An Apple Strategy Failure
Let’s start with a little history. In the 1980’s…
Apple had agreed to license certain parts of its GUI to Microsoft for use in Windows 1.0, but when Microsoft made changes in Windows 2.0 adding overlapping windows and other features found in the Macintosh GUI, Apple filed suit. (The courts decided against Apple.)
Much of the court’s ruling was based on the original licensing agreement between Apple and Microsoft for Windows 1.0, and this fact made the case more of a contractual matter than of copyright law, to the chagrin of Apple. ~ Wikipedia, Apple Computer, Inc. v. Microsoft Corp.
I believe the lesson Steve Jobs learned from the above was all new Apple technology had to be patented to the max. Here is Jobs famously saying, “and boy have we patented it” at the 2007 introduction of the iPhone:
Unfortunately for Apple, Jobs got it wrong. What Apple has learned in the seven years since the introduction of the iPhone is that patent enforcement is entrusted to a worldwide court systems that is expensive, maddeningly slow and wildly inconsistent. Further, courts are justifibly reluctant to issue injunctions in patent disputes and it is injunctions — not money damages — that best serve Apple’s strategic purposes. In other words, Apple — an organization fanatical about owning its key technology — delegated the enforcement of its key technology to a court system totally out of their control.
I believe Tim Cook is now employing a very different grand strategy.
Out With The Old, In With The New
I think it’s clear Tim Cook long ago abandoned Apple’s failed patent strategy and replaced it with a strategy fully within Apple’s control. In essence, Apple decided to do what only Apple could, and only Apple would want to, do: out-integrate their competitiors.
Let’s recap. In only a few short years, Google was able to pivot and turn Android into an operating system that rivaled, and many would contend surpassed, the iPhone’s operating system. In only a few short years, Samsung was able to take the hardware they were making with Apple and use it to compete against Apple and surpass Apple in hardware sales. Apple’s “boy-did-we-patent-it” strategy failed and failed miserably to deter either Google or Samsung from competing with Apple.
Now look at the integrated services introduced by Apple at WWDC 2014. Services like continuity, Apple Family Accounts, Healthkit and Homekit make it clear that where Apple is going, no one can follow.
It’s not because Apple’s rivals aren’t world class. They are. It’s because Apple’s rivals don’t make both the hardware and the software. They literally can’t create a closely integrated product because they don’t make one.
Now you could argue Microsoft makes both the hardware and the software, but Microsoft is very late to the hardware/software game and when it comes to hardware like the A7 (soon to be A8), 64-bit processing and Touch ID, Microsoft is not on the same playing field as Apple.
Further, even if Microsft COULD follow Apple’s strategy, they wouldn’t have the economic incentives to want to do so. Apple is devoting endless amounts of time, energy and effort into integrating their hardware with their software becasue they want you to live exclusively within Apple’s ecosystem. Microsoft wants its cloud services to run on all devices. Microsoft wants its operating software to run on all devices. Microsoft wants its hardware…uh…frankly, I have no idea what Microsoft is trying to do with their hardware. And I don’t think they do either.
Apple’s strategy involves ever tighter hardware, software and services integration on such a scale no other company could do it (because it requires the simultaneous creation of both the hardware and software). Apple’s strategy is tied to a business model so unique that no one else would be incentivized to do it.
Does all of this mean Apple is going to dominate the iPhone and the tablet markets? Just the opposite. All of this integration comes at a cost. This is premium, a vertical, a walled garden strategy. Apple wants you to want to own at least two and perhaps all three of their devices (iPhone, iPad and Mac). Many will gladly do so. Most will glady do with out. And others will will sadly do with out. Apple will dominate only the premium market. That will be more than enough.
Is this a growth strategy for Apple? Maybe no and maybe yes. Premium is premium and there’s only so many people who want and can afford a premium product. This is true of all markets. But those who can afford an iPhone or an iPad or a Mac will also be those who can afford to buy all three. Apple is providing them with stronger and stronger incentives to do just that.