Let’s be honest.
Modern Apple (2007+) was only initially about superior hardware and software solutions. Many things, such as App Store or Touch controls, contributed to the success of the first iPhone, but that competitive advantage was quickly nullified by an excellent play of Google (which turns out to be pure struck of luck, but that is a subject for a completely different post).
Figure 1: Phones in the Product phase appeal to customers through the power of Apple brand, which feels very exclusive.
Very quickly, a large ecosystem of Android phone producers created solutions that were ahead of what Apple could singlehandedly deliver. So Apple turned to branding and exclusivity, and as years were passing, the Brand played a bigger and bigger role in driving the sales. The focus on the exclusivity reached its peak probably when Apple announced $5,000 monitor which did not include a stand sold separately for $1,000.
Figure 2: The brand today is more important than technical solutions.
Apple knows it is a dead end. It cannot increase the prices without an end, and notable murmuring during the stand introduction, technical problems of MacBooks and perceived lack of novelty suggest the brand is getting weaker.
So, Apple is trying to enter the services space.
Figure 3: Apple enters a mature service market.
Entering a mature service market is not easy. It takes a lot of effort to convince users to change their habits.
Figure 4: Apple is a new entrant in a quickly maturing market.
However, winning in a mature market is not entirely impossible if one have some advantages, such as a good, existing relationship with customers, so the up-sell process could be quick and effective.
Figure 5: A natural up-sell is almost impossible for Apple.
As the Figure 5 shows, the natural up-sell is almost a closed path for Apple. It was too exclusive, and relying only on hardware users would seriously limit the target audience for Commodity services. So Apple is slowly opening up for non-Apple hardware.
There is an internal conflict between the scale needed to make services profitable and the exclusivity required to sustain emotions associated with Apple devices. This conflict is not easy to manage:
- if you open too quickly, your iPhones will loose a lot of value
- if you open too slowly, you will not win in the services space.
I do expect that this type of challenge is conflict driven, and inside Apple, there are two fractions that are fighting with each other - the older but still mighty Product people who has a lot of past successes, and emerging Service people who seem to understand that Products in this space are about to disappear.
The most notable takeaway is how Inertia limited Apple moves. There is very little that could be done without jeopardising the brand, so Apple is very likely to stay on the existing course and exploit its deteriorating image for as long as possible.
The challenge for my readers - look at Apple TV. Figure out what competitive advantage it has (with the exception of the brand), and what is necessary to make it successful. Then estimate what are the chances Apple will do that. It might be a dead duck already ;-).
