Horace Dediu on the mark – Apple and Amazon are flip sides of same coin

monster waveby isRough Meztapha

The Anti-Apple
[Via asymco]

Building a successful business is hard. Many try, few succeed and those that do tend not to thrive for long. So success in business it should be respected. Especially in highly competitive industries like technology. The fragility of success however should also give one pause to think about how delicate a business model is.

The presumption that companies can shift business models at will is usually false. Businesses are balanced on a knife’s edge of dependency on multiple variables. Almost all resources are expended on preserving this balance.

This being my observation, I take issue with assumptions that large companies can “pivot” on a dime or that they can change their business models “when conditions are right”. Consider Microsoft’s dilemma. They have all the resources in the world and yet they could not pivot to take advantage of a change so mundane as a low power microprocessor (which enabled a mobile computer and hence a new ecosystem and profit model for software.)

[More]

Both Amazon and Apple represent 21st century companies, ones that reach success by being intelligent. They find non-zero sum solutions for themselves and for their customers. Helping any other group, such as bandits on Wall Street , is secondary.

Too many 20th century corporations act like bandits, following a zero-sum solution where their success usually requires the ultimate failure for the consumer. They do not have customers, only consumers.

They sell off the products that people like, or merge and destroy the products people like, or change business models and destroy the products people like.

All to enrich the bandits and not the customers.

Apple and Amazon in many ways act very different. They do not seem to be much concerned with how the bandits on Wall Street see them. And in both cases, Wall Street views these two companies with unreal narratives.

Apple’s future earnings are expected to be lower than Walmart’s. Amazon’s earnings are expected to be 20 times greater than Walmar’s. To give you an idea of how far they were off  in 2012 – Amazon had $61 billion in revenue but lost $39 million; Apple had $156 billion in revenue with a profit of $41 billion; Walmart had $116 billion in revenue with a profit of $17 billion..

So Apple made over twice as much money as Walmart but was valued less. Amazon lost money but was values astronomically greater than Walmart.

How can the ‘efficient’ market do such a poor job valuing these two companies? It’s a question.

So be a successful 21st century company 

The route each company has taken is different – Apple surfs a high margin monster wave predicated on finding new innovations of its own to sell to others at high mark up; Amazon on a low margin monster wave predicated on finding innovative ways to sell the innovations of others cheaply.

Both are the best at what they do. To continue requires laser-like focus on that wave, even as that wave is buffeted by the winds of disruption, threatening to break at any minute. If they can do that, the wave really has no end. 

Like the waves at Cape St. Francis:

Or the Klamath River:

And that monster wave is the benefit to their customers. As soon as the customer no longer sees a benefit they are gone and the wave comes crashing down.

So anyone who suggests that Apple or Amazon could simply change misses the whole point. The second either takes their attention off their wave, they are done for.