Don't telegraph your moves

There once was a company named "Play" that developed what was, for the time, a revolutionary video processing system called Trinity. It could capture and switch video like professional video switchers that cost ten times as much. For three years, Play took Trinity to the NAB Show, each time promising to ship it before the end of that year, but never managing to do so. So, year after year, Play went to NAB, always showing a few more bells and whistles, but not a shipping product. By the time Play finally completed development and shipped Trinity, most people in the television industry has stopped paying attention. Play eventually went out of business, although some of its concepts live on in products from Newtek and Adobe.

Back in 1995-96, Netscape told the world that it would make Microsoft Windows obsolete by moving applications from the operating system to the browser, which would make the applications operating system-neutral. This was tantamount to waving a red flag in front of a bull; in this case, the bull was Microsoft. We all remember what Microsoft did in response--everything possible, both legal and illegal, to crush Netscape. For all its publicity and hype, Netscape wasn't big enough to withstand Microsoft's onslaught. The company was sold to AOL at a good price considering the situation, but it's fairly clear that Netscape would have eventually failed had AOL not acquired it.

RED, the digital cinema camera company, has fallen into the same trap as Play with its Scarlet camera. In 2007, RED started talking about Scarlet, a camcorder that would provide true HD output at a cost around $3,000, which at the time was where prosumer SD camcorders were priced. Then, in early 2008, Jim Jannard, RED's founder, announced that Scarlet was going to become a video-capable DSLR. In November 2008, RED showed off non-working prototypes of Scarlet and its big brother, Epic, but they didn't ship anything.

As soon as RED started talking about making Scarlet a DSLR, companies that already made DSLRs like Canon and Nikon, as well as companies that were planning to get into the DSLR business like Panasonic, started to pay very close attention. In November 2009, RED made the rounds again, this time with yet another non-working prototype of the Scarlet, but Canon, Nikon and Panasonic all had DSLRs in the market that could do HD video, all for less than the (now increased) price of the Scarlet. This March, you'll be able to buy a Canon Rebel T2i with excellent video capabilities for $799 without lens. Sony, which had been holding back, now plans to release two DSLRs with AVCHD video by the end of the year.

By making premature announcements, RED educated its competitors. RED may have assumed that its competitors were too incompetent or too hidebound to respond, but they were wrong. At best, the Scarlet is going to end up as a niche product rather than the revolutionary change in camera design that Jim Jannard envisioned.

Now, Microsoft itself may be falling into the same trap with Windows Phone 7 Series. At the Mobile World Congress a couple of weeks ago, Microsoft previewed its new operating system for smartphones, a radical departure from previous Microsoft offerings. The problem is that smartphones that run Microsoft's new operating system won't ship until the end of 2010, thus giving Apple, Google, RIM and other competitors nine months to respond. Microsoft used to be able to get away with it--their preannouncements would cause FUD (fear, uncertainty and doubt) in the minds of potential buyers of other products. However, that was when software development took years; now it takes months. By the end of the year, it's likely that the advancements that Microsoft demonstrated will be integrated into its competitors' platforms, and any real competitive advantage that it might have had will be lost.

The lesson? Don't telegraph your moves. Announcing products and strategies too early will only educate your competitors and frustrate customers, not create FUD.

Why "Pay-to-Pitch" makes no sense for anyone

Over the last few months, a firestorm has erupted over angel venture funding groups and "deal-finders" that charge startups to pitch to their investors. The battle has been led by Jason Calacanis, who's declared war on pay-to-pitch. The most recent pay-to-pitch scheme to come under the spotlight is from New York Angels, led by David Rose (not the one with the orchestra.) New York Angels charges $150 as an application fee for a chance to pitch to whichever members of his group decide to show up that night. That's a lot less than some other groups and finders who charge thousands of dollars, but it's still pay-to-pitch.

In defense of why his group charges an application fee, Rose said the following: "The reason we charge a fee is because we're between a rock and a hard place. The unfortunate but accurate fact is that 90% of all companies requesting funding are simply not fundable, by anyone, anywhere...no matter how earnest the entrepreneur might be. The larger VC funds get upwards of 10,000 plans each year, but that's ok for them because they either completely ignore over-the-transom submissions, or have them read by a paid associate." (Click here for a link to his complete response.)

The problem with this logic is that $150 isn't going to spell the difference between a fundable startup and one that's not, and New York Angels is taking money from all of them. Assuming that Rose and his team only actually present the plans that they think are fundable to investors, they're effectively collecting $1,500 for every startup that gets to pitch. On the other hand, if they're letting startups pitch that they know aren't fundable, they're misleading the startups and wasting their investors' time.

If I were an angel, I'd want to screen my own deals, rather than let someone else tell me what's good and what's not. I wouldn't put any more trust in Mr. Rose than into a stockbroker or investment banker who's trying to get me to make an investment.

I don't begrudge Mr. Rose or his logic; I just think that it's wrong. Pay-to-pitch doesn't open up any real funding opportunities for startups. Investors involved in pay-to-pitch schemes either a) could do better by screening their own deals, or b) are motivated by the money they make from pitching fees, which means that they're not serious investors.

Canon's new Rebel T2i "...Delivers a very similar picture to the 7D in every video mode"

One of the first in-field video shoots with the new Canon Rebel T2i is on the interwebs. According to Nino Leither, the Vienna-based cinematographer who shot the footage, the video from the T2i is virtually indistinguishable from that of the Canon EOS 7D, which costs twice as much. For professional videographers and cinematographers, the 7D is hardly expensive, but the Rebel T2i will cost $899 with a kit lens and is priced to be a "step-up" DSLR for consumers who want more than a point-and-shoot. The fact that you can shoot HD video with cinema-level depth-of-field control and interchangeable lenses using a DSLR that costs less than a high-quality consumer camcorder, at a data rate that no consumer camcorder can touch, is amazing.

One thing that's gone largely unnoticed is that Canon's DSLRs, along with models from most other manufacturers, come with software that allows the cameras to be configured and controlled over USB. You can configure white balance, gamma, exposure modes and much more from your PC. In Canon's case, you can even monitor the Live View display and shoot video or stills remotely. Professional video cameras use devices called CCUs (Camera Control Units) that do the same thing, but they cost thousands of dollars. (There are some camcorders that allow settings to be stored on a memory card and then swapped between devices, but they obviously don't allow live control.) The ability to bring multiple cameras to the same settings, and even operate them remotely, with a piece of free software is amazing.

Just as Canon's 5D and 7D set new standards for HD price/performance, the T2i will push that bar even further.

Update, 26 February 2010: Gizmodo has gotten its hands on two more videos shot with preproduction T2is. One video was shot in Beijing's Zhongguancun shopping district, which is apparently China's answer to Akihabara in Tokyo. The other one was shot in New York City. Again, the videographers said that, subjectively at least, the video shot by the T2i is very close or equal to that from the 7D.

Books: The container is not the information

Update, March 4, 2010: Penguin Group is well on its way to implementing the future of eBooks that I described in this post. John Makinson, Chairman and CEO of Pearson's Penguin Group spoke at the Financial Times' Digital Media & Broadcasting Conference in London on March 2nd. He showed some concepts for how Penguin plans to transform books into interactive applications for Apple's iPad.

Not a lot has changed in the structure of printed books since the time of Gutenberg. A typical book has a title page, a table of contents, a forward and/or introduction, a set of chapters, and sometimes, an index. Books were organized the way they were because it made it relatively easy for readers to navigate through the content. Today, most eBooks follow the same design and organization as print books, many even going so far as to precisely duplicate the layout of the original print book. However, an eBook is not a print book, and there's absolutely no reason why it needs to be interacted with in the same way as a print book.

In the simplest possible terms, a book is a container for information. The conventions that have developed over the centuries for organizing that information were appropriate for a print medium, but once a book is digitized, the ability to access and utilize the information contained in the book increases exponentially. For example, why bother with an index when a search engine will let you find anything in the book faster and more easily? If you can search for topics and relationships, why do you need a table of contents? Why bother to organize the book into pages when there's no standard page size for eBook readers and text will reflow according to the display or window size being used?

Is there a reason for a book designer to sweat over the details of specific typefaces and sizes when the user can change them with a push of a button or a mouse click? Instead of the page references used by writers and teachers to direct readers to a particular place in a book, why not use named anchors and hyperlinks to identify and navigate to important "landing zones"?

Once a print book is digitized, it can be incorporated into databases and searched along with other documents and information sources. Why limit the reader to just the information contained in the eBook in question? If the reader enters a query and the search engine finds better (or more recent, or more detailed) information from a source other than the eBook itself, shouldn't it point the reader to that information?

If an eBook can be read on a computer that supports audio and video playback and interactive content, why should the eBook itself be limited to text and static images? Replace the static illustration of a physics experiment with a dynamic animation that readers can interact with. Instead of a color image of an elephant, show a video of elephants in the wild. Instead of simply including Walt Whitman's poem "America", link to an audio recording from 1890 of Whitman himself reading the first four lines of the poem.

In short, a book is a container, not the information itself. eBooks limit their potential if they're nothing more than an electronic facsimile of the original print book. The contents of a print book should be the starting point for an eBook, not the end point.

Free exhibit pass to NAB 2010, April 10th-15th in Las Vegas

Most of my readers are probably familiar with the National Association of Broadcasters' annual convention in Las Vegas, to be held this year from April 10th through 15th. It's the premier broadcasting technology conference in North America, and along with IBC, held every September in Amsterdam, one of the world's two top broadcasting conferences. This year, they'll have exhibit space dedicated to over-the-top video and IPTV on broadband networks, along with the show's usual focus on audio and video production and post-production hardware, software and services.

I've both spoken at and attended NAB over the years, and if you have anything to do with audio or video production, post-production or distribution, it's well worth attending. They're giving away free exhibit-only passes; to register, visit http://ow.ly/13TL9 or the main NAB Show website at http://nabshow.com/register with the code A913. (If you decide to go, I'd suggest that you register for a hotel room early; even with the poor economy, hotels tend to fill up quickly.)

Is Microsoft back in the smartphone game?

Microsoft announced and demonstrated Windows Phone 7 Series today at the Mobile World Congress in Barcelona. It's a radical departure from earlier Windows Mobile operating system designs. They essentially abandoned the previous Windows metaphors in favor of Zune HD on steroids. The user interface is uncluttered, even Spartan, but very elegant and designed for excellent performance with today's smartphone CPUs and GPUs. It includes all the functionality of the Zune HD, and will be a gaming platform that's compatible with Xbox Live. (The Xbox Live-related features will be detailed at Microsoft's forthcoming MIX Conference.)

Smartphones with Windows Phone 7 won't start shipping until the end of the year. It's too early to say what impact the new operating system will have on the iPhone, Android, BlackBerry and other platforms, and given that Apple, Google and RIM now have nine months to respond before Microsoft gets to market, they could step up their games if they need to. However, it's a great sign that Microsoft has finally decided to drop the Windows Mobile baggage and build an operating system designed around how people really use smartphones today. Before this announcement, I was ready to write off Microsoft in the mobile phone market, but it now looks like they're going to remain a serious contender. This makes HTC, which stuck with the Windows Mobile platform despite Microsoft's problems, look even better.

Pivots: Getting it right the first time

Veoh's bankruptcy and liquidation announcement last week was no surprise for people who had followed the company for years. Veoh raised $70 million dollars in venture funding from mid-2005 to its demise. Its bankruptcy was triggered when the company could neither raise more money nor find an acquirer.

Veoh was somewhat unusual in the online video space, in that it followed the same basic business plan from launch to death (although, as Dan Rayburn pointed out, the elements of that business plan changed like the wind)--an advertising-supported business that aggregated content for consumers. A far more common path for online video startups is to begin as an advertising-supported content aggregator (either user-generated or professionally-produced content), and when that doesn't work, change direction (pivot) and take some portion of their technology--content management, encoding, video players or advertising delivery--and market it to businesses on a "white label" basis. When that plan fails (as it usually does), the company is either sold to an acquirer or shuts down.

An excellent example is Joost, which launched in late 2007 with a blizzard of hype as an advertising-supported content aggregator. It dropped its consumer-oriented services and shifted to offering white-label video distribution services to business in the summer of 2009. After burning through $45 million in outside investment and untold millions more from its founders, it was sold for a few million dollars to November 2009.

One lesson from all this is that pivoting will not necessarily save your business. The Lean Startup and Customer Development movements emphasize agility and quick changes to your business plan over taking the time at the outset to insure that you're targeting a real market opportunity and not a mirage. This works very well early on. However, once you staff up and raise a significant amount of outside investment, it's easy to find yourself trying to make a broken business model work for far too long. By the time you pivot, it's too late. Your investment, technology and user base become an "anchor" that defines the businesses that you can pivot into. In the case of online video, you end up pivoting from quicksand into a desert.

It's essential to take the time upfront to get your product/market fit right, and to insure that you're pursuing a real market and not a mirage. You may have to change direction a lot in the first few months of operation, as you learn more. It's much better to recognize early that you're going in the wrong direction and make changes, than to try to make mid-course corrections to a speeding locomotive. Once you've raised funds, staffed up and built your infrastructure, inertia and ego kick in, and fundamental changes to your direction will become almost impossible.

Thus this warning: Pivot early and often (if you have to), because you probably won't be able to successfully pivot later on.

Speed, not scale

Since the dawn of the Industrial Revolution, businesses have done everything they can to get big. Bigger companies can produce more at lower costs, allowing them to either lower prices and increase demand, or maintain prices and increase profits. More revenues and more profits enable you to get even bigger. To oversee a growing organization, you need more and more layers of management. You also have to do extensive planning and forecasting in order to anticipate the future. And to keep the wheels from flying off, you need detailed policies and procedures to cover just about every possible situation.

This model works fine in large, relatively stable markets, but as soon as the rate of change increases (due to technological or customer demand changes, competitive pressure, the availability of desirable substitutes, or any of a number of other causes), large organizations are unable to respond rapidly. As Nassim Nicholas Taleb demonstrated in his book "The Black Swan", there's no business or economy that's immune to rapid, and sometimes catastrophic, changes. What that means is that the bigger an organization gets, the less able it becomes to withstand sustained change.

Scale certainly still matters in some industries, especially those that require enormous capital investments. However, the value of being small, nimble and able to rapidly adapt to change outweighs the value of size and scale. Thanks largely to the Internet, small players are no longer at a significant cost disadvantage vs. big competitors, and geographic location is no longer essential for success. Speed, not scale, will win the race.

Quick notes: New Canon video DSLR, iPad application thoughts

Two quick notes: First, Canon just announced the EOS Rebel T2i, a DSLR with true 1080P video capture capabilities, all the same frame rates as the much-lauded EOS 7D, and an $899 list price including kit lens. In essence, it's a 7D for the first-time DSLR buyer. The T2i continues the trend of incorporating professional video capabilities into DSLRs. We'll know whether this is the real thing or too good to be true when sites like dpreview and CamcorderInfo get their hands on it, probably late this month or early next month.

The next step in the development of video DSLRs is to change their ergonomics so that they're comfortable to use for long periods of time. DSLRs, like all still cameras, are designed to be brought to the eye to frame and focus a shot or sequence of shots, and then to be put down, while video cameras are designed to be held steady at the eye for several minutes at a time. A number of companies have come up with shoulder stocks and other mounts to compensate for the poor ergonomics of DSLRs when used for video. The next step is for the DSLR vendors themselves, such as Canon and Nikon, to jump in with DSLRs that not only have video capture features but also have the right video ergonomics.

The second note is a thought about iPad applications for media production and post-production. Over the last few days, I've read articles in Mix Magazine and the Hollywood Hand Held blog about iPod applications for audio and video production. The iPad would make an almost perfect control surface for audio workstations, video editing systems and color correctors (the one missing element would be tactile feedback.) What's even nicer about the iPad is that its functions and layout could change at the push of a button. Euphonix, for example, has separate Artist Series hardware control surfaces for audio mixing, video editing and color grading; put them together and you're looking at a couple thousand dollars worth of hardware and a lot of desk space. An iPad could perform all the same functions at a fraction of the cost and would require a fraction of the desk space, plus it's portable.

As time goes on, I'm sure that we'll think up more and more applications for the iPad that take advantage of its display, touchscreen and intelligence.

Success leads to arrogance, which leads to failure

I've been following the recent Toyota saga with a good deal of amazement mixed with curiosity: How bad is this thing going to get? For three decades, Toyota was the world standard for quality. Their manufacturing, planning and training processes were all designed to eliminate the sources of defects and thus build inherently high-quality vehicles. Very few people purchased Toyotas because of how they looked or how exciting they were; most Toyotas are about as exciting as macaroni and cheese. They purchased them because they knew that they were reliable and dependable.

The wheels started falling off for Toyota (no pun intended) a few years ago, when the company's J.D. Power quality scores and Consumer Reports reviews started to decline. According to Business Week, several years ago, Toyota began pressuring parts suppliers to lower the cost of their parts. One unnamed vendor said that his company had been told to decrease the cost of its parts by 10% for each generation of designs. Perhaps Toyota thought that its manufacturing systems would identify and compensate for defects caused by less expensive parts; if so, it was clearly wrong.

What makes this even more embarrassing for Toyota is that the company looks like it's denying responsibility, assigning blame to its vendors and refusing to issue recalls until it's under intense Government pressure. Its head of quality in Japan said that the company had been pressured into issuing the recalls, but its U.S. division said that the recalls had been voluntary. The president of Toyota, Akio Toyoda, had nothing to say publicly about the crisis for weeks until he was cornered at the Economic Forum in Davos, Switzerland by a reporter. Yesterday, he finally made a public apology, but it was carefully worded not to say that Toyota caused the problems and accepts responsibility for them. It was, instead, a statement that the company would improve its processes and focus more on customers.

Just as the stuck accelerator problem seemed to be coming under control, word came out from both the U.S. and Japan that most of Toyota's Prius models may have braking problems that have resulted in accidents. The Japanese Government is calling for a recall in that country, but Toyota has so far refused to comply. Steve Wozniak, Apple's co-founder and the owner of several Priuses, reported that his 2010 Prius has a problem with uncontrollable acceleration when driven with cruise control. Wozniak believed that it was caused by a software bug, but Toyota's response was that there's no problem with the car's software. Then, they reversed course and said that yes, the Prius has software problems, but in the braking system, not the accelerator.

What caused the well-oiled Toyota machine to break down in so many ways will be the subject of case studies and books for years. I think that arrogance played a big part--the cocksure belief that Toyota's processes and systems were so good that they couldn't possibly be the problem. If there was a "problem", it was with customers who drove too fast, or who were incompetent, or who thought that they might score a financial windfall from the company. Toyota had managed to pass General Motors to become the world's largest car company...surely they knew what they were doing.

For many companies, their time of greatest success is also the time when failure becomes most likely. People make two critical errors when they experience success:

1. They convince themselves that they're solely responsible for their success, and that other factors, such as economic conditions, the failures of competitors or sheer luck, were immaterial.
2. They believe that their success validates their judgment, and that going forward, they'll have the same success.

Success is always due to a variety of factors, some internal and under our control, and some external and partially or completely out of our control.  A successful strategy under one set of conditions can fail miserably under a different set of conditions. Just ask GM: The company was making record profits from its trucks and SUVs when gasoline was under $2.00 a gallon, but at $4.00 a gallon, demand dried up and all the problems that had accumulated from decades of mismanagement became obvious. It was like a lake drying up to reveal the dead cattle that had wandered in and drowned over the decades. They were there all the time, they just weren't visible.

Success also makes us believe that we're infallible. We look at the great decisions we've made, admire the wonderful policies and procedures that we've put in place, and assume that as long as we keep doing the same things, we'll continue to be successful. However, go back to my previous point. Success is due to both internal and external factors, and we usually have little control over the external ones.

Consider Yahoo. They were by far the most popular site on the Internet. They had expanded from a search engine to a destination covering hundreds of topics with services for consumers and small businesses. Then, in 1998, out came this little two-man operation from graduate students at Stanford who thought that they had a better search engine. Yahoo first ignored, then disparaged this funny little company called Google. Ten years later, Google was the number one site on the Internet, while Yahoo, which had spread its focus so thinly over so many different businesses and market niches that one of its executives referred to it as the "peanut butter" problem, was looking to Microsoft for financial salvation.

When success spawns arrogance, complacency inevitably follows, and the result will be failure. No matter how successful you or your organization are, you don't have all the answers. You don't have control over all the variables that will determine your future success. Even Superman has to contend with Kryptonite.

Is the $9.99 eBook dead? Not at all

Earlier today, Gizmodo pronounced the $9.99 eBook dead, as a result of an announcement by Hachette that it is joining Macmillan (and probably HarperCollins) in instituting an agency pricing model where resellers such as Amazon and Apple will get a 30% commission on sales of eBooks at prices set by the publishers themselves. (I've learned from a source that Penguin is working on its own agency plan to be announced in a few months.) Of the Big 6 trade publishers, only Random House and Simon & Schuster would be without an agency model for sales of eBooks.

In response, Amazon has a number of tactics that it can execute. First, it can limit distribution of print titles from publishers who impose agency deals. The "nuclear option" that Amazon exercised against Macmillan backfired because the company "capitulated" almost immediately. However, a longer-term strategy of purchasing fewer print copies of Macmillan's titles, letting them go out of stock more often and taking longer to refill inventories would serve the same purpose. If the eBooks are available day-and-date with print versions and in unlimited quantities, while the print versions are often out of stock, it would provide more incentive for readers to move to eBooks.

Amazon could also play one publisher against the other, offering more promotional support and even co-op funds to help pay for newspaper, magazine and television advertising, in return for more pricing flexibility. Those publishers who cooperate would increase their revenues and/or decrease their costs, and would put pressure on other publishers to fall in line.

Finally, I expect Amazon to get even more aggressive in pursuing electronic rights from established authors. Many established authors or their estates have contracts with publishers that predate the eBook era, so they retain their eBook rights. There is a strong body of legal precedents and settlements that favor the authors and estates in cases where their print publishers claimed eBook rights that they had not specifically been granted. Amazon can price these titles at $9.99 or less and still offer extremely attractive financial deals to authors.

In short, the $9.99 eBook is far from dead, and Amazon still has many ways to prevail in the long term. 

NBC Universal: We make it up as we go along

In Congressional hearings today, NBC Universal and Comcast answered questions about how their merger would affect the supply of programming to competitive outlets, among other topics. During questions, NBC Universal Chairman Jeff Zucker was asked about Hulu's decision to block the ability of Boxee to display its programs. It's important to remember that at the time of the dustup between the two companies, Hulu was owned by NBC Universal, News Corporation and Providence Equity Partners (Disney subsequently invested in Hulu.) Therefore, any decisions that were made weren't Zucker's alone. However, responding to direct questioning, he said that the decision to block Boxee was made by Hulu's management because Boxee was "... illegally taking the content that was on Hulu without any business deal."

The problem with this statement is that it's wrong on both counts. First, Hulu's management has admitted that it was pressured by its joint venture owners, including NBC Universal, to block Boxee. Second, at the time that Boxee was displaying Hulu's content, it was using the same facilities that Hulu made freely available to anyone. Boxee wasn't stripping out any advertising in Hulu's streams or interfering with the streams in any way. Hulu specifically targeted Boxee in denying it service. Then, when Boxee attempted an end-around by using Hulu's freely-available RSS feeds, Hulu blocked them as well.

I wrote earlier about Zucker's cowardice in how he blamed Jeff Gaspin for the disastrous late night "musical chairs" plan at NBC. Now, Zucker is hiding behind Hulu's management (that acted at Zucker's direction) and is accusing Boxee of illegal behavior that never occurred. Boxee has responded to Zucker's charges and has linked to a video of the Congressional Q & A. I've given up on trying to comprehend how this man has managed to keep his job. All I can say is that Jack Welch is spinning in his grave, and he isn't even dead yet.

Motivation vs. fixation

Steve Tobak of BNET wrote yesterday about Steve Jobs's remarks about Google last week at Apple's post-iPad "town hall", and used them as an example of the value of having an enemy in order to motivate the troops. As someone working at Netscape when Microsoft declared us Enemy #1, I saw just how motivating having an enemy can be. At the same time, it's extremely important to differentiate between motivation and fixation. Microsoft focused so hard on killing Netscape that it repeatedly crossed the line from honest competition into using its monopoly position illegally. That decision brought both the U.S. Justice Department and European Union down on the company. The result is that Microsoft finds its hands tied whenever it tries to exercise its power.

It's also important not to fixate on a single competitor and ignore other risks. While Microsoft was pounding Netscape into the ground, Google was just getting started. Microsoft ignored Google, but Google's plan from the beginning was to eventually take on Microsoft, which it's successfully doing. Now, Google is too big for Microsoft to kill, and Microsoft's playbook, which was written in the Netscape days, is out of date and ineffective.

My last point is that it's better to fixate on customers than competitors. If you consistently satisfy customer needs, anticipate their future needs and are responsive when they have problems, you're going to be successful. I think that's the real secret of Apple's success with the iPod and iPhone. While competitors were focusing on adding more codecs to their MP3 players, Apple was focused on the user experience. Instead of trying to improve on the BlackBerry model as other smartphone companies were doing, Apple again focused on the user experience.

In short, it's important to understand your competitors but not fixate on them. Fixating on customers will almost always result in a better outcome.