Apple Vice President of Software Engineering Craig Federighi introduces Apple Intelligence during the WWDC24 keynote at Apple Park on June 10, 2024. (Image Credit: Apple)
Microsoft was the first to start sticking AI on devices, which it did months ago with Copilot+. It caught Google and Apple sleeping and would have had the AI space owned with OpenAI and ChatGPT.
But Microsoft's execution is so bad it's questionable if anyone is using any of these Copilot+ features today. It's still holding back remember, and the buyers remain confused as to whether something is or is not an AI PC given there's no desktop AI PCs, no gaming AI PCs, and no workstation AI PCs available in the market or in sight, at least in the near term.
This has given both Apple and Google time to close the competitive gap. Apple announced its Apple Intelligence initiative in June and then rolled it out last week in a way that should have more general Apple users using desktop and smartphone AI than Windows users are. Google has also begun to roll out AI features, so both companies are taking advantage of Microsoft's extremely poor execution.
The big difference for Apple is that it has started offering AI experiences in Apple stores in 15-minute sessions so that Apple users and potential users can play with the technology and get more familiar with it. There's no similar effort on either Microsoft or Google's part.
Now, let's talk about how this likely benefits both Apple and its users during this rollout of AI. Then, it's time for my Product of the Week to be my new favorite phone: the Google Pixel 9 Pro Fold, which I now carry daily.
The Problem With People and Features
We are creatures of habit. We want to do things as we always did them. This is problematic for the company Microsoft, and the rest of feature-rich products such as Office 365 and Windows because, the very characteristic that constitutes their advantage over other offerings-feature richness-is also something to be distrusted.
What's troubling is that once the users don't make use of the enormous number of features, it is quite straightforward to migrate those users to a competing offering because the competition doesn't have to bridge all of the features. Only the ones most people actually use will have to be bridged. We see it happening today with Google Workspace, which is not yet perfect but does what most people want to have done and at much cheaper costs during a time of belt-tightening.
If you don't get people to use and like the pieces of your product that are unique, even if dominant, a lower-cost competitor can easily migrate those users to their competing offering. Over this challenge, if you have a complex product or a unique set of features like, say, Copilot+, you need to promote using those features and remind users of their value. Otherwise, your ability to retain your customer base is significantly degraded.
Internet Explorer Example
We saw that play out with Internet Explorer. Initially caught off guard by Netscape Navigator, Microsoft played it very well and ultimately took the market away.
Two strategic mistakes marked Netscape's tragic mistake. First, it openly contended with Microsoft. Then instead of positioning Navigator as a front end to a suite of really interesting web tools, Netscape was competing directly with the Office of Microsoft. This placed them on Microsoft's turf, and a battlefield to be won that Netscape was ill-prepared to fight. Netscape lost that battle and went into history.
Then, after attaining around 98% market share, Microsoft largely defunded IE much as it has now for the most part defunded Windows. Google responded with a version of its Chrome browser that seemed to work better than IE, and Microsoft bled market share.
Since Microsoft Edge, the browser that followed Internet Explorer, runs now on Google's Chromium technology, Google, in fact owns the browser space but isn't repeating the errors that Netscape and Microsoft made.
Microsoft's Artificial Intelligence Screw Up
Generative AI is now the new advanced version of AI and is being thrust into the market through the cloud predominantly. Microsoft has released Copilot+ with Cocreator and Recall; in concept, both are very useful. Then Microsoft was forced to withdraw Recall from the presentation since it highlighted concerns for security without any mitigation measure; and Cocreator is in effect Dall-E but running locally.
Additionally, the only PCs that would ever run these two apps were those initially configured with the Snapdragon X processor and focused on people who value high portability but not performance. It's a group that just typically wants the basics and doesn't chase new features or capabilities as much as performance users, gamers, and workstation users do.
So, one of the two apps was left in the backburner, and the people targeted with the hardware were not those that would be typically first movers for AI tools.
It has been one of the worst misfires I've ever seen so far.
Apple's Better AI Approach
Apple is unleashing its AI tools to every customer, not just a slice of the laptop using population. And the in-store experiences above will positively influence customers to try and eventually use these AI tools at rates much higher than Microsoft's approach alone could.
As such, although Apple's AI implementation is still lagging a bit behind Microsoft's, it is probably the case that more people will use it, so it should be a far stronger competitive differentiator. That's because a feature that no one uses provides little, if any, value, and Apple is simply doing a far better job of making people use Apple Intelligence than Microsoft is doing with Copilot.
Conclusion
While entering a market first, as Microsoft did, can give the business a huge advantage, poor execution lets competing companies slipstream this early effort and seize the market the pioneer created. That is what happened in Netscape Navigator versus Internet Explorer; Microsoft entered last in that race but out-executed Netscape.
Now we see nearly the same thing happening in AI between Apple and Microsoft, and Google is right there on Apple's tail. Microsoft ceded the market but stumbled, leaving the door open for Apple to step into the fray with a far more aggressive push. While Microsoft's Cloud AI endeavors remain unthreatened, its desktop AI endeavor is now being overtaken by both Apple and Google thanks to the truly abysmal execution by Microsoft.
That's partly why Microsoft has abandoned the smartphone market, and in either case the result is clear: Apple is out-executing Microsoft here. This cycle, then, it means Microsoft will not displace Apple, and Apple has a decent chance to take a significant share away from Microsoft as people get even more excited with Apple's more useful AI tools and base user training.
Comments