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.

Part 2: Dear Industry, Focus on Profit Share not Market Share

Published by

Ben Bajarin

Ben Bajarin is a Principal Analyst and the head of primary research at Creative Strategies, Inc - An industry analysis, market intelligence and research firm located in Silicon Valley. His primary focus is consumer technology and market trend research and he is responsible for studying over 30 countries. Full Bio

466 thoughts on “Dear Industry: History Will Not Repeat Itself”

  1. Too simple an analogy. Cars are like computers, but not like OS’s. So with PCs there are lots of hardware manufacturers but few OS’s.

    Maybe mobiles will be different because of greater numbers though.

    1. Agree, that is why next week in part two of this series, I will look at platform share and show why it won’t be like the 90’s when Windows had 98% of the market. I will show why all three and perhaps a fourth will have a healthy share. I’ll actually be surprised if in 5 years any one OS in mobile has more than 50% share. I could be wrong but I don’t think so.

  2. The biggest fallacy of the Microsoft owned the PC market due to it’s licensing (and many vendors) vs Apple’s single brand strategy does not really acknowledge is that it was IBM that built the Intel based DOS > Widows PC in to a dominate position not Microsoft.
    The market is very different and the issue is not that the market is mature, and there is not IBM in the market place that customers needed to validate the market.

    1. again for the time being I am breaking up hardware from software or platform. You are correct though and honestly “for the time being” I think we can make the case that Apple is the new IBM. They are the trusted source helping not only mature the industry but the product life cycle.

      Recalling the statement that IT wouldn’t buy anything other than IBM for fear that they would get in trouble simply because the brand and products were so trustworthy. I see the same consumer mentality in Apple customers. Only it may not stay that way forever due to market maturity and fragmentation.

      Just thinking out loud of course.

  3. How is the next 25+ years about bringing computing to the masses? Lots of people had computers in their homes in the 1980s.

    1. That was a very small part of the market and mostly US during that time period. There are still many, many, billions of people who still don’t have computers of any kind. Smartphones, tablets, PC’s, connected TV’s etc will all start getting to billions of people for the first times and then some over the next 25+ years.

      We still have a long long way to go.

  4. “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.”

    That’s one of the smartest things I’ve seen written by any blogger, analyst, or commentator to date.

    Joe

  5. Compelling piece – congratulations! One important difference between autos and PCs/phones is the time in market maturity at which China became the number one consuming geography of the “device” (now true in both PCs and smartphones). I expect we will see competitive forces swing to the experiential demands of a Chinese consumer more dramatically than in the automobile industry. Thoughts?

    1. The past two years I have been studying China in depth. Although I point out parallels in autos and PC there are also differences. One of the things that I am noticing is that just as fragmented are US consumers and their mentality / personal preferences, so will be the Chinese. To be honest their interests may be very different.

      What may end up happening is that vendors have regional strategies with their product portfolios. This would mean a slightly more complex supply chain but to cater to the unique needs of each region this may be necessary.

      Basically what I am saying is that it is possible that the same product won’t work in every region. We will see how it plays out but Asia will be the largest market for consumer electronics by at least double. It will just take a little longer to mature.

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