After the boring iPhone SE, Apple should pause, and look back.

Apple, on the 21st of this month, launched the much hyped 4 inch iPhone, dubbed as the iPhone SE.  This iPhone, according to Apple isn’t just the most powerful 4 inch ever, but could also be the iPhone with the simplest presentation that Apple could offer to its customers. It should go like, ‘Take the internals of the iPhone 6s, put it in the iPhone 5S case, take away 3D touch and market it as a phone for people who prefer the compact 4 inch screens.’

Apple enters the mid-tier segment but with speed breakers on Innovation

In the real world though, Apple is positioning this as a mass market product for people in the mid-tier segment who want an Apple phone but couldn’t afford one until now. This is for customers who were either unhappy with their Android/Windows devices or were in the hunt for an iPhone in the second hand market (This market is really huge by the way). These customers would most likely be 1st time Apple users who would be ready to shell out a minimal premium to enter the Apple eco-system. Barring a minor % of people who actually prefer a 4 inch phone, this is for the customer who dreams of a Mercedes but eventually settles for a Skoda. Both are my favourites for the record.

The markets always looks north

Apple is a company with a $590B+ market capitalisation. It’s phenomenal rise and influence as a tech company is next to none. However, such rise and influence often comes at a cost: the expectation to ‘eternally’ grow at a scorching pace, ignoring the fundamental law of averages. Apple’s shareholders are hungry for more growth and the market will take Apple by its horns if it falters on the path of growth.

Such expectations and pressures could even make the heavens nervous. Until now, the tides were in favour of Apple and there was an invincible Halo effect that continued even under the leadership of Tim Cook, a genius in his own right. Now, as is with any Halo effect, the influence of Apple on the minds of the consumers is withering. And Apple’s decisions are a result of that.

Innovation is taking a beating at Apple. 

Apple is a company that has built its reputation on innovation. It’s massive user base and respect for the brand was an end result. The tables have shifted now, as Apple is now seen juggling with cosmetic innovation to keep the juggernaut running at a steady pace. Apple, with the launch of the iPhone cover at $99, showed that the urge to keep the mills running can hasten innovation and ridicule the company’s reputation. This juice pack was dubbed as the ugliest design by reviewers and admirers of Apple. The Apple pencil and the Apple keyboard at $99 and $139 each, meant that Apple was finding additional ways to make that extra buck to keep the investors happy. the clever decision to start with a 16GB iPhone instead of a 32 GB base version also meant that customers would essentially be misled into believing that they are making a voluntary choice to upgrade to a 64 GB version by just shelling out $99 more. In India, this choice could mean shelling out an additional $130!

Apple : Time to learn some lessons from your biggest competitor : Samsung

The iPhone SE is also seen as a compulsion to keep the company growing, even if it comes at the cost of the company’s reputation as an uncompromising innovator. Apple has very wisely entered the mid-tier segment of the smartphone market where there is an opportunity for Apple to grow by stealing the Android pie from other manufacturers but this launch seemed like a company in a hurry. Everything from the presentation (which was really subdued and boring) to the design of the phone was unworthy of Apple. Apple has made minimal changes to the design of the iPhone 5s and added almost nothing to the specs of the iPhone 6s when assembling the iPhone SE. Simple features like water proofing and wireless charging functionality could have been added but Apple has chosen to reserve these features to excite investors and customers for the latter half of the year. The starting price in India has been pegged at Rs. 39,000 and makes me wonder why any smart buyer would not opt for a Samsung Galaxy S6 instead of this one. Samsung could throw in a surprise too by launching an updated S6+ to take on this segment and leave Apple jolted.

“The world needs Apple to behave like Apple. Seriously”

Apple is still a customer focussed company as on this date but its commitment to the cause is waning with every launch. Apple’s management should realise that growth was and will continue to be a result of real innovation and increments in the user experience. Customers take some time to digest developments in perception and shall continue to pick up any device that Apple comes out with for a few more years. However soon some competitor will eventually seize the opportunity to trip Apple when it can. One should learn a lesson from Samsung when it was faltering in innovation and differentiation until 2014. It revisited the root causes of success in consumer tech and reshaped how customers perceive Samsung. Today, the early adopters and expert reviewers would not blink in declaring that in areas like camera and real world features, Samsung is inching ahead of Apple. As of today, Consumer Reports, a very respected name in technology has dubbed the recently launched Samsung S7 as the best phone ever.

Investors cannot be blamed for Apple’s decisions. They have put in their money and will expect staggering returns for their buck. If Apple wants to continue to dominate the landscape for not just three but another two decades, it has to look at a roadmap that is sustainable, even if it means taking a pause for a fresh breath of air. A couple of years of stagnation would not then indicate that the company has been wrecked, but is ready for an another giant leap to leave us all in admiration. The world needs Apple to be like Apple. Think.

 

This (Or that) road can give Samsung the comeback it needs

Friday was a disappointing day for Samsung. Its’ sales for the third quarter not just fell sharply by 20%, but to exacerbate the pain, operating profit was down by a staggering 60% in the same period. This is bad news for the Samsung fans and shareholders alike. To put things in perspective, Samsung still continues to be the leader in mobile phone shipments. The worry? Market share and shipments are beginning to show a decline

To be honest, most of us who follow the mobile world knew this was coming. Samsung,earlier dominating the world of smartphones, is now handcuffed between 2 segments of the market. If the pummeling from Apple wasn’t enough, especially with the launch of larger screen sizes, it was also getting a hit from low cost players like Xiaomi (Xiaomi, according to IDC, is now the 3rd largest in terms of phone shipments), right behind Samsung and Apple). To put it in perspective again, Xiaomi is just one of the many players taking potshots at Samsung. Micromax, Gionee and the likes are beginning tho beat Samsung at its’ own game.

The fault lies in Samsung’s product strategy that leaves consumers around the world confused, and this confusion cannot be settled even after an end number of debates and statistics. The confusion: 1) Is Samsung a niche or a mass market brand?

2) Which segment of the market does it belong to?

3) Where does the focus lie?

The answers to the above can go either way depending on where you would like to tilt. That is exactly the problem. Samsung has failed to walk in one direction, trying to shoot arrows everywhere instead.

It is true that Samsung has been a leader for years now and this could be a finding in hindsight. But things were different then. Most players (Blackberry, Nokia, LG, HTC and so on) were struggling and the fight was squarely between Apple and Samsung. If you didn’t opt for Apple’s camp, Samsung was the obvious option. The charts below a timeline that demonstrate how Samsung’s market share has fared against its’ competitors in the recent years until now.

A further break up of this market share will give us enough information on why it is getting harder for Samsung to retain market share:

Period	Samsung	Apple	Huawei	Lenovo	LG	Others
Q2 2014	24.9%	11.7%	6.7%	5.2%	4.8%	46.7%
Q2 2013	32.2%	13.0%	4.3%	4.7%	5.1%	40.7%
Q2 2012	32.2%	16.6%	4.1%	3.1%	3.7%	40.2%
Q2 2011	17.0%	18.8%	2.5%	0.2%	5.7%	55.7%

Things have further changed in Q3, 2014 as Xiaomi emerged as the 3rd largest player, further denting Samsung’s prospects:

This shows a consistent fall in Samsung’s market share, from around 32% in 2013 to a low of around 24% in the 3rd quarter of 2014

So what has changed in the last few months. The market looks in a different shape now: Sony is turning around, Microsoft Lumia (erstwhile Nokia) is showing signs of revival ; LG is beginning to showcase the best in mobile technology Chinese power brands like Xiaomi are offering cutting edge specs at delightfully low prices, focusing on volumes to offset low margins. Some like Xiaomi are also redefining ways of business by building a cult around their brands and at many occasions, opting for ‘online only’ sales to cut down on the costs incurred as a result of ‘middlemen’.

This has also had an adverse effect on not just sales but operating margins too, which reflect the customer’s tendency to opt for other low cost brands or Apple as an alternative to Samsung’s Galaxy line of flagship phones. Samsung hasn’t done enough to distinguish its brand from competitors and this means consumers are either refusing to pay a premium and for those who are willing to, Apple provides for a viable alternative with its superior brand image and visibility.

Samsung has to make up its mind. It will continue to lead but at this rate, it won’t be very long before it becomes s shadow of its past. It either has to focus on the mass market or take a flight to the upper end. Also, the now notorious strategy of launching phone to attend every price point and customer is also not likely to work. It needs to focus on genuine innovation and clarify on the brand’s ultimate intentions.

Sure, this might make a temporary dent in Samsung’s fortunes in the coming 1-2 years. But with a long term focus, Samsung will have a clear direction. Also with phones like the Samsung Galaxy Note 4 and more wraparound or curved screens like the Samsung Galaxy Note Edge in the near future, there is not an iota of doubt that Samsung has the capability to make class leading phones but all it needs is focus. With enough cash and R&D at hand, Samsung should see through the tough times without hurting itself much, except for the shipments in the segments it chooses to exit for good.

If Samsung wants to retain itself in the lower and mid segments, it could as well launch a separate brand to cater to them. With Samsung’s penchant for a quick roll-out of new products and offerings across a number of price points, low cost players could be in for a ‘rude’ surprise.

Whatever might be the case, I am confident that Samsung’s ‘have it all’ strategy has its’ fair share of fundamental flaws and this strategy needs to be reversed if Samsung intends to stay relevant in the mobile space. I can hardly think of a brand that places itself in all corners of a marketplace and yet gives clear and concise signals about its brand positioning. Samsung has to decide: Whether it wants to be the Hyundai, Cherry, Volkswagen or the Mercedes of tomorrow? It cant have it all, at once.

Follow me @SauravD86 for more news and updates on the tech world!

What makes Apple click. And why others are finding it difficult

Apple is the envy of the tech industry. It generated a revenue of $171b in 2013 and generated a profit of $35b. These are astounding figures and suggest that the Apple strategy is working, much to the disappointment of other tech manufacturers. So what is Apple doing right ?  There are some valuable lessons in this story that will also provide an insight into the inner workings and philosophy of Apple.

Apple saw a very successful year in 2012. The iphone 5 was well appreciated by consumers and the device had the best of hardware and software mashed into one that provided for a great user experience. ipads continued to be well received and the macs were steady. The only waning signs were that of the ipod touch.

2013 was a lackluster year for Apple. Sales continued to improve but profits took a hit. On the product front, most launches were evolutionary in nature and looked unimaginative by Apple’s standards. Critics grew skeptical by each passing day about Apple’s dominance and pace of innovation. Tim Cook was seen as a solid operational guy but according to many lacked the vision and creativity of Steve Jobs. This year could be the one when they are proved wrong.

Over the last many years, Apple has continued to maintain control over the entire eco-system and this has become the hallmark of Apple’s strategy. These controls have ensured an admirable level of build quality in software as well as hardware. Apple has never for a moment compromised on the user experience and this has translated into higher prices for the end consumer. Apple also continues to maintain a very desirable profit margin and this has led to a pile-up of available cash – enough to meet any contingency as well as opportunity.

Apple has been very focused on its target customers. The same category of customers that Apple looked to target many years back are the ones that exist even today. Prices have been lowered across categories but one cannot afford to look at target customers only on the basis of price points available. These are consumer categories that are very quality conscious and don’t mind shelling out extra bucks for a hassle-free user experience.

The focus has not been confined to customers alone. They extend to the products too. Every product receives the due attention and commitment required.  Apple’s design philosophy focuses on the user. Materials are of top-grade quality and the devices are simple to use. As a result, Apple’s entire product line is a leader in itself. Apple wants to remain in the premium space and has no two thoughts about it. This philosophy is a continuity of Job’s thought process as Apple’s co-founder.

No one strategy can be applicable to every other competitor in that category. Google follows a strategy that is in sharp contrast to Apple. It does not control the user experience and the software is open sourced. Manufacturers are free to make modifications and this gives them more freedom to decide for the consumer. But this strategy seems to have counter effects that Google probably didn’t anticipate. Google’s mobile platform Android continues to grow and eclipse Apple in terms of market share  but this open source strategy has led to an influx of mal-ware that is worrying. Also, manufacturers are either unable or choose not to upgrade older devices, leaving old device users in the dark. Google has to address these problems if user satisfaction levels across devices have to be improved upon.

Microsoft follows a very different strategy too. On the mobile front, it is addressing users both in the lower and higher price points. However, this has the potential of leaving consumers confused. A user that picks up a device worth $500 doesn’t want other people around to be seen with the same device that has the same brand embossed and costs $200. Microsoft, in an attempt to cater to every consumer price point, is failing to position its brand – either as a mass market or a premium offering. Microsoft’s mobile operating system is not helping things either – it has too few quality apps. It needs to attract high quality developers towards the eco-system. The launch of a new tablet – Surface Pro 3 will not help things either. Microsoft continues to demonstrate that it has the capability but faces serious issues with execution. The tablet could have been bundled with a keyboard for a complete user experience. Instead, it has chosen to price the keyboard separately resulting in a high entry price. Without a keyboard, it is at odds with the very successful Ipad and at higher price points  it clashes with a  product that is focused and well defined – The Macbook Air. Without ground breaking innovation, it is difficult to compete with Apple’s offerings. Surface Pro 3 chooses to be a laptop as well as a tablet, essentially trying to be everything to everyone.

Samsung is facing problems of its own. Like Microsoft, it is trying to cater to all markets where it sees an opportunity. Samsung has been successful in the past but problems are showing up. Till 2 years back, very few brands had the technology and marketing budgets like Samsung and this allowed Samsung to flourish.  Now, smaller brands are emerging and their strategy too is in contrast to Samsung. Price points of regional heavyweights like Gionee, Xolo and Micromax are difficult to match. Most of these brands outsource many product elements as a result of hardware being widely available at very cheap prices. They are looking to attack Samsung with low margins and mass volumes. Their size  gives them a cost advantage and makes them more agile. The Samsung advantage suddenly has become its Achilles heel.

Apple’s consistent strategy, discipline and focus has ensured that it remains largely untouched. At the WWDC 2014 conference, Apple’s new software launches seems to be a a reflection of this strategy and this is likely to pay off dividends for Apple in the long run. It continues to focus on the user experience and the brand. It remains in control of the entire eco-system.  Apple will not take the first mover advantage until it is confident that its products will click with the consumer. LG and Google have already launched their take on the watch but the initial user experiences are unsatisfactory. Apple’s rumored iwatch will be watched very closely. Apple could have one more winner on it’s hands.

Any single entity is yet to find an answer to Apple’s strategy. Google has made inroads but is yet to launch something that will bring Apple down anything soon. Google could look to co-exist but this defensive strategy could prove to be very dangerous as Apple has made it’s intentions clear. Microsoft continues to struggle with new launches and still rests on the laurels of it’s Windows platform. For mobiles, Microsoft’s market share is growing at a snail’s pace but Google and Apple have nothing to fear as of now. Samsung is already embroiled in a tense battle with rivals in the mass market and the ‘first mover’ and ‘me-too’ strategy hybrid model is beginning to fade.

Elements of Apple’s strategy have been successful elsewhere too. Amazon’s aim to control the entire supply chain-from the warehouse to the logistics is giving it an edge over its competitors. It is swifter and ensures faster delivery times for consumers. German car manufacturers are looking to remain premium and have no intention to catering to the masses. Even new launches catering to first time young buyers in emerging markets like the Audi A3 and Mercedes A class etc. maintain class leading build and ride quality. For now, Apple is winning the battle. Time only will tell whether it will disrupt it’s own business model before anyone else does and remains intensely competitive or a new leader shall emerge using new strategic tools to get the better of Apple.