Why Apple Disrupts Markets
Tuesday, December 21, 2010 at 8:27AM Thoughts About The iPhone, Part 1 described how prominent tech pundits were convinced the iPhone would fail.
Thoughts About The iPhone, Part 2 asserted that the iPhone succeeded because of Apple’s strategy of maximizing the quality of the individual user experience.
Recap: Most firms strive for a competitive advantage through 1) market share, 2) becoming the least-cost producer, 3) innovation, or 4) real or perceived product/service quality. I believe that the emphasis on the quality of the end-user experience was decisive with the iPhone.
D Edstrom commented: “I'm inclined to say Apple has been succeeding with a convergence of 3) Innovation and 4) Quality. But overall, I agree: ‘Maximizing quality to meet the needs of the end user.’” His mention of convergence leads to something fascinating: Consider the iPad. Before it was announced, the rumor mill reached fever pitch about a possible new tablet computer from Apple. Potential competitors and pundits declared that the success of the iPhone was a fluke because initially, it hadn’t been taken seriously enough and competitors were slow to respond. This time would be different. Microsoft CEO Steve Ballmer gleefully unveiled a tablet prototype at the Consumer Electronics Show just three days before Apple’s event, in an effort to steal any thunder that event might create. Other competitors announced they would quickly respond with tablets that would have more features and capabilities.
After the iPad introduction, the silence was deafening; everyone went back to the drawing board. Why? One reason: $499. No one could produce and distribute a product of that quality, with those innovations, for anything close to $499. In their bluster, competitors assumed Apple would price its tablet at $999 or at best, $799. Perhaps even a low-end version at $699. PC manufacturers, who specialize in slapping together bland commodities at commodity prices, couldn’t imagine being undercut by Apple. Almost a year later, there is still no Ballmer tablet but it’s rumored he’ll be demoing another one at next month’s CES:)
Apple’s success in reducing manufacturing costs is itself an interesting blog posting, but I want to stay above the tree line and go on to say that Apple’s success in building quality products, continually introducing innovations to its products and services and further, becoming a least-cost producer has inevitably lead to an increase in market share. This seems simple enough, almost naive. Yet in today’s tech marketplace, the brightest guys in the room go for market share through deals with large entities—Microsoft with PC manufacturers and IT departments, cell phone manufacturers with wireless providers. Or mergers and acquisitions. It’s all top down. Apple is taking a bottom-up approach. With Apple, you don’t get your assistance from Bangalore; you get it person-to-person at your local Apple store, seven days a week, for free.
Currently, there’s no end of analysis of why Apple is enjoying success and why it’s such a disruptive force in markets it enters. However, if you use the framework I’ve just outlined, it’s simple and inspirational: start by maximizing the quality of the end-user experience; keep innovating to improve that satisfaction; and keep the quality/price ratio as high as possible. In terms of end-user experience, Andy Ihnatko of the Chicago Sun-Times said it best: “...Apple has the annoying habit of producing products that make perfect sense once you get your hands on them.”
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