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Saturday, March 10, 2012

Apple vs. the world

"The iPad Is Unbeatable", this is a good article by Farhad Manjoo.  Many have now accepted Apple's dominance.  Apple is no longer the underdog.

Farhad highlights, to the mainstream audience, just how lost all other competitors are in the transition to the Post PC world.  Microsoft, HP, Dell and Intel all trapped in a no-growth environment still trying to figure out their Post PC strategy.

The one things all these competitors fail to realize, in the Post PC world, the differentiation between "hardware" and "software" should no longer exist.

There are a few key observations that justify the lack of differentiation:

1. higher replenishing cycle of mobile devices (phones and tablets)

2. lower cost of the mobile device

3. ecosystem matters

4. the line between consumer and enterprise is vanishing

These points are important because they all are related in one aspect or another.  For instance, a strong ecosystem and lower cost of device allows for a quicker device update cycle.  A higher satisfaction rate promotes brand loyalty, greater demand for the device and ultimately device usage in the enterprise.

Apple understands this, and obviously executes brilliantly on this knowledge.  Apple's key strengths in understanding the above, are the very things their competitors ignorantly ignore.  Apples two key strengths are:

1. the importance of standardization

2. efficient manufacturing

An example of Apple's standardization is the screen size of the iPhone and iPad.  There has been no difference in screen size from the original devices. This promotes consistent app development and updates, making the developers happy.  Happy developers are the backbone of a great ecosystem. A great ecosystem makes for a happy consumer.  A happy consumer creates more demand for the product.

High demand for a product forces Apple to have efficient manufacturing. Efficient manufacturing, at the level of Apple, is far more difficult with a company that differentiates between hardware and software.  Apple's brilliance is in their ability to forecast their product demand. Through their forecast, they take the risk with huge upfront raw material costs, allowing for an even cheap device.  But this strategy becomes less of a risk with the development of a consistent brand. (No competitor currently has this.)

A consistent brand requires consistent refresh cycles. Apple is very organized with their refresh cycles. In comparison, other OEMs seem to release devices sporadically, and at a rate that consumers ignore the brand. I would argue there really is no other smartphone with a solid brand.

Even though the separation between hardware OEMs and software completely reduces a phone's brand, the strategy may still work. But for the strategy to work, the ecosystem needs happy developers. Which means there should be a level of standardization within the hardware. For instance, no alteration in screen size that causes developers to seriously alter their apps or OEM 'specialized' software that screws with older app versions.

The phone and tablet market are obviously pretty different. There can be an inexpensive smart phone that does not need Apple's level of manufacturing efficiency. But when in comes to tablets, if any competitor want to truly compete with Apple, they got to get their shit together, and use Apple tactics to bring costs down.  Amazon proved you can compete with Apple if an ecosystem is in place and the price is right, despite an inferior product.

Right now, with the acquisition of Motorola Mobility, Google is in a prime position to compete with Apple in the tablet space. Google needs to execute properly. (Maybe focus on a iPad-size device that is 'good enough' tech spec wise for $199.  Do this to gain brand recognition and share, then slowly get to the internal-specs of the iPad.)

(The aspect to which I disagree with Farhad is the threat to Google. Without Siri's answer engine inside the iPad, Google has less to fear. Google has a complete dominance in mobile search, across all mobile devices.)

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