The big news last week was Apple’s new iPhone 5. Although the new phone is lacking in revolutionary features like Siri that premiered in earlier versions, it does come with a new connector. Called Lightning, the new connector replaces Apple’s proprietary 30-pin adapter that debuted with the original iPod. A better name for the new connector might have been Tornado as the change has created mass chaos in the $7 billion aftermarket for iPhone accessories. Manufacturers of devices with physical docks must now redesign their products to interoperate with the Lightning connector. The most heavily impacted are manufacturers of speaker systems, clock radios and workout equipment.
The change promises a lift in sales and profits for consumer electronics retailers and wireless stores. Telecom carriers typically bank 80% of the retail price as profit when selling Apple accessories. Of course, consumers who invested in speaker systems or clock radios are not as excited. If they choose to upgrade to iPhone 5 they will be forced to purchase new devices.
Some consumers and hardware manufacturers have abandoned physical connections altogether, jumping to wireless interfaces via Bluetooth. The idea of a wireless connection provides piece of mind to those seeking to €œfuture-proof€ their Apple accessory investments. However, as with all standards Bluetooth is destined to be replaced by a newer, faster, simpler communications protocol. There has been talk for several years about how Bluetooth will be replaced by a Wi-Fi Direct or Near Field Communication (NFC).
To reduce compatibility issues between iPhone5 and pre-existing devices, Apple introduced a $29 adapter that allows connections from the new phone to old docks. But most people I have spoken to question whether Apple really cares about the inconvenience it has caused its customers or its ecosystem of aftermarket product suppliers. When a company enjoys the dominant market position as Apple does it has the power to drive new standards without much concern for backlash from your business partners.
Unfortunately, we know these type of interoperability stories all too well in the B2B Integration sector. Over the past 10 years we have seen numerous market leaders dictate new integration technologies to their community of business partners. A few years ago, Medicare announced that it was requiring EDI claims to be submitted via the 5010 version of EDI standards. As a result, hundreds of thousands of hospitals, physician offices, pharmacies, labs and long term care facilities have undertaken a massive upgrade of their B2B integration technologies to comply with Medicare’s guidelines.
Walmart sent shockwaves through the entire retail segment in 2002 when it announced its intention to shift to AS2 for all EDI communications. Tens of thousands of Walmart suppliers ranging from multi-billion dollar brands to small seasonal merchandise vendors were forced to purchase, install and train on AS2 software. The same pattern repeated when the mega-retailer announced its plans for data synchronization and RFID.
Banks struggle with these interoperability challenges as well. When a multibillion dollar software company tells its banks that it will only communicate via SWIFT each of the financial institutions must spend months configuring and testing their new connections. Some of these banks may be smaller institutions in Southeast Asia, Sub-Sarahan Africa and Latin America that lack experience with SWIFT’s corporate programs. As a result a considerable learning curve must be overcome to establish connectivity.
The same pattern of disruption occurs over and over again when market leaders dictate new B2B interoperability approaches to their community of business partners. Although market leaders may have good intentions trying to drive new, innovative approaches to interoperability within an industry, the result is often a considerable amount of chaos.
A better option is to offer reverse compatibility to older standards or to allow business partners to choose from many different standards as a means of connectivity. In recent years we have seen a trend towards this approach amongst multi-national corporations towards B2B integration. Although, it remains to be seen whether a similar sentiment will develop in Cupertino.