, three months after Jobs' 30th birthday.

Microsoft threatened to discontinue Microsoft Office for the Macintosh if Apple did not license parts of the Macintosh graphical user interface to use in the Windows operating system. Under pressure, Sculley agreed, a decision which later affected the Apple v. Microsoft lawsuit. Also while at Apple, Sculley coined the term personal digital assistant (PDA) referring to the Apple Newton, one of the world's first PDAs.[17]

This decline, or shall we say the failure in his strategy, was well documented in the BoomBustBlog post, A Glimpse of the BoomBustBlog Internal Discussion Concerning the Fate of Apple. Steve Jobs returned to Apple to both prove John incorrect in his (alleged) technology sales to consumer's mantra and send Apple's valuation and business through the stratosphere - primarily through consumer sales. Steve Jobs accomplished this by wrapping said technology in sexy easy to use package surrounded by some of the best marketing this country has ever seen.

Lessons Learned and Lessons Lost

• The "Sculley Era" at Apple was characterized by market division and further subdivision, with a large number of models covering what critics called a too-finely subdivided range. Each production model was marketed under different names in each of several primary markets -- home, education, and business; with time, each of these models generated upgrades and variations, which created unforeseen incompatibilities: keeping the operating system (The Macintosh System Software) compatible with all Macintosh models was a never-ending task. This strategy backfired, as it resulted in high engineering, manufacturing, and marketing costs, as well as market confusion. Buyers would look at similar machines in a store, each conceived for a particular market but usable elsewhere, and with comparable performance specifications, and become confused as to which product to buy. Too many products with similar specifications led to decreased profits, despite high gross margins

It is now easier to see why Jobs is sticking to the KISS (keep it simple, stupid) methodology of product line-up, and it is paying off in troves. There is only one current version of the most profitable item that Apple sells - the iPhone. He will most likely do the same or similar with the iPad. The result is that he is able to translate those high margins into actual profits, at least for now. My concern is actually more on the margin side. You see, there is a lesson lost in all of this as well.

What worked for Apple over the last 10 years will probably back fire over the next 10. It appears as if Steve Jobs is at risk of replicating the mistake that John Sculley made.

What makes the iPhone and iPad so appealing (outside of the cool, sexy, hip, marketing mantra generated buzz) is the fact that the hardware and the software work quite smoothly. It's relatively quick, smooth and attractive. One of the major reasons Apple is able to accomplish this is its vertically integrated business model and technology stack. It controls everything and severely limits customization. You can actually (at least without voiding the warranty) do more to customize monograms and colored cases on iPhones than you can to the OS and core applications and functions. The reason for this is three fold:

1. It keeps the system as foolproof as possible, with less things to go wrong
2. It guarantees vendor lock-in, thus guarantees minimum profit margins
3. It assures there is minimum competition for Apple apps and functions on their own products

This closed end system has worked like gangbusters for Jobs and crew thus far, but then again the original closed model worked extremely well in the '80 as well. It was when confronted with a much more open and flexible platform that you see the weaknesses of this model emerge. Ask Apple how those PCs took over the industry. Now, we have the same thing happening with Google's Android products vs Apple's iOS products. See Android Now Outselling iOS? Explaining the Game of Chess That Google Plays in the Smart Phone Space and How Google is Looking to Cut Apple's Margin and How the Sell Side of Wall Street Will Enable This Without Sheeple Investor's Having a Clue to see the strategy behind Google's attempt to commoditize the space and collapse margins across the board. The weapon du jour is open source code vs. proprietary vendor OS, but the goal and effect is still the same - dropping prices to the point of virtual ubiquitous and universal acceptance of your platform, wherein peers either cannot compete or are relegated to niche markets.

No, the iPhone is not the best phone in terms of usability or technical proficiency. While much of what goes into preference of computers/phones is quite subjective, the flexibility of the Android system is nigh impossible to deny at this point if you remain objective. iOS devices now have significant competition among a variety of smartphone manufacturers. I will show how the weaknesses and flaws of the closed model has already caused Apple to fall behind in the technical capability and usability race, but before that we need to explore the major difference in marketing and placement ideologies between Apple's iOS products and Google's Android products.

The Consumer Appliance as the iPhone vs The Ubiquitous Computer as Android

As explained earlier, one of the greatest appeals of the iPhone and the iPad is the smooth uniform user experience and seamless bridge between hardware and software. The price (and in part, purposeful strategy behind) this is the inability customize the phone. Nearly all customization is actually just an Apple tweak sold at high markup or a high margin accessory sold by Apple or its partners. Of course there is nothing wrong with making money, but Google has utilized a very new age method of doing the same (making money). Through the use of open source business models and technology Google has positioned Android to deliver both a smooth user experience, exceptional (as in best in the industry) capabilities and the ultimate in flexibility. It has managed to accomplish this at close to no cost to itself yet has literally transformed the entire mobile landscape - arguably more than Apple did with its mobile offerings.

The iPhone as the Consumer Appliance

You see, the iPhone's strength is as a consumer appliance. Buy it, turn it on, and use it. If you want to make changes, buy the changes from Apple. If you want customizations, you must buy the customizations directly from Apple if or when they become available. If you want to change the functionality your device, you can upgrade to a more expensive version when it becomes available (usually within a year), but you are stuck within the confines of whatever Apple makes available. If you don't like the core apps that Apple provides, you are basically out of luck. It's just like buying any other high end consumer appliance, you pretty much are stuck with what you bought unless you want to upgrade to a more expensive edition. This has traditionally been a very positive thing for the investment prospects of a company for it enables them to charge a lot for their products and control the rate of development. This may no longer be the case, and "open" is probably the new "closed" in terms of profitable business strategies.

Android as the Ubiquitous Computer: How Google has employed modern open source business models to do things differently, and in my opinion, better

Android has created what is literally the antithesis of the iPhone ideology. Release the operating system in a literally completely open and manipulable form, and make it available to anyone who can download a file. Ask anyone who adheres to the old school of tech business models and software distribution and you will get answers peppered with colorful words such as absurdity, suicide and foolishness. Yet, look who has taken over the mobile landscape as we look as the latest market share numbers...

The Android OS is updated nearly every other month. This rapid rate of advancement is phenomenal, and every update literally brings brand new functionality to my old device. Contrary to the mantra espoused from Apple's PR camp, it has not resulted in market fragmentation. As a matter of fact, even with this rapid rate of development, Apple's iOS Is The Most Fragmented Of The Leading Mobile Operating Systems. One major perk of leaving the OS open source is that you get the development expertise of 100,000s of developers and bright minds to improve your technology - and you get it for free! More on this in a minute, but first we have to address the adage that I hear so often...

But Apple's iPhone is currently the best smartphone on the market, isn't it?

I don't believe so. The mere fact that the Android OS is advanced on such a rapid and regular basis has not only put it ahead of iOS in a very short period of time, it has allowed it to widen said lead with every update and puts pressure on Apple to part from its tried and true model and rush product out the door. This has led to much more buggy software than Apple users are use to. I am an iPad user and the latest 4.2 update is rife with bugs, and under performs both its predecessor and all of my Android devices.

To illustrate the power of the open source software model paired with capable and competent hardware vendors (ex. Motorola, Samsung and HTC), I will detail how I put together my personal cell phone and outline its features. Any iPhone, and quite possibly even the upcoming version, will pale in comparison. This is not really about Google vs. Apple, but the near impossibility of a closed system outperforming an open system over time. BoomBustBlog, the site that you are most likely reading this on unless it was syndicated or cross posted, is run on the LAMP platform - all open source. Linux OS, Apache web server, MySQL database, and PHP scripting language. Even the content platform is open sourced (think Drupal, Joomla, etc.). Despite the fact that all of this stuff is absolutely free and open, and available to be modified at will simply by opening a text editor, it is updated more often than - and outperforms ANY commercial product, ANYWHERE near its functional categories. That includes products from them all - Microsoft, Sun, Adobe,,, everybody.

That being said, let's see what an Android-powered HTC Evo can do when a guy decides to make some changes to it. The original phone is the third from the left, with the original specs below.

A very important note from a technology user, media consumer and investment strategy perspective!

I would like to make it clear before we commence this tutorial on how to build what I consider to be the ultimate mobile computing device available today for less than an hour of your time and practically no monetary investment other than the purchase of a cell phone that although I feel this Android computing device is technically superior to that of the iPhone 4 and everything else available from competitors (other than the new Android releases such as the Nexus S, etc.), the true triumph and marvel of Google's accomplishments lie outside of chips, screens and software widgets. Google has successfully found a way to not only compete, but to outperform an entrenched competitor with a fanatically strong following, a solid product line, hefty margins and probably some of the most astute management and engineers in the industry - and they did it by utilizing a new school business model that didn't even exist a couple of decades ago - the open source distribution model. It truly appears that this model is difficult to understand by many users, analysts, investors and even competitors. I am sure there will be many "But show me the money!" and "How will they make money" comments abound. A lack of understanding of the business model's capabilities apparently has aided Google in implementing Android in stealth mode until it was too late to effectively stem its momentum.

The vast majority of the following tweaks and improvements are not capable on the iPhone. This is not because Apples engineers are not able to enable them from a technology point of view, but because they provide too much freedom to the end user and allow said end user to circumvent Apple's highly profitable, yet tightly closed ecosystem (and that of its partners, the carriers and 3rd party vendors). Basically, Google has turned hundreds of thousands of developers loose to cannibalize the profit centers of Apple. Examples are rife:

1. You cannot obtain a quality media server for the iPad/iPhone for that will compete with Apple's Airplay initiative. Go through the App Store and you will see there are a few that are available, but the user reviews unanimously agree that they don't work. They work perfectly fine on the Google platform, but Google doesn't sell media streaming hardware.
2. You will not be able to download a torrent client because that will cannibalize Apple's fat iTunes profits. Again, Google doesn't profit from selling movies and music, either.
3. You will not be able to download custom ROMs because that will give you control over your Apple device and allow you to leave the extremely profitable, yet densely walled Apple garden/confinement space. There are 30 to 40 custom ROMs available for my device. Why? Because it does not conflict with the Google business model. They don't profit from locking down the hardware, nor the ecosystem. You can actually by apps from any source that you desire. Google even has an app that helps the average user visually build and distribute their own apps.
4. You will not be able to replace the core Apple apps with 3rd party apps. I don't really understand the logic in this stance. Apple has a lot to gain by having 3rd parties improve the core functionality of their device, and very little to lose as if the 3rd party apps become ubiquitous, iOS becomes more established as platform and becomes less an appliance. Unlike the previous bullet points, I don't see how this protects the Apple revenue stream, but to the contrary I do see how this can hinder it.

While many in the industry clearly see that the battle is more along the business strategies than the tech (with the rapid tech development cycles being sued as a lever in the business strategies), there are still many who do not see where the true fight actually exists. I hope to shine some light in this arcane area. Now, on to building that super computer for your pocket!

Larger Image

Custom ROM

To this phone, we visit the xda-developers site and we download Myn's Warm 2.2 ROM and apply it to the phone. Basically, this is a custom-written OS that fixes many of the issues of the stock Evo OS and adds a slew of other pluses.

To wit:

• Adds 4G Toggle to Notification Power Controls: you can now access 6 mbit download speeds by touching an icon that is available from any screen that you have open

• Adds custom Themed OTA Swype keyboard: Swype is a revolutionary text input method that allows text input on a smartphone approaching 45 WPM. See the history. Combine this with the Google Voice Command app and you have science fiction in the palm of your hand.

• Data throttling governor removed: Most smartphones have data speed limits built in to make the carriers happy. This negates much of the benefit of having 4G systems, ex. wimax and LTE. Now, your new customized EVO is limited only by its technical capability, and not the profit margin constraints of your carrier
• Ad-Free Hosts file added (No more advertisements)
• Updated Darktremor Apps2SD: Move all compatible apps to your storage card, up to 32 GB worth
• Added GingerBread Calculator, GingerBread menu/submenu Developers have taken portions of the newly released OS and added to the run currently running on the Evo for the best of both worlds
• Custom look and feel throughout the OS
• Adds mod to sustain volume when in car dock
• Adds Nexus S LiveWallpaper
• Adds the following new Sprint apps to sdcard: (Blockbuster, Kindle eReader, NOVA Demo, Sprint Zone Update, New Sprint Nav, New Sprint TV)
• Updated SuperUser: Gives the user FULL Adminstrative control over his or her phone. Now you are in control of your phone, not Apple, ATT, Verizon, or Spring
• Updated Hulu to support latest Flash update (10.1.105.7): Now you can watch Hulu for free, despite the fact that they tried to block it on the Androids and charge for it on the Apple mobile devices
• Updated RomManager: If you don't like this custom ROM (OS customization) you can easily swap into any of at least 40 others, all constantly refreshed with OTA (over the air) delivery
• Updated Wireless Tether: You can now wirelessly tether up to 8 devices (mobile hotspot) with 4G speeds, WITHOUT having to pay your carrier an extra dime. You can't do this on the iPhone and you have to pay to do it most other places.
• Fixed Power Menu Icons, now full color.
• More performance tweaks: This customization is faster than the stock Evo, more flexible, and with addition of add-ons, better on battery life
• There's more to the package, but I'll assume you got the message

Total cost: $0 and about a half hour of your time.

Expanded Power

Seido 3500 MaH extended battery (read the 333 reviews enthusiastic reviews, there is no need for me to elaborate): Allows for up to four days between charges when paired with power management software

Most people know that the massive capabilities of the Evo come at a high cost - the need to constantly tweak for battery life. This battery, managed by a competent power management program such as UltimateJuice (formally Juice Defender) will give the Evo 20 to 72 hours of life with ALL features TURNED ON, and screen brightness turned up with heavy use.

If you use a custom ROM (which is available for free, see Myn's Warm 2 plus 2 above) and engage in moderate use you will be looking at 85 to 100 hours before charging. This is what the future of mobile computing truly is. I purchased the battery 3 days ago, charged it once and never got below the 50% mark, all the while using it as a 4G hotspot (which drained the most juice) streaming movies off of Amazon, using it as a full torrent client to download several gigs worth of files, emailing, texting, talking and surfing to my heart's content, and taking 720p video and nearly uncompressed 8 megapixel pics (using Camera 360, illustrated below) at about 5 megs each. This is the real deal for mobile computing, and I have yet to put the battery through 6 recharge cycles as recommended by the manufacturer to fully attain the battery's potential.

Hardware price: $53.94 & this item ships for FREE

Software price: Free or $5 for the Ultimate version which does things such as turns wifi on or off depending on whether you are near oft used hotspots, underclocking or overclocking the CPU, etc.

For those who are not geeky enough to be familiar with battery technology, these batteries pack a wallop. They use lithium polymer technology (LiPo packs in hard cases) in lieu of the much more ubiquitous lithium ion tech. The ability to remove the battery is what makes this doable (at least with today's tech, since these batteries can be dangerous if misused or punctured beyond a certain temperature). I have three kids, and am essentially a big kid myself, so I have been playing with these things for years. Here's an example of what a LiPo powered electric toy car can do... 161 miles per hour, raw speed from a LiPo powered car with brushless motors. I have one that routinely breaks 70 mph, without any custom mods. These are the real deal!

Free Peer to Peer sharing and free music downloads

Install your own Torrent client, for those who miss Limewire, et. al., you can actually install a torrent client directly on your Android phone. This is a favorite of college students looking for peer to peer shared files. You can also search and download MP3s in real time without the iTunes payment or gateway - OTA and directly off the web without a computer with Music Mate.

A simple interface to search and download mp3 music from public domain via public search engines, all are free!

After you use the peer to peer sharing app to download copyright free content, you don't have to worry about file formats and extensions. Rock player will play practically any video and audio format that you will come across on the web, and play it back with absolutely amazing fidelity.

Free High end music player with Lyrics, artist background, wireless sync with computers, iTunes import and graphic equalizers

Winamp for Android (beta) offers a complete music management solution (2.1 OS & above) featuring wireless desktop sync (Winamp 5.6 required), iTunes library import, & access to thousands of internet radio stations with SHOUTcast. Learn more - http://www.winamp.com/android.

Free Media Streaming throughout your entire house

Compatible with most upNp and DLNA devices, 2Player will stream music in any direction (to your phone and from your phone) with Xbox 360, PS3, Wii, modern receivers and preamps network aware TVs, any Windows 7 or higher computer, Sonos systems, media servers, etc.:

- Plays music locally, and on a ton of DLNA network media renderers.
- Support for Windows 7 media services, and XBOX 360 Media Center
- Music download to your phone from Windows 7 media shares and DLNA media servers.

If you want to stream video, pictures and music you can use Twonky server.

TwonkyServer Mobile allows you to share music, photos and video stored on your phone with devices on your home network. A free Android version of the popular TwonkyServer, it works with most UPnP and DLNA certified devices, as well as Xbox 360. Find other Twonky products and the TwonkyServer Mobile FAQ at www.Twonky.com.

• Talk To Me Cloud The Android Universal Translator: this is utterly amazing. It now translates up to 38 languages (the link included here seems to be dated) - both ways, both verbally and delivers written text. That's right, just like in the original Star Trek series. Has to be seen to believed.

• App Inventor: will unleash a wave of creativity through Android, and probably create hundreds of thousands of Android mini-programmers through the education system as this application allows users to create their own Android apps. You can use a PC, a Mac, or even an Android phone to make the apps.

• Camera 360: Allows the 8 mp Evo camera to compete with nearly any point and shoot in a similar sensor class

Once you take your nearly uncompressed JPEG photo with your new and improved phone camera, you can further customize it with Picsay Pro.

Now, this super souped smartphone will not cost you a penny extra. That's right! All of this stuff is available for free, except for the extended battery (hardware). I would love to see how many feel the iPhone stacks up to an Android phone such as this Evo, with all of the included power and flexibility. I actually typed this post in a cafe in Brooklyn, and noticed a few smartphone users admiring their devices. I pulled out the custom Evo illustrated above and took a video of both of the users to show the blog the new wave in mobile computing. I'm a hardcore nerd of a user so I'm to be expected to fawn over much of this stuff. These are normal, average people, and they are quite impressed with their new Android and its capabilities. The amazing thing is that they are also staunch Mac users...

Those that are interested in my take on Apple's potential and actual margin compression issues should subscribe and download Apple iPhone Profit Margin Scenario Analysis Model and the Apple business model note.