Apple's iStrategy - the "i"s have it
Given the iPhone 4.0 launch there’s been a lot of talk among friends and colleagues about Apple’s iPhone strategy. At our last pancake party, one of my iHater friends insisted that Android’s success (and strategy) heralded the death knell of Apple in the smart phone market. In class last week, my students questioned Apple’s walled garden approach. Surely it had already failed spectacularly in the 20th Century, when Apple lost the computer wars against Microsoft. How could it sustain itself the 21st Century?
But the Apple garden of the 90s is not the garden of today. And iOS4 shows us clearly that Apple has learned its gardening lessons well.
Yes, the latest iPhone feature set is pretty fabulous: longer battery life, front-facing camera for video calls, high definition video, gyroscope, multitasking and more. All of these features add up to a super phone with real advances over its predecessors. But strategically, Apple’s most important feature upgrade is the repositioning of its operating system from iPhone OS to iOS 4. It’s not just for phones any more. It’s for the iPad, it’s for iPod, and it’s for iDevelopers.
By expanding the functionality of their OS, Apple increases the size of their iTunes ecosystem. More iProducts means more developers. More developers lead to more content and more users. More developers and more customers encourage Apple to create more iProducts. It’s a network effect in practice. Can any other phone manufacturer talk about their $1 Billion check to the development community? What about the 100 million iOS devices on which consumers use and buy content? This is Apple’s offensive and defensive weapon against Android and the pure mobile phone ecosystem.
Apple failed in the ‘90s when they lost the developer community. This time around, Apple has learned how to make money for content developers. And as long as Apple can provide incentives for the developer market, here at Bulldogmi, we’re betting their dominance will continue.
The i’s will have it, indeed.
a.) Apple is definitely walking a fine edge with their development community. They have, in effect, become a network operator ('carrier' in the USA) in terms of being a 'walled garden'. While it's OK to be a nanny when an echo system is being developed, in the long term it hampers more than helps. You state that operators and manufacturers have never understood the content side of the equation. I'd agree, but Apple doesn't either: case in point the Amazon kindle android app will be far superior to their offering on the iOS. Why? Because you can purchase content in the app on android and not on the iOS. Why? Because Apple's 30% cut of revenue demand is far to large on business that are (increasingly) operating on tighter margins. And don't even think of operating a business that competes with Apple.....you'll get nowhere. Strategy wise, Apple is repeating the same mistakes that the operators did in the 90's and 0*'s.
b.) 100 million devices? Nokia has roughly 1.5 billion in the wild (and that's just them). Android is being adopted by device manufacturers like wildfire and the numbers have exceeded Apple in a very short period of time (and the margin will only become wider).
c.) Strategy wise, you've missed the huge elephant in the room (i.e. what was not said in the presentation): They have no cloud strategy whatsoever. This is where Google is killing them and it will get even worse (this applies to the Nokia's out there as well). With devices that demand unlimited data plans, why is that? If my android device gets crushed, sinks to the bottom of the ocean, etc who cares? I just pick up another one, sign in, and my data is there. Apple? "Oh, you haven't synced with iTunes so your data is at the bottom of the ocean". On Android, everything is device and cloud centric which a.) means you don't have to play by the iTunes rule and b.) means that you can reach customers that don't have computers (that 90% of the planet is a, um, pretty large market).
Very true that Apple is winning because they have got the developer community on board, but before I say that this is why they are being successful I would like to know 2 other companies have done the same thing with success, then know one industry that could do the same thing and make it work. Looking at things in hind site is always 20/20... What company could do this in the future and be the next Apple?
R*
1) The perception of market is that Google is the best search engine; and Apple is a company that makes Cool stuff. This simple perception alone will cost Google a lot (money wise and effort) to compete with iPhone.
It would be much better if Google stays as Google and collaborate with Apple on online services. Unfortunately, in the Market, you do not win with the better product, you win with the better perception
2) The best defensive strategy for market leaders like Apple (in mobile industry) is to have the courage to attack themselves. Attacking means keep obsoleting your previous product! And this is exactly what Apple does.
3) The Google is not a leader in Smartphone / mobile devices but they act like a leader. Their attack is wide rather than narrow. I am not an expert in phones but I follow the news, this is the first time that I have heard that "You do not loose your data, if you phone goes into the ocean...But you will loose data if your iphone goes into the ocean" , Google had to push this with all their POWER during the last year! But they did not. If this is true that could be the Achilles of IPhone.