Tag: Steve Jobs

Apple-opoly: It’s Not a Game

money
money (Photo credit: 401(K) 2012)

Some people can hardly contain their excitement when a company like Apple is thriving with sky high profits in the midst of a dismal global economy. Yet, this same excitement is seldom shared when banks or oil companies report similar results. Wouldn’t we all prefer reduced fees or lower gas prices over excessive profits from the very companies that portend to serve our best interests?

This past week a colleague forwarded an article from cultofmac.com titled Apple’s Astonishing Profit in Context. My colleague’s opinion of Apple’s incredible performance is also echoed in the article itself. Of course, I would be hard pressed to disagree with them as I’ve written many times before that “The proof of wisdom is in the results.” The following quote from the article puts Apple’s “wisdom” in perspective:

From October 2011 to September 2012 Apple made more money than Microsoft, Ebay, Google, Yahoo! Facebook and Amazon combined. In that same period, Dell, Asus, Intel, Acer, IBM, Lenovo, and HP (basically the entire PC industry) only made $19.3 billion in profit, which is less than half of Apple’s profit.

Who can argue?

Apple has effectively advanced available technologies into unique devices that have dominated several market segments including: Computers (Mac), Smart Phones (iPhone), Tablets (iPad), and Media Players (iPod). Although Apple did not necessarily “invent” the core technologies that define their devices, they did find innovative ways to integrate them to provide an extremely user friendly experience.

Hardware is not Apple’s only source of revenue as the “App Store” is yet another venue that continues to feed Apple’s bottom line. If I understand the terms correctly, Apple receives at least 30% of every App Store purchase and as Apple is quick to mention more times than not, the number of available apps is in the hundreds of thousands and continues to grow every day. That in and of itself is an incredible feat.

I contend that the level of success enjoyed by Apple has peaked. This article, “Apple Losing Lustre On Wall Street: 3 Theories Why” is one of many that have surfaced recently as Apple’s stock has plummeted over the past few days. As stated in my recent post, Apple’s Best Kept Secrets … May Be Their Worst Enemy, Apple’s products are expensive and are subject to higher rates of planned obsolescence giving people cause to “wait” before buying.

Waking Up The Competition

Many would suggest that there is no competition when it comes to Apple’s products and, to some extent, there may be some truth to that. The question is, “What really sets Apple apart from it’s competitors?” I contend that a key component of Apple’s success is driven by their exclusive integration of the iOS operating system into virtually all of their devices. When compared to the number of competing companies selling electronic devices based on the Windows and Android operating systems, we quickly learn that Apple is the sole proprietor of it’s core hardware / software environment and the current court battles with Samsung strongly suggest that Apple wants to keep it that way.

In other words, while there are a number of competitors in any given segment, Apple has no direct competitors that manufacture computers using their operating system thus allowing them to command the price at which their devices are sold. In this context, Apple can determine it’s own price points, void of any threat from a competing manufacturer. From a financial perspective, Apple’s strategy to stay the course is a huge success – at least it was until now.

Image representing Windows as depicted in Crun...
Image via CrunchBase

The wisdom of Apple’s strategy to integrate hardware and software is perhaps a lesson learned by Microsoft as they too have joined the tablet race with the introduction of the Surface RT and soon to be launched Surface Pro. There is, however, a very stark difference. Whether Microsoft intended to become a tablet manufacturer is open to debate but Microsoft did not exclude or attempt to prevent their competitors from developing devices based on the Windows operating system. Microsoft certainly intentioned to develop a hardware environment that will best reflect the capabilities and performance of the Windows 8 operating system.

Competition inspires innovation as manufacturers attempt to earn a bigger share of the market with more differentiating features and ultimately lower prices. As a result, margins are strained on Windows 8 devices and competing products using Google’s Linux based Android operating system among others. Unlike the exclusive Apple-opoly market, consumers continue to reap the greater benefit of an open competitive market in the “non-Apple” world.

There is indeed a price to be paid to sustain a company that attempts to maintain an exclusive monopoly in the market place. I contend that Apple has more to lose and very little to gain as competitors continue to define and differentiate themselves in their applicable market segments.

The “App” Store – Remember Your Roots

Chart showing downloads and available apps on ...
Chart showing downloads and available apps on the app store over time, since the App Store was opened in 2008. (Photo credit: Wikipedia)

If Apple’s devices are the cash cow, then the App Store is the cash calf. As mentioned above, Apple’s take is 30% of every App Store purchase. For a developer, losing 30% for the opportunity to sell an “app may be a great deal but … to a company like Microsoft, nothing could be further from the truth. Presently, Microsoft is subject to the same “App Store” rules of engagement as any other developer and this has now become a major point of contention between the two companies.

When it comes to Microsoft, Apple’s memory seems to be lapsing. In 1997 Apple (very much like RIM) was struggling to stay afloat and Microsoft’s Bill Gates stepped in to bail them out. It seems this gesture of goodwill has waned as Apple has subsequently grown to become a monopoly of it’s own making. In the world of Windows, Microsoft’s Office suite is unparalleled and I suggest the same can only be true in the world of Apple.

It appears that relationships between people still matter in the world of business and we can only wonder if Steve Jobs would feel differently about giving Microsoft a break in the App Store. Clearly, Apple would be a different company – or not exist at all – without the injection of Microsoft’s support as announced on August 6, 1997 at Mac World Boston. As Steve Jobs himself said during the conference:

“We have to let go of this notion that for Apple to win, Microsoft has to lose.” – Steve Jobs

Steve Jobs encouraged the audience in this video to “think differently”. Perhaps those who have succeeded Steve Jobs have forgotten (or never had the opportunity to remember) what it was like all those years ago when they were struggling to just to stay afloat. If there was ever a move to burn bridges with a once “rival turned ally”, the app store’s rules of engagement is one of them.

The Extremes

Remember RIM and the BlackBerry? They too have an exclusive operating system and hardware platform that at one time lead the smart phone segment by storm. The BlackBerry Messaging (BBM) service between BlackBerry devices is second to none and now includes BBM voice calls. Apple’s iPhone was a major disruption to both hardware and software as we knew it, offering users a substantially improved experience with available technologies. RIM’s market share and stock prices decreased dramatically for failing to introduce fresh, innovative technologies in a timely manner. Whether RIM’s OS10 can reignite the passion for their products and the profits in kind remains to be seen.

So hopefully what you’ve seen here today are some beginning steps that give you some confidence that we too are going to think differently and serve the people that have been buying our products since the beginning. Because a lot of times people think their crazy, but in that craziness we see genius and those are the people we’re making tools for. – Steve Jobs

Today, RIM is in a place where Apple once stood. Unfortunately for RIM, there is no rival stepping up to bail them out. In today’s world, rivals simply wait for their competitors to fold or file for bankruptcy before swooping in to reap what’s left behind. It is unfortunate, but as time will tell, consumers who are left with empty pockets will soon part ways with companies that choose to monopolize a market that serves the best interests of their shareholders and the bottom line.

Lessons Learned

Value is Not Market Share – In the delicate ecosystem of finance and business, the underlying theme is the perception of “value” for the consumer, the company, and it’s shareholders. I commend and praise Apple for the design and quality of their hardware with few exceptions although I have expressed my dissatisfaction with the frequency at which these devices change. As for their software offerings, I am also somewhat underwhelmed, at least from a business perspective. As for connectivity, Apple provides a seamless bridge between devices with unparalleled ease.

However, knowing that up to 40% of the purchase price is gross margin, the question for Apple devices still remains, “Does the price reflect the true market value?” Fundamental economics would suggest that the value of a product or service is determined by the price the consumer is willing to pay. I contend that in a society based on capitalism, competition will yield a price that better approximates the true value of a product or service.

“Success breeds complacency. Complacency breeds failure. Only the paranoid survive.” — Andrew Grove, co-founder Intel

Competition = Innovation – The Windows 8 and Android operating systems give us a greater appreciation for how real competition can lead to innovative hardware and software technologies at lower prices that benefit consumers versus those that ultimately aim to benefit shareholders. RIM’s new BlackBerry 10 reaffirms the inertia that exists within a company where only two options exist – to survive or die. With that inertia, we now see momentum building for the unveiling and launch of another new and innovative solution in hand held devices from BlackBerry.

Hansei / Reflection – Success can be both a blessing and a curse. Too few companies take the time to reflect on their history to appreciate their current state of affairs. Very few companies like Apple can claim to have risen from the ashes to become a self sufficient world renowned icon. However, in their wake, Apple’s success has also led to a certain “ego” or culture of arrogance that suggests “nothing can stop us now.” As we consider the current court battles with both rivals and allies, it’s difficult to discern which is which.

Collaboration = Mutual Successes – Success is seldom the result of one person’s effort and typically the result is greater than the sum of its parts.

We can choose to fight for the current state to preserve “what is now” or we can – in the words of Steve Jobs – “think differently”.

Until Next Time – STAY lean

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Vergence Analytics

BlackBerry or Bust?

WIND branded Blackberry Bold 9700
Image via Wikipedia

Leadership

Leadership can make or break any organization whether it is business, government, or even a sports franchise. I felt compelled to cite this quote from a column titled “Iconic teams tumble from penthouse to outhouse” as published in the Toronto Star (20-Jan-2012):

And while all have found different routes to the bottom, they do have one thing in common: ineptitude at the top. Find a meddling owner or inept general manager and you’ll find a franchise in trouble.

“Pro sports franchises are first and foremost businesses,” says Richard Powers, a professor at the University of Toronto’s Rotman School of Management. “The same problems that get businesses in trouble are what get sports teams in trouble.”

Clearly, to be successful, organizations require effective leadership. For this same reason, a successful lean initiative must be driven from the top leadership of the organization. I discussed this on our Lean Road Map page suggesting that without executive leadership, the program is certain to fail.  This sentiment is also confirmed in “The Toyota Way to Lean Leadership” by Jeffrey Liker and Gary Convis:

That’s because these problems were in fact leadership problems, not lean process problems. They were a stern reminder that all the investment in lean process in the world will not yield the expected outcomes if it is not accompanied by lean leadership throughout the enterprise, including corporate support departments.”

We also discussed the necessity for lean leadership in our previous post “Lean Leadership – The Missing Link?” As we learn of Kodak filing for bankruptcy and disturbing results for RIM, we are anxious to continue our review of “The Toyota Way to Lean Leadership” over the coming weeks. Kodak invented the digital camera and failed to pursue their own innovation. Again, another indication that leadership with a clear vision for the future is pertinent to the success of your organization.

RIM and the BlackBerry

Rumors of a buyout or take over of RIM have been circulating in the media. As an owner of the BlackBerry Bold smart phone and Playbook, I’m hopeful that RIM (or some version of them) will be with us for quite some time.  More so, their survival is just as important to our local Ontario (Canadian) economy. Although there are many players in the smart phone and tablet market, Apple appears to be the prevailing competitor to RIM with its iPhone and iPad offerings. All, however, pose a major threat to RIM’s declining presence in the market.

Market Share, Price Points, and Customer Satisfaction

RIM effectively lowered prices for their Playbook product line and that’s great news for customers looking to get a great tablet. While this may help to increase market share and make the PlayBook a real bargain, this does little to appease the many people who purchased the product at full price (myself included).  The 64GB PlayBook is now selling for prices ranging from $217 (16GB) up to $325 (64GB) versus the original release prices of $499 and $699 respectively. Whether these price points are closer to reality, a means to increase market share, or a means to simply reduce on hand inventory remains to be seen.

The Product Experience

My overall experience with the BlackBerry has been relatively positive:  it works as advertised although I did keep a bottle of rubbing alcohol close by to keep the roller ball working on my old phone. The number of applications available seems to be somewhat limited compared to the iPhone and iPad, however, what I have is more than sufficient for my purpose.

Upgrading

I’m very pleased with the new changes introduced in my new BlackBerry Bold 9900. I finally get to enjoy the benefits of Touch Screen technology while the full keyboard remains in tact and an optical sensor replaces the ever failing “roller ball”. Unfortunately, this upgrade also required parting with cash that I wasn’t planning to spend:

  • The new style connector required new chargers for car and home.
  • New USB cable to connect my lap top, again because the connector style changed
  • New Case for the phone.
  • A capacitive Stylus to minimize finger prints on the touch screen.
I also purchased a Voyager Pro Blue Tooth in keeping with our “driver distraction / hands free” driving laws here in Ontario.
  • Voyageur Pro – Blue Tooth

Connecting

I also have a 64GB PlayBook and connecting with my BlackBerry Bold smart phone was relatively simple and seamless. I actually like the ability to tether my PlayBook through my smart phone and the BlackBerry Bridge software works like a charm. The 64GB PlayBook presents better value for the money than the 16GB or 32GB PlayBooks.

Smart phone software upgrades and backups are performed using the BlackBerry Desktop manager through your lap top or desk top. I found some of the applications like Twitter and WordPress did not work correctly when I first upgraded to the latest operating system, however, they seem to have resolved themselves.

Accessories

I find that accessories for the BlackBerry products are over priced and even Walmart stores carrying these products don’t provide much relief.  Here are some of the basic essentials:

Not essential but highly recommended:

Connecting BlueTooth devices (also known as pairing) is a simple task and one you’ll quickly grow comfortable with after you’ve done it a few times.
So what’s with the blog post?

The leadership of the company must embrace and deliver the vision of the company to the consumer in the form of product and service expectations. As much as I appreciate my BlackBerry products, I have also admired Apple from afar.  Steve Jobs had a great vision for the Apple product line that sees individual products now connecting in ways that were never thought possible.  While Apple retained its roots in computers (iMac) it also extended that vision to include the iPhone, iPod, and iPad. Quite simply, the Apple product line presents a complete and seamless “digital” solution through improved connectivity, portability, and technologies in general.

Steve Jobs’ vision enabled Apple to drive beyond the limits of our imagination. Few companies have excelled as Apple has to define products that we never knew we needed until they invented them. They simply didn’t refine existing products, they expanded their niche products into a wholly unique offering as only Apple could do. Coupled with connectivity options that exceeded anyone’s expectations, Apple products will continue to define and dominate the market for years to come.

As for RIM, the leadership has been in the headlines for all the wrong reasons: shareholder leadership / infrastructure concerns, product valuation, and the procurement of an NHL hockey franchise.  As I finished writing this post, a link to this article appeared in my twitter timeline > Bowing to Critics and Market Forces, RIM’s Co-Chiefs Step Aside.

A decision such as this can’t be easy and demonstrates how outside influences can affect the leadership of any organization – good or bad.

Until Next Time – STAY lean!

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Vergence Analytics