How to dominate your competition – learn from Apple
by Saeed Khan
Did you notice what Apple did this past week?
Yes, they announced the iPad 2, but it’s worth taking a look at the details of the announcement and analysing the implications.
It’s been less than 1 year since the original iPad was released, and we all know how much of a success it has been, even with a number of seemingly glaring limitations. And although the iPad has a dominant position – 70%+ market share, competitors like Samsung, Dell, HTC, Motorola, RIM, HP and others have all started to stake their claim in the market.
Yet before most of Apple’s competitors have established their first generation products in response to the iPad, Apple announced a new, faster, thinner, less expensive upgraded version of their product: essentially obsoleting the original iPad.
And this strategy is not new to Apple. Look a the history and evolution of the iPod, and you’ll see the same pattern. Year after year, newer, more feature laden products were introduced, with more storage, video playback, video recording etc. driving new demand and staying well ahead of any competitors like the Zune.
Apple was it’s own biggest competitor. Given their dominant position in portable audio/video market, why would they let anyone else take market share?
And looking at the tablet market, it looks like Apple is following the same pattern with the iPad. A 3rd edition iPad is already rumoured to be coming out by the end of 2011. Can Apple’s competitors keep pace?
Now ask yourself, how does your own product strategy compare to this? Are you in a position to obsolete your own products, or will you let your competitors do that for you?
Saeed
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How to dominate your competition – learn from Apple http://ow.ly/1s81YU
I think an interesting thing that some overlook about Apple that allows them to innovate at this pace is their exceptional discipline when it comes to their product portfolio. They really only have 4 core product lines (Mac, iPod, iPad, iPhone) and a few software assets and accessories, which all serve to support those 4 product lines.
If you contrast this portfolio focus with other similar size (and even much smaller) tech companies the difference is staggering. They probably have the same amount of resources as Cisco or IBM but they focus all of them on a very small solution set. This focus on only releasing a small set of GREAT products has IMO been one of the keys to their $300B+ market cap.
Jason
Thanks for the comment. The small set of products is definitely one of the things that distinguishes Apple from other companies. I read somewhere that if you took iPad revenues alone as a business, it would place well in the F100 in terms of company revenue. That’s incredible for the first year of a new product.
The small product portfolio drives extreme focus — both for Apple to release great products , but for the press, and for customers who don’t have to wade through endless product portfolios. e.g. compare the number of Blackberry models to the number of iPhone models.
Restricting choice allows economies of scale in production as well. I would use the analogy of SouthWest — a very profitable airline that only has 1 class of seats and only flies one model of aircraft (as far as I know). This provides huge efficiencies in pilot training, maintenance, parts, ticketing etc.
Just wondering out loud….are there other very successful companies that use limited choice as a success strategy?
What gets lost in the discussion is the ill will that Apple fosters with many customers when they force obsolescence of their own products so quickly. Though many Apple customers are more than happy to waste disposable income on the next minor tweak in the product line, a growing number of people – as evidenced by the current Best Buy buyback campaign – are growing tired of Apple withholding functionality for the next iteration only months away.
Oh, and if you’ve ever used Zune – both the player and the interface – you’d know that Apple is *not* “well ahead” of Zune when it comes to features and functionality. The iPod demand is driven by cheap product that fails quickly and those who are locked-in via iTunes, where switching costs – both real and perceived – are all that is holding them there.
Andrew
Thanks for the comment. It’s true there is some ill will, but the buy-back programs — from Best Buy, Gazelle etc. — seem to address that ill will. Remember when Apple lowered their initial price for the iPhone. A rebate to customers who paid the higher price seemed to alleviate that.
I do think that Apple either manages adversity well, or gets some slack in that area — e.g. I think that the AntennaGate for iPhone and lack of Flash on iPad would have hit other companies (e.g. Microsoft or RIM) much harder.
As for the Zune, my point was not meant to imply a feature comparison, but instead a market share comparison. i.e. Apple not giving new entrants room to establish foothold with a differentiated product. e.g. Apple added an FM tuner to the IPod Nano quite late, probably in response to the Zune.
As for demand being driven by cheap products that fail, I haven’t seen evidence of that. If it were, there would be clear backlash wouldn’t there? I still have a fully functioning original iPod Mini, and several slightly later models that all work.
As for switching costs, you can’t fault Apple for locking in their customers can you? Microsoft or any other company would do the same if they could. I’m not a big fan of iTunes to be honest — it’s the worst part of the whole iPod/iPad experience. But I can move my music to another player if I want….but no one else offers the ease of experience of the iPod or the selection of the iTunes store.
On the iPhone rebate – remember, that was not a proactive step, but a reaction to severe negative publicity. And while I agree that those other feature issues might have hit other companies much harder, Apple’s reaction hasn’t been to take responsibility for those issues, it has been to deflect criticism, since they know their consumer will buy regardless.
As for the buyback programs, there was an article this week about how those programs went into a tailspin when the iPad 2 came out. Companies won’t be able to make the expected margins since the 2 has better features/price. I think there will be more frustration if the 3 hits in the fall. This also poses a question of the environmental responsibility of having 15m pieces of electronics merchandise out there that the consumer is already looking to turn over.
As for Zune vs. iPod, you’re right about lock-in – Zune tries to achieve it through their ZunePass and integration with xBox. The difference between the lock-in is that there is real value for the consumer with Zune’s lock-in, where as with Apple, it was primarily based on DRM which did not offer consumers value. I think if you were to try a Zune player and the ZunePass & Marketplace services, you’d be shocked at how superior they are to iTunes.
Andrew
I may look at the Zune given your encouragement, though I should say that my kids and wife all have newer iPods. I have that old, but still functional mini that serves me.
What I find interesting about the Zune is that I have never heard Microsoft market the Zune in any way that appeals or even registers with me. I’m not criticizing, but just stating a fact. Where Microsoft is failing with the Zune is in capturing mindshare. And without mindshare, there is no marketshare. The Zune, ZunePass & Marketplace may be superior to the iPod and it’s offerings, but how is the average person to know?
Apple builds great products — most of the time
— but equally importantly — perhaps even more importantly — they get the message out. That is not the case with Microsoft, and in fact many technology product manufacturers.
Great point. Guys I know at Microsoft said that they should hire me in marketing over there because I do a better job selling the product than they do.
Andrew,
FYI…Looks like the Zune is officially dead.
http://www.crunchgear.com/2011/03/14/r-i-p-microsoft-zune-2006-2011/
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A couple of the many articles in 2007-08 about Apple’s QC issues on iPod:
http://www.engadget.com/2007/09/25/apples-ipod-classic-experiencing-issues-of-its-own/
http://www.dailytech.com/iPod+Touch+and+Nano+Owners+Seeing+Issues+with+Display+Quality/article8908.htm
http://tech.blorge.com/Structure:%20/2007/09/17/apple-faces-quality-control-issues-across-new-ipod-lines/
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Maybe the answer is as simple as this: http://is.gd/yXkQBu Apple is Apple's biggest competitor with short cycles in new product versions.
Dominate your competition by making your current product obsolete. http://t.co/85Hzo3qc
When I initially commented I clicked the “Notify me when new comments are added” checkbox and now each time a comment is added I get several emails with the same comment. Is there any way you can remove people from that service? Thanks!|
I’ll see what I can do. Not sure why you’re getting multiple emails.
Prior to iOS 5, the iPod branding was used for the media player included with the iPhone and iPad, a combination of the Music and Videos apps on the iPod Touch. As of iOS 5, separate apps named “Music” and “Video” are standardized across all iOS-powered products. While the iPhone and iPad have essentially the same media-player capabilities as the iPod line, they are generally treated as separate products. In the last few years, iPhone and iPad sales have overtaken those of the iPod.“….
Kind regards