Apple Disrupted Cisco, Here's How

In tech, convenience trumps completeness, and good enough is better than great. Just ask Cisco (Nasdaq: CSCO  ) , which recently ceased production of the Flip camcorder. The iPhone has rendered the Flip all but irrelevant.

According to Apple's (Nasdaq: AAPL  ) published specs, the iPhone shoots high-definition video at 720 pixels at 30 frames per second and includes audio. Specs for the most recent Flip say it would shoot hi-def at 720 pixels at 60 frames per second with video output as MP4 files. Not much difference for casual users, in other words.

Therein lies the problem. Smartphones in general and the iPhone in particular have become this generation's Swiss Army Knife, right up to the point that Flickr says that the iPhone 4 trails only Nikon's D90 SLR as a source for new photos and videos posted to the site, The New York Times reports. Cisco had no choice to but to flush the Flip.

The triumph of mediocrity
Can any of us claim to be surprised by all this? For all of Apple's talk of magical products, what makes the iPhone special is its App Store, price, and form factor. Carrying an iPhone is easier than carrying a separate camera, and easy matters. A lot.

If it didn't, the iPad would have been a disaster. Both Samsung's Galaxy tab and Motorola Mobility's (NYSE: MMI  ) Xoom claim additional features, and Google's (Nasdaq: GOOG  ) Android operating system is famously customizable.

You know what? For a lot of consumers, "customizable" is just a synonym for "difficult."

Apple isn't the only company to take advantage of this shift to simplicity. Staples (Nasdaq: SPLS  ) pitches its office supply services as giving customers an "easy" button. Netflix (Nasdaq: NFLX  ) gets away with not having the newest titles by pitching pervasive, all-you-can-watch streaming access.

Green Mountain Coffee Roasters (Nasdaq: GMCR  ) may offer the best example of all. Sure, the company makes great organic coffees. But the real growth engine is the Keurig single-cup brewing system. Revenue from sales of brewers and cup refills rose 68% in the December quarter, and that's in spite of known issues with some systems.

Some tips for investing like a simpleton
The shift to simple has profound implications for us as tech investors. For one thing, it means re-evaluating what creates value. What do we look for if not quality? Try asking these questions when assessing the worthiness of new consumer technology:

  1. Does it solve an obvious, painful problem without creating more pain? Think of how Netflix simplifies streaming with its pricing and delivery model.
  2. Do substitutes offer more features, or more convenience? Remember, it's about delivering aspirin to those with headaches. Most often it's elegant design and not new features that provides the relief.
  3. Beware "customizable." Think of universal remotes. How many times have you been befuddled by all the options on these devices? Options are anathema to busy consumers who just want to find and watch a favorite program.

Here again, Apple offers a perfect example. The Mac maker isn't known for offering whiz-bang features in all its gear. Rather, the iPad and iPhone are best known for what they don't offer. The first iPad didn't offer a camera. It didn't offer a USB port. It didn't do a lot. But it did offer a big screen that made using it a lot easier on the eyes than the seven-inch tabs it was competing against.

That's why I'm not surprised to see the iPhone disrupting the camera and camcorder space. Who cares if the video is shaky in some spots? Baby Molly can't stop cracking up at how her dog eats bubbles. The iPhone is just as good any camcorder for capturing moments like these.

What other ways to do you see smartphones disrupting the tech industry? In what ways have you personally chosen convenience over completeness? Please weigh in using the comments box below.

The Motley Fool recently introduced a free My Watchlist feature that allows users to stay ahead of the curve and receive up to date news on companies like Apple, Cisco, or any of their competitors. To get up-to-date news and analysis these companies, add the stocks to your watchlist today:

Google is a Motley Fool Inside Value pick. Google and Green Mountain Coffee Roasters are Motley Fool Rule Breakers recommendations. Apple, Netflix, and Staples are Motley Fool Stock Advisor selections. Motley Fool Options has recommended members create a bull call spread position in Apple and a bearish put position in Green Mountain Coffee Roasters. Motley Fool Alpha LLC has shorted Green Mountain Coffee Roasters, purchased Netflix puts, and owns shares of Cisco. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He owned shares of Apple and Google at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. You can also get his insights delivered directly to your RSS reader. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool owns shares of Apple and Google and has created a bull call spread position in Cisco. The Fool is also on Twitter as @TheMotleyFool. Its disclosure policy asks that you photo it from the left side, please.


Read/Post Comments (11) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 25, 2011, at 7:24 PM, gslusher wrote:

    "It didn't offer a USB port."

    The iPad Camera Connection Kit includes two small connectors that plug into the iPad's 30-pin connector. One is an SDHC card reader, the other an USB port. It can connect to cameras, camcorders, flash drives, audio output devices, keyboards, etc. (No printers, but that's a matter of a lack of drivers.) What more do you want? Apple's design allows for ONE connector to serve multiple purposes, rather than having ports all over the device. (The same port puts out HD video, for example.)

  • Report this Comment On April 25, 2011, at 7:40 PM, pstoimenov wrote:

    That is not necessarily true. Videoconferencing using cell phone was not invented by Apple. It is true that Apple pretended that however models from Nokia and Sony Ericsson had this feature years before the iPhone even existed (e.g. Nokia N97).

    The difference is only now good data coverage allows this feature to be less 'gimmicky' and more useful.

  • Report this Comment On April 25, 2011, at 7:49 PM, Superstef wrote:

    "The triumph of mediocrity" says the writer, then references the iPad and iPhone. The only mediocrity I see here is the quality of research that went into this article. Damning with faint praise does not do either of these products justice, nor the tens of millions who took their money out of their pocket to buy them. There is no point using examples to bolster the claim that 'good is good enough' - which may indeed be true in many cases - when the examples chosen prove precisely the opposite. iPad and iPhone are examples of superb engineering exceeding user expectations: why else are there still lines round the block to get ones hands on an iPad, and why has iPhone consistently been voted the best smartphone in the world?

  • Report this Comment On April 25, 2011, at 8:03 PM, motleyjedi wrote:

    Why does MotleyFool continue allow a fandroid like Tim Beyers to bash Apple again and again? Soon, MotleyFool will become TrueFool.

  • Report this Comment On April 25, 2011, at 8:42 PM, rlcato wrote:

    @motlyjedi:

    Try reading the article next time before 'bashing' him. You have any 'bashing' quotes he made here?

  • Report this Comment On April 25, 2011, at 9:16 PM, TMFMileHigh wrote:

    @Superstef,

    Thanks for writing.

    >>Damning with faint praise does not do either of these products justice, nor the tens of millions who took their money out of their pocket to buy them.

    With due respect, you need to read the article again. I'm praising the iPad and iPhone for their simplicity rather than damning them.

    (We're a two iPhone, one iPad, one iPod Touch, and four Mac household, by the way.)

    >>iPad and iPhone are examples of superb engineering exceeding user expectations: why else are there still lines round the block to get ones hands on an iPad, and why has iPhone consistently been voted the best smartphone in the world?

    You're writing as if these products are a triumph of bells and whistles. That's not the case. Other products have more features. What the iPad and iPhone have that others don't -- and why there continues to be high demand for each of them -- is an appealing form and function that does what consumers want and nothing more.

    Foolish best,

    Tim (TMFMileHigh and @milehighfool on Twitter)

  • Report this Comment On April 25, 2011, at 9:17 PM, smkirby wrote:

    This is a "simpleton" article ...Cisco was well aware of the iPhone when they bought Flip....at the time Cisco viewed Flip as a way to drive even more networked based video to the networks and the Flip potentially could have become the new "edge " of the network...Cisco also has numerouse enterprise based video solutions and having Flip provided potentially an enterprise class vehicle to upload video onto an enterprise network...however given Cisco's recent refocus, they found Flip to be too distracting from their core strategies..especially given the number of employees (550) versus the revenue and the realization that yes, even though they were the market leaders now, in two years smart phones would continue to erode market share for standalone video products...so Cisco chose to retain the technology and the FlipShare software which is fabulous for potential future use in other video products...and take a fat tax write off instead of a lingering sale of the company for less money...

    Not everything is a simple as you try to convince the public.

  • Report this Comment On April 25, 2011, at 9:19 PM, TMFMileHigh wrote:

    @motleyjedi,

    >>Why does MotleyFool continue allow a fandroid like Tim Beyers to bash Apple again and again? Soon, MotleyFool will become TrueFool.

    Ding! Empty claim. Evidence please.

    And for your reading enjoyment, the disclosure line once more:

    "Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He owned shares of **Apple** and Google at the time of publication."

    Foolish best,

    Tim (TMFMileHigh and @milehighfool on Twitter)

  • Report this Comment On April 25, 2011, at 9:24 PM, TMFMileHigh wrote:

    @smkirby,

    Thanks for writing.

    >>This is a "simpleton" article ...Cisco was well aware of the iPhone when they bought Flip....at the time Cisco viewed Flip as a way to drive even more networked based video to the networks and the Flip potentially could have become the new "edge " of the network...

    I'd be more convinced if this didn't sound like the Cisco PR party line. Trouble is, when Cisco bought Flip in March 2009 Apple had yet to introduce an iPhone capable of video recording.

    Foolish best,

    Tim (TMFMileHigh and @milehighfool on Twitter)

  • Report this Comment On April 25, 2011, at 9:53 PM, BradReeseCom wrote:

    Hi Tim,

    It might help to know who Cisco CEO John Chambers depends on for technology advice:

    In December 2007 Cisco CEO John Chambers hired Motorola’s failed CTO Padmasree Warrior (it was under Warrior’s leadership that Motorola sales declined by more than -$4 billion, while simultaneously, Motorola operating earnings collapsed by -$3.8 billion to a loss of -$534 million).

    Padmasree Warrior is now Cisco’s Chief Technology Officer and was recently promoted to the additional position of Cisco Senior Vice President and General Manager, Enterprise, Commercial and Small Business (she particularly focuses on Cisco’s efforts in architectures: borderless networks, data center/virtualization, collaboration, as well as key initiatives such as security, and mobility. She leads a team of 10,000 engineers)!

    The following blog authored by Padmasree Warrior gives a hint as to WHY Cisco is now making the decisions that it does:

    —————————-

    Blog of Padmasree Warrior – Motorola Executive Vice President and Chief Technology Officer

    iPhone, uPhone, We all Phone!

    January 10, 2007

    Lights, camera, action!

    As worshippers come out of the heady, enthralling, grandstand production called Macworld, the hype settles and reality sets in. It’s called “the morning after”!

    Many people ask me what I think about Apple’s announcement of the iPhone. If you are one of those, here is my opinion. If you are not, my apologies for making you read yet another post on the much-anticipated Apple iPhone.

    First, I am thrilled that an innovative tech company like Apple finally decided to “join the club” and build a cell phone with multimedia. I have always been a fan of Apple’s creativity and cache for the cool factor. It is great for the mobile industry to have an icon like Steve Jobs stand up and say that it took his company over 2 years to build a multimedia cell phone! It just goes to show how complex it is to get into this business. The photos and pictures of Apple iPhone did not disappoint me. I expected nothing less from the likes of Jonathan Ive. Disclosures – I am a Jonathan Ive fan, I have owned an iPod since early launch, and I am a nut for cool gadgets.

    I am also delighted because Apple’s announcement validates what I have always believed – mobility will change the world and transform communications, computing and entertainment. At Motorola, we call this vision, “Seamless Mobility” for the Mobile Me.

    Having said that, here are my morning-after doubts:

    1. Touch screens have been around for a long time. I wonder how practical users will find this on a “phone”. There is a huge difference in the usability between a portable media player that you can put in a pretty case and carry on your hip versus a mobile phone that you constantly take in and out of your pocket or purse, hold up to your face, drop on the floor many times in the course of a day! Smudges, scratches and breakage are big issues. Let us hope we don’t have to spend more money and carry special cleaning lotion and buff cloth as accessories!

    2. There is nothing revolutionary or disruptive about any of the technologies. Touch interface, movement sensors, accelerometer, morphing, gesture recognition, 2-megapixel camera, built in MP3 player, WiFi, Bluetooth, are already available in products from leaders in the mobile industry – Motorola, Nokia and Samsung. So, what appears to be the initial pricing at $499 and $599 with a minimum 2 year service agreement seems a stretch.

    3. Battery life is problematic. User experience will be compromised with a mere 5 hours of talk time, and what about standby time? Speaking from over 20 years experience building products for the mobile industry, power management in mobiles is a non-trivial problem!

    4. At a time when the entire industry is moving to 3G, UMTS, HSDPA, 1x EV-DO and WiMax for wireless broadband, why launch an “internet device” on a 2.5G EDGE network? It is weird to me that high-speed over-the-air data access is under-leveraged. I am also puzzled as to how this will increase ARPU for the service provider, how will it drive traffic onto their high-speed networks? IMO, a super way for Apple to differentiate itself would have been snappy over-the-air music and video download and synch.

    5. I am not sure about the lack of a keyboard. Remember most people use a cell phone to make calls, especially when they are driving. I reserve judgment on how easy this will be for making calls or texting while we are moving at high speeds.

    6. Is 4GB or 8GB of embedded memory necessary on a mobile, especially when you can have a cheaper option with an expansion slot that allows the consumer to add the memory and pay for it separately if they need it?

    7. Lastly, when you have billions of devices – is a closed, proprietary system the right strategy? What happens to the operator’s differentiation with branded services? Is this signaling a sea change in the service provider’s mark on the UI?

    As always, Apple raises the bar with a compelling concept; and this time to enhance the vision of Seamless Mobility for the Mobile Me – which I welcome.

    Stay tuned for other great products from others and us in the mobile industry! The race continues.

    —————————-

    I mean in my opinion, there’s a reason why Cisco is acting so clueless: Padmasree Warrior – Cisco’s Chief Technology Officer!

    Sincerely,

    Brad Reese

  • Report this Comment On April 25, 2011, at 11:16 PM, kutani123 wrote:

    Brad,

    Just learned some more info, additional to the failed CTO you mentioned above, there is another incompetent exec Chief Strategy Officer (CSO) Ned Hooper and his corporate dev group as KNOW NOTHING about consumer business but was assigned, in charge, masterminded the FLIP acquisition.

    As matter of fact, NOTHING wrong with Flip by itself prior to acquisition..It was perfecrtly in both technology and market

    The BIG problem was after acquired it, the bunch of incompetent Cisco execs, in 2 looonnngg years as promised, failed to improve it, failed to upgrade it to wireless interface from USB interface. It's really a shame for Cisco Consumer team..

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