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.
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