Apple iPhone Raises Zune Clone-and-Hone Bar

Yesterday, Robbie Bach, president of Microsoft's entertainment and devices division, dismissed the idea of an Apple iPhone. The gist of his comments was that there were too many design problems getting a phone and music player to both work well on the same device. Today, Steve Jobs announced Apple's iPhone with a slick new touchscreen interface and other innovative advances that seem to solve all of those nagging design problems, and then some.

This episode sums up the Microsoft clone-and-hone approach (see yesterday's post for more on clone-and-hone). For all its virtues, Microsoft does not innovate core design. Apple does. Microsoft sees problems. Apple sees opportunities to be creative.

In fact, the main Microsoft challenge is to figure out how to clone the innovations of others without paying too much for intellectual property violations. Let us look to history for an example:

In the 1980s Apple’s Macintosh operating system, with its graphical user interface, gave it a distinct competitive advantage over Microsoft’s character based DOS interface. To hamper Microsoft’s efforts to develop its own GUI, Apple asserted copyright ownership of the "look and feel" of its interface. This included 189 specific elements, like the use of icons, rectangular windows and overlapping windows. Apple then licensed Microsoft the rights to use certain of these elements, but with severe limitations. For example, Microsoft was not permitted to use a trash can metaphor for deleting files; windows had to be arranged side-by-side ("tiled") and not overlapped. These restrictions made the first release of Microsoft Windows clunky and it was notably unsuccessful. That was Apple’s intention.

Microsoft fought back by re-interpreting its license agreement with Apple and pretty much ignoring any restrictions. The Windows GUI soon became very Mac-like. In a series of expensive legal actions starting in 1988, Apple attempted to assert copyyright and contractual violations by Microsoft, finally dropping all claims in 1997 when Microsoft invested $150 million in a then-struggling Apple. In the interim, Windows achieved monopoly status, generating billions of dollars of annual revenue, and the payment to Apple was a trifle to Microsoft.

It will be interesting to see how the Softies do with the iPhone intellectual property. Early in his MacWorld presentation, Jobs was clear, stating, "Boy, have we patented it!" Later, he added that Apple had "filed for over 200 patents for all the inventions in iPhone, and we intend to protect them." This clone won't be quite as easy for the Softies to pull off as the Mac clone was. It should be fun to watch this story unfold.

A footnote: it seems that Apple has reached an agreement with Cisco Systems to use the iPhone brand name, for which Cisco owns the trademark. Chalk up another negotiating coup to Jobs.

Copyright © 2007 Philip Bookman

Technorati: Business Strategy, Clone-and-Hone, Zune, Microsoft, iPhone, Apple.