Dear Industry: History Will Not Repeat Itself
I have noticed an interesting thread of conversation both with some industry folks as well as in the media. That thread is around the assumption that the technology industry will repeat itself and a dominant platform will emerge and command the lion’s share of the market. I understand why many people would assume that this would be the case, but I would encourage more discussion around the topic. History might not repeat itself—at least not the way they think.
This assumption that history will repeat itself also lies at the core of why people keep making a big deal about market share statistics. Since market share does not equal profit share, the only reason we would make a big deal of it is if we are looking for the dominant platform to emerge. If we are to assume history will repeat itself and we are anxiously waiting for the dominant player to emerge, then I would fully understand why market share is such a big deal. However, I do not believe history will repeat itself and here is why:
First of all this industry (the computer industry), quite frankly, is not old enough to assume that history is cyclical. In fact, the majority of this industry’s computing history has been in the enterprise. Only in the past 5 years or so, I would argue, have we moved to a mature consumer market in personal computers.
We have a slide in one of our big picture industry trend presentations where we start out by saying that we are in the middle of a 50 year journey. The first 25 years was about bringing computing to business customers and the next 25+ years is about bringing computing to the masses. Given that perspective, it is difficult to say that the way the industry operated during the past 25 years or so by developing technologies largely for enterprises customers, is going to operate the same way going forward in bringing computing to the masses in every corner of the earth.
Using history as their guide, many who believe it is cyclical will point out a trend within product categories to start out vertical, then go horizontal, then back to vertical. Since this happened in the category of Mainframes, Mini Computers, and now personal computers it is easy to think that the vertical-horizontal-vertical trend is an industry truth. However, if we truly analyze the cycle it is clear it is more a product category truth rather than an actual industry truth. In the case of Mainframes and Minis toward the end of the product life-cycle they generally ended vertical and stayed that way.
The reason for this is because the vertical-horizontal-vertical product path is the same path a technology takes as it moves from creation-standardization-maturity. In the beginning when a new category or technology is created there is a flood to create similar yet different products. It begins vertical and fragmented. Soon after a standard emerges, which is when the life-cycle goes horizontal the single standard drives the market to maturity at which point it then begins to fragment again and trend vertical. As interesting as that factoid is the real evidence lies in understanding mature markets.
Understanding Mature Markets
In all case studies the dominant platform is only dominant until the market matures. This is perhaps one of the best ways to understand how it is possible that Microsoft’s Windows OS is actually losing market share and Apple’s OSX is gaining market share. When markets mature they fragment and open up the doors for differentiated vertical players to succeed and begin to forge their own market share. Below is a slide depicting how this happened in automobiles.
What you will see (or recall if you remember) is that the shape of the mid-sized car (embodied in this photo by a Toyota Corolla) was the dominant look and feel of a car. They mostly looked the same as the market was maturing and consumers were figuring out their needs, wants, and desires with this product. However as the market matured and consumers became familiar with these kinds of cars, they wanted ones that were more suited to their needs, wants, or desires. When this happened, design variation opened the door to fragmentation so the dominant shape and form of an auto began to break up into segments. Thus the luxury, economy, SUV, Mini-Vans, Trucks and more segments of the market were born.
The fact of the matter is the consumer market is so large that it can sustain quite a bit of consumer choice rather easily. It is for this reason that multiple technology platforms, segments, and ecosystems can remain in the market and all retain healthy market shares. Take for example the chart below showing US automobile market share by brand in 2010.
I show this slide to show how a mature market that has segmented with a plethora of consumer choice all differentiated around form factors and preference can be sustained. Notice in this chart that there is not a clearly dominant brand or automobile platform. This is because the market for automobiles is mature and can sustain a healthy mix of variation.
Now with those charts in mind take a look at the chart below with a breakdown of OEM Vendor market share from earlier this year. Keep in mind some of these numbers have changed but the changes up or down have not been drastic.
When you break down Smartphone market share by OEM it looks very similar to the US automobile OEM market share. Now some may be questioning the comparison between the automobile market and the personal technology market, however, I would argue they are very similar. Both are very personal choices based on personal preference. The automobile industry is 30+ years further along in its industry cycle therefore I believe provides many of the fundamental market elements to shed light on what the future of the personal computer industry may look like. Namely one by which there is not a dominant platform or hardware vendor but one that can sustain a healthy diversity of consumer choice.
In part two of this series we will dive deeper into a smarter discussion about how to think about vendor market share and platform market share going forward.