by Gonzalo Baeza Hernández
Apple’s segmentation strategy, and the folly of conventional wisdom
[Via O'Reilly Radar]
There is a myth, more of a meme actually, about the ‘inevitability’ of commoditization. It is a view of the world that sees things linearly, in terms of singularities, and the so-called “one right path.”
In this realm, where commoditization is God, horizontal orientation (versus vertical integration) rules the roost. How else to define consumers, not in flesh and blood terms, not as spirits that aspire to specific outcomes, but rather, as a composite set of loosely-coupled attributes.
This mindset is compelling because it is simple and familiar, but it also leads to blind obsequiousness.
Historical edifices are held as indelible fact. “It’s Microsoft v. Apple all over again.” “There has to be one absolute, dominant leader.” “Open will always prevail — and should prevail — over proprietary systems.” “Market share matters above all else. Even profits.”
There is one small fly in the ointment to this ethos, however, and its name is Apple. (For a historical perspective on tech industry architectural orientation, check out “Waves of Power” by David Moschella.)
Apple’s gaudy performance relative to its industry peers
The following inconvenient facts must be an affront to the horizontal, commoditized, open, market share zealots. Apple has launched three major new product lines since 2001 : the iPod (October, 2001); the iPhone (July, 2008); and the iPad (April, 2010).
The company’s stock is up 3,000 percent since the launch of iPod, 60 percent since the launch of iPhone, and 20 percent since the launch of iPad.
In that same time period, the major devotees of the loosely coupled model — Microsoft, Google, Intel and Dell — have been, at best, outpaced by Apple 6X (in the case of Google dating back to the launch of iPod) and at worst, either been wiped out (in the case of Dell) or treaded water (in the cases of Microsoft and Intel) in every comparison period.
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This is one of the best articles detailing how Apple is not like a conventional company and that conventional wisdom does not hold. As it states:
Therein, lies the problem with conventional wisdom. Namely, that it’s conventional. It doesn’t think outside the box in terms of strategic imperatives, like building differentiation, growing margins or defensibility.
Apple is playing chess while the others are playing checkers – a great metaphor from the article. Apple does what the customer wants and leads them to their products. Other companies follow without having a real understanding of why things are popular.
In this regard, Apple’s product strategy is a study in market segmentation. Versus merely trying to stuff a product, burrito-style, with as many different features as possible, they target specific user experiences, and build the product around that accordingly.
Putting in all sorts of things because they can, not because they are useful. The hardest thing in most any endeavor is what to leave out. But Apple does a great job of making most people desire so much what is present that they do not mind what is missing. Like the AppleTV, which I may very well get because it will give me simple access to what I want for less money. Who cares whether it has a DVD or hard drive. I’ll be able to stream the content from devices that do have those.
ANother insight from the article is how Apple reboots successful products, not failed ones, as many companies do. So the iPod nano is completely different with some new features that make it worth buying, while Apple completely stops building the old one, no mater how popular it was.
The article has a great chart showing all of Apple’s mobile devices. Each has a decided niche that does not impact any of the other devices. Apple knows the exact purpose of each one and makes each one a compelling choice. So, where are the other wearable devices? How about wearable with touch interface?
One thing people forget when they say that these devices will cannibalize computer sales is that each of them must be synched to a computer. Whether you have an iPad, iPhone or shuffle, you want to connect them every so often to a computer of some kind running iTunes. Because of that, there is also an incentive to buy a Mac computer, since you are going to have to have one anyway. I wonder how many people are buying Mac laptops on their next purchase just to make using iTunes easier?
So all the iOS mobile devices would drive sales of Mac computers.
No one else has the devices nor can they drive the same strategy the makes all of this work seamlessly.
