Tuesday, June 11, 2013

Apple thoughts

Yesterday, at its World Wide Developer Conference, Apple presented a series of product-line extensions ranging from an updated operating system, to a streaming music service, and a series of hardware tweaks. By the end of the day, the press was somewhat disappointed and  the stock market was mixed to down.

I think it's important to revisit the DNA of Apple's staggeringly great run over the past decade. In fact, you can point to a similarity over the Company's lifetime. Apple tends to invent, what in hindsight were obvious solutions, which are so self-evident in their presentation as to be accepted immediately by tens of millions of people. As the solutions tend to 'invent' markets, they begin with near 100% share, which the force of gravity and well capitalized competitors continually erode. PC's are in the single digits and the phones have about a 1/3 share. The tablet, being relatively newer, still has share over 60%, but it's declining too.  Revenues are going up, as the markets are growing, but share is declining.

The company is far better at inventing new markets than protecting their position in existing ones. It's not that they are disinterested in doing so, but unlike what Microsoft pulled off 20 years ago, the key candidates for customer 'lock-in' are applications which are now browser, rather than operating system based.  Presenting a family of solutions such as iOS, Airplay, iCloud, iTunes etc helps to influence people to stay in the family; it's necessary, but not sufficient for lock-in. This is good for consumers, and I believe good for Apple. They have to keep innovating to not only stay ahead, but to support a premium position.

Market defining opportunities do not present themselves every year, let alone the time it takes to properly engineer the right solution, at an acceptable price. As a consequence, the company will have up and down performance, and will continue to lose customers in some segments, while gaining share in others. That's just a fact, and again, it's better for them to accept this than to bring out products before their time. After all, it took three CEO's and five years to recover from the Newton debacle.

1 comment:

  1. Charlie: good point. but that's assuming they haven't learnt from their mistakes
    allon

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