Getting Really Personal

Today the computer is not a bag of parts being shipped to us; it is integrated into our telephone and automobile and refrigerator and we don’t need to think about the software because it has become so intuitive and embedded in the product that all we have is life itself.

—Paul Terrell

If the war for control of the PC industry was over, Apple’s hope, Jobs believed, was to stay alive long enough to be a player in the next big movement.

Some significant change was coming, it was clear; but guessing just what its form would be was the challenge. What happened was that the core of the computing universe began to move away from the desktop and onto mobile devices and the Internet. In the first of these shifts, Jobs and Apple played well and delivered a series of category-defining products. It was one of the most remarkable recoveries in corporate history, and was to be one of the most impressive instances of market domination. Starting in 2001, Apple began to set the mark that the rest of the industry had to hit in one new device category after another.

But as the 1990s came to a close, the world of mobile devices was looking very different.

Windows was not just the operating system of the great majority of personal computers. It was also behind the scenes in everything from point-of-sale terminals and automobiles to early smartphones.

These phones, which came on the scene at the end of the 1990s, were a niche product, the top end of the cell-phone market. They featured extra capabilities like a camera, media player, GPS, and to-do lists and other personal-productivity tools. BlackBerry smartphones from RIM set the bar with email, messaging, and web browsing, and they were the phone of choice for government workers. These phones weren’t full-fledged computers, but they delivered some of the same functionality.

Another popular device category was the digital music player, almost always called an MP3 player (after the widely popular digital music format). There were already analog cassette players, the category-defining example being Nobutoshi Kihara’s Sony Walkman. But British inventor Kane Kramer came up with a design for a digital audio player, along with the means to download music, plus digital-rights-management (DRM) technology, clear back in 1979. He lost the rights to his inventions when he couldn’t afford to renew patents, but his ideas were not lost. By late 1997 the first production-volume commercial digital music player from Audible.com went on sale. Through the end of the millennium the MP3 player market blossomed with many new players, including the Diamond Rio and the Compaq HanGo Personal Jukebox.

The recording industry was terrified. Its trade association, the Recording Industry Association of America (RIAA), regarded these devices as tools for music piracy. The RIAA sued Rio but lost. Although Rio prevailed, other companies didn’t fare as well in the clash between the music industry and Internet culture. Napster was a peer-to-peer file-sharing service primarily used for sharing music MP3s. Founded by Shawn Fanning, John Fanning, and Sean Parker, it prospered from June 1999 to July 2001, peaking at 80 million registered users. Then Metallica and Dr. Dre and several record labels sued, and Napster was shut down by court order.

Napster doubtless hurt some musicians, but it was arguably instrumental in making others, such as Radiohead and Dispatch. These new services and devices challenged traditional thinking in many ways, and they were creating new market niches. Again, the devices were not computers—but they had microprocessors in them and, like the BlackBerry, they could do some of what a computer could do.

The idea of such smart devices predates personal computers. As semiconductor designers had understood back in the 1970s, the chips were the computers. All the other bulky stuff was just there to communicate with humans. For many applications, the level of human interaction expected was relatively minimal. If it didn’t have to do all that a computer did, a device could deliver a lot of capability in a very small package. And significant new markets were finally developing around certain kinds of devices.

Apple was not a player in any of these markets. But in the MP3 devices, Jobs saw an opportunity.

The Player

Technologically, music players were a solved problem. And the market for them was well established. The problem was, it wasn’t exactly a legal market. Jobs had sung the virtues of being a pirate, but getting shut down for music piracy wasn’t what he had in mind.

But Jobs had clout now. As the CEO of Pixar, he was a player in the entertainment industry. Under contract to Disney, Pixar had released Toy Story in 1995 and had gone public the same year. Jobs became an instant billionaire and someone to pay attention to in Hollywood. But it remained to be seen whether his newly minted Hollywood cred would buy him any time with music-industry executives.

And he needed face time with those executives for what he had in mind. There were several pieces to the plan: a music player, a new model for selling music, and buy-in from the music industry.

Somehow, he got it. Somehow he convinced the big players in the industry to license music to Apple under terms never before considered.

But first came the device. The original iPod introduced a scroll wheel as its primary input device, and it had a monochrome LCD display and earbuds. It was marketed with the slogan “1,000 songs in your pocket.” It was basically Kane Kramer’s (now public domain) digital player.

For the selling model, Apple purchased Bill Kinkaid’s SoundJam MP from Casady & Greene in 2000, renamed it iTunes, and released it in 2001. By 2003 iTunes had developed into the first fully legitimate digital music store. DRM software within the store protected the industry from piracy, and a radical pricing model made piracy elsewhere far less appealing. The pricing model made music sales a meritocracy, leveled the playing fields for indies, and destroyed the album. Everything would now be a single, Jobs dictated, and the new price for every song was the same: 99 cents.

The streamlined processing of the iTunes store meant that labels and artists got paid faster than in the past. Much of technology was inherent in Napster and the MP3 format, but Apple put it all together. In the first week the store was open, it sold a million song files.

Sales for the iPod took off more slowly, but by the end of 2004 Apple and its iPod owned some two-thirds of the growing market for digital music players. Margins were big and the profits huge. By 2007 iPod sales were making up roughly half of Apple’s revenue. Apple had, as Jobs knew it must, identified an emerging market and dominated it.

But Apple was not resting on its laurels.

The Phone

As far back as 1983 Jobs knew what he wanted the next product after the desktop or portable personal computer to be. At an offsite meeting for the Mac team, the one where he told them that “real artists ship” and “it’s more fun to be a pirate than to join the Navy,” he also challenged the Mac team to do a “Mac in a book by 1985.”

In a book? Apple would later produce portables called MacBooks, but Jobs wasn’t talking about a portable computer. What he was really talking about was Alan Kay’s Dynabook.

Kay, a Xerox PARC legend, had conceived of the Dynabook years earlier. It was in effect the prototype for every tablet device since created. It was a thin, flat display. Viewing it, you felt like you were reading from a piece of paper rather than a screen. It had no physical keyboard. It was a ubiquitous information and communication device that wasn’t necessarily a computer.

Jobs wanted the Mac team to wrap up the Macintosh quickly and get started on this next big (or little, really) thing, this tablet. But it didn’t happen then or in all the time he was gone, really. In the early 2000s, on the heels of iTunes and the iPod, he was ready to make it Apple’s next product.

It didn’t play out that way, though.

At the January 2007 Macworld show, Jobs announced “three revolutionary products…a wide-screen iPod with touch controls…a revolutionary mobile phone…[and] a breakthrough Internet communications device.” After getting cheers for each of these “devices,” he confided that they were all one product: the iPhone. The iPhone was essentially the tablet device shrunk to handheld size and with a phone packed into it.

It wasn’t the Dynabook, but neither was it a traditional smartphone. One of the things that set it apart from smartphones was the groundbreaking user interface. Another was that it ran Apple’s OS X, a full computer operating system. That didn’t make it a full computer, but it was impressive for the capability it promised.

Jean-Louis Gassée understood how impressive and powerful that was. “I thought Steve was lying. He was saying that OS X was inside the phone. I thought, He’s going to get caught. This time, he’s going to get caught. Well, no. When the geeks had their way with the first iPhones and looked at it…it was genuinely OS X.”

To really make use of a computer operating system in a phone, you had to figure out how to let the user do most of what could be done with a keyboard and a mouse on a device that had neither. The user-interface team, led by Greg Christie, had to invent a whole language of finger gestures. From there, the potential of the device was far beyond what had ever been delivered in a phone.

At the time of the demo, much of that was still potential. The iPhone was nowhere near ready to release when Jobs demoed it. But when it was released a few months later, somewhere around half a million iPhones were sold in the first weekend.

But Apple wasn’t alone in the new market for extra-smart phones. Microsoft had been probing this market with its Windows CE and later its Pocket PC platforms for over a decade. And back in 2003, four entrepreneurs—Andy Rubin, Rich Miner, Nick Sears, and Chris White—started a company named Android to create a new operating system based on the Linux kernel and emphasizing a touch-based interface for tablets, smartphones, and the like. Two years later, the company was acquired by Google, which had been investing its huge income from its search business in various enterprises. The Android project remained in stealth mode, with no hint of any intent to produce a new operating system to compete with Windows Mobile and Symbian—which were the players to beat.

When Apple released the iPhone, the developers recognized that Windows Mobile and Symbian were not the target; Apple’s iOS mobile operating system was. They regeared and, within months, unveiled Android. But arguably more interesting than the technology was the fact that Google announced Android as the first product of a consortium of companies committed to developing open standards for mobile devices. Apple’s iOS was Apple’s own proprietary platform. Two different models for mobile devices were now in competition: the open Android model and the closed iOS model.

Delivering the Tablets

Jobs hadn’t forgotten the Mac-in-a-book dream, though. And he wasn’t alone. Technology companies had been exploring the Dynabook concept for 20 years, since well before Jobs said anything to the Mac team about a Mac in a book. The concept required several innovations: flat-panel displays, the display as input device, and advances to get the machines small enough to carry.

Back in January 1979, inspired by the Dynabook, Xerox PARC researcher John Ellenby left to start a company with friends Glenn Edens, Dave Paulsen, and Bill Moggridge. Working without publicity, they delivered a computer, the GRiD Compass, in 1981—the same year IBM introduced its PC. It was an impressive machine, the first laptop computer, the first with the later ubiquitous foldable “clamshell” design, featuring a novel bit-mapped flat-panel display and a rugged magnesium case. It was a product driven by technological challenge, not budget constraints, and it was priced at $9,000. Fortune magazine named it a product of the year and it found a ready market in the military. It was reputed to be the first piece of consumer equipment (except for the powdered drink Tang) used on the space shuttle.

Although the GRiD Compass inspired an entire industry of laptop computers and its magnesium case was an idea that Steve Jobs picked up on at NeXT, the GRiD machine was no Dynabook. In particular, it used a keyboard for input. But if you could use the screen for input as well as output, you could immediately eliminate half the bulk of the device. A number of companies moved the idea forward over the years.

But while these companies pushed the technology for Dynabook-like devices, many of them were designed to be computers. Part of the genius of the Dynabook, though, was that it didn’t necessarily aspire to that. It was something new—something that didn’t yet exist.

Jerry Kaplan (Symantec Q&A and Lotus Agenda developer), Robert Carr (Ashton-Tate Framework developer), and Kevin Doren (music synthesizers) started Go Corp in 1987 to build on the flat-screen idea by producing a portable computer that used a stylus for input. Their product, the EO Personal Communicator, didn’t take the world by storm, but it did solve a lot of technical problems, and to those in the industry it was at least a proof of concept.

Another personal-computer pioneer who believed in the possibility of these no-keyboard devices was VisiCalc designer Dan Bricklin. In 1990 he and some colleagues founded Slate Corporation with a mission of developing software for pen-based computers.

Then Jeff Hawkins, who had worked at GRiD, started Palm Computing in 1992 to develop handheld devices that were not necessarily computers. He and his team had varying degrees of success with personal digital assistants, smartphones, handwriting-recognition software called Graffiti, and a mobile operating system called WebOS.

Apple, under the leadership of John Sculley, embraced the idea and fielded a whole line of pen-based products under the Newton label. Newton was a handheld computer with its own operating system and some groundbreaking technology. After bad publicity for its iffy handwriting recognition, Apple replaced it with a highly regarded handwriting-recognition system developed in-house by Apple researcher Larry Yaeger and others.

As a demonstration of the achievements of Apple research and development it was wonderful, but it fell somewhat short as a successful consumer product. Consumers were not clamoring to enter data via handwriting. Neither Newton nor any of the other tablet devices from the 1990s succeeded. It would be a decade before the tablet market would truly catch fire.

When Apple finally returned to the tablet market in 2010, its iPad was another category-defining product, like the iPod and iPhone. Skeptics pointed out that it did less than a personal computer, and questioned what the market was for such a device. But that was the point. It was something else, and if it found a market it would be plowing fresh soil. Jobs would again have succeeded in opening a new market.

And the market was there. By mid-2010 Apple had sold a million iPads, and a year later the total was 25 million. The tablet market was booming for other companies as well. Amazon had released a handheld reader called the Kindle in 2007, and it staked out a somewhat different market, being specifically a book-reading device. Google’s mobile operating system, Android, was in use in phones and tablets from many companies, and the Android slice of the tablet market soon surpassed Apple’s. With Android, developers saw the re-emergence of an open platform.

The idea of browser as operating system came to fruition when Google released its Chrome OS in 2009. Built on top of a Linux kernel, its user interface was initially little more than the Google Chrome web browser. Chrome OS was the commercial version of an open source project, Chromium, which opened the source code for others to build on. Laptop computers were soon being built to run Chrome OS natively.

Although Apple was setting the bar in each of these new product categories and profiting greatly from them, it wasn’t necessarily leading in sales. By 2011 Android devices were outselling all others. By 2013 they were outselling all other mobile devices and personal computers combined. Nearly three-quarters of mobile developers were developing for Android. Google’s open model had been a highly successful play.

Meanwhile, sales for personal computers were flat or declining. The center of the computing universe had shifted to these new mobile devices. To be sure, the market for some of these mobile devices may already have been reaching saturation by 2014, as evidenced by a general decline in iPod sales and the hint of a decline in iPad sales. But the trend toward new specialized devices was not dependent on any particular device. New ones were being planned and launched. The personal computer was being deconstructed, its capabilities allocated to more specialized products.

The other major trend away from the desktop wasn’t about physical products, though, and it wasn’t led by Apple.