Apple Watch

How Apple Keeps the Competition Whipped

Apple observers are forever predicting the company is about to launch dramatic new products. For a long time, it was an Apple television, display and all. Now, expectations driven by some Apple research on what cars need has people convinced the company is about to get into the auto business.

Don’t believe it. Endless rumors about what Apple is up to is a fun parlor game and creates stories to fill up web pages. But it ignores how Apple actually does business. Apple likes to surround itself with a lot of flash, but the fact is its phenomenal success is the result of a somewhat plodding approach, but one that is very difficult to criticize.

Apple is the most profitable and, with a more than a $700 billion market cap, the most highly valued corporation in the world. It accomplishes this with a lot of careful steps. It puts huge effort into operations, from acquiring components to retail. Its concern with product detail is obsessive. But it has some key, unique principles:

Move slowly and carefully. Somewhat computerized watches have been around at least since 2004. The market has been flooded with new watches for the past couple of years, from Google, Microsoft, and just about everyone else in the market. Apple will finally have the Apple Watch out this spring, the usual case of taking its time. It will be good, it will meet customers’ needs, and it will be expensive.

Apple WatchThe approach is similar to the iPod and the iPhone. Let the competition experiment and make mistakes. Design an exquisite entry that works far better than anything in the market. Grab the market, selling to people who never even considered the competition.

Apple can maintain its standards because it never brings out more than one significantly new product a year and often skips that, sticking with updates of the current line. The iPod came out in 2001, the iPhone in 2007, the iPad in 2010, the Apple Watch in 2015. In between, we got some redesigns of existing products such as the new Mac Pro in 2013 and the iPhone 6 and 6 Plus in 2014.

It is true, especially in the Jobs days,  that Apple would attack a possible product, such as the phone, that it was actively developing. But that has been a rare course. It should be quite clear Apple has no interest in a television. If nothing else, no one, even Gene Munster, has ever come up with a case where a TV made sense as a business. The notion now seems to be dying as the the TV business itself continues to suffer. It will continue to develop the Apple TV box–a new version is expected this fall–but that’s it.

The car situation is more complex. Apple has an interest in autos, but that certainly is for developing systems for cars–support for the iPhone is already common and is likely to be expanded–but not designing or building cars. Although cars are increasingly wheeled computers, everything about their manufacture — their regulation, their sales, their ownership — is dramatically different from anything Apple knows.

The car business also violates Apple’s core move that new products should quickly be profitable. Tesla is in its fifth year and its losses are growing at about the same rate as its sales. CEO Elon Musk admits profits are still quite a distance away. Apple could afford to buy Tesla in the extremely unlikely chance Musk was interested in selling it but it simply does not fit its approach to business. Starting a new car company would be even more complex, more expensive, and less practical.

Minimize the product line: Samsung offers a countless number of phones (ignoring multiple colors and variants for carriers). Apple sells the iPhone 6, 6 Plus, and 5s. Hewlett-Packard makes a couple dozen laptops, Apple makes the 11″ and 13″ MacBook Air, the 13″ MacBook Pro, and the 13″ and 15″ Retina MacBook Pro. The Apple models do not offer buyers much modification–mostly processor, memory, and storage. The limited range provides huge advantage everywhere from manufacturing to promotion to retailing.

Mac AirApple also minimizes design changes. I own a MacBook Air, a MacBook Pro and an iMac. The oldest of these is five years old (the durability, both in terms of performance and usefulness, is another wonder) but you would have to look very hard to find some minor design functions that differ them from current models.

This approach lets Apple maintain pricing that yield wonderful profits. (Although Macs and iPhones are considered expensive, they compare fairly to models by other manufacturers meeting the design and quality.)

Control retailing. You cannot buy a Mac at Walmart. You can get an iPhone, but not an iPad. Apple is very careful about what it sells where. Except in special circumstances, such as the need to move stock before an upgrade, sellers are never, ever allowed to discount. ((Pricing of phones, of course, is somewhat more complex because most sales include subsidies under service plans.))

New York storeApple’s stores have been brilliant. I remember when Apple opened its first store in Tyson’s Corner Mall, in Washington’s well-off Virginia suburbs in 2001. I was convinced it would be a flop. The store, in the mall’s prime location, was too big and too expensive. No one wanted to schlep a Mac home from a mall (Mac desktops and laptops were all there were).

This is why Steve Jobs and Tim Cook run Apple and not me. The Apple Store was and continues to be a phenomenal success. I know of no outlet as consistently full of customers. And they are rich with buyers, not just shoppers. Amazingly, after 14 years, no one has successful copied it.

One critical thing is Apple moved as slowly on stores as it did in developing products. There are fewer than 500 Apple Stores, all of them handsome and very carefully located. They sell more per square foot than any other retailer, an honor long held by Tiffany.

All of these factors share patience and caution. Apple comes out with bold products but it sticks with the old Latin rule of festina lente–make haste slowly. It may be an odd principle for a company that lives on the leading edge of technology but it is tough to beat.

Published by

Steve Wildstrom

Steve Wildstrom is veteran technology reporter, writer, and analyst based in the Washington, D.C. area. He created and wrote BusinessWeek’s Technology & You column for 15 years. Since leaving BusinessWeek in the fall of 2009, he has written his own blog, Wildstrom on Tech and has contributed to corporate blogs, including those of Cisco and AMD and also consults for major technology companies.

16 thoughts on “How Apple Keeps the Competition Whipped”

  1. Very well put. I think that you could have added that Apple very rarely launches first. That is, they’re perfectors and optimizers of technology AFTER their pinhead competitors have taken most the risks and made most of the mistakes. This is not a criticism, it’s VERY smart of them. Let the dimwits make all the mistakes, then come in and clean up.

    Their marketing is absolutely top flight. Perhaps the best in world history. When I say marketing, I don’t mean just advertising. It’s much deeper than that. It’s what to launch, and in what sequence. It’s also what (who) to allow in and what (who) to discourage. I can’t help but wonder how much the decision to keep Facetime and iMessages restricted to iOS users only, was impacted by the predetermined notion of having the general users believing that Apple invented videoconferencing, or that iMessage is anything other than text messaging. Big wins in mindshare, nonetheless.

    Operationally, they are world class. No question. Again we see old competitive techniques such as buying up a huge chunck of supply of certain components (like Coke did vs. Pepsi by buying up sugar supplies, in the early 1900’s).

    All these things make Apple a tremendously well run business. Truly admirable through that filter. Everything is self serving though, with a beautiful layer of “user sugarcoating” (IMO). Their self serving aspects do take a monumental amount of audacity. They get away with it though, and this audacity is attempted to get copied by their competitive nitwits. They get away with it to a degree too.

    I’ll close with a tongue in check, friendly dig…

    “Apple likes to surround itself with a lot of flash”
    I can’t believe you just said that! 😉

    1. “Let the dimwits make all the mistakes, then come in and clean up.”
      I suspect that there is a certain realisation at Apple that being out of the gate first does not count for much if you don’t know where you are going.
      In addition, there is a “launch window” for a lot of technology products. The great fear that companies have is launching too late (when there are strong incumbents), whereas launching technology too early is at least as dangerous (because the technology is too expensive, the functionality too limited and the market too small).
      Apple has been remarkably successful (and lucky) in both respects. The corollary to this thinking is, of course, that you would have to assume that Apple has a portfolio of ideas that they have tried, but have not been able to get to work to their satisfaction.

    2. “I can’t help but wonder how much the decision to keep Facetime and iMessages restricted to iOS users only, was impacted by the predetermined notion of having the general users believing that Apple invented videoconferencing, or that iMessage is anything other than text messaging”

      Consumers aren’t this aware, normal people don’t even think about this stuff. You’re viewing things through that nerd lens again.

      What Apple does over and over and over again, is identify jobs-to-be-done that deliver value to the user, and make those easy. It ain’t rocket science.

      1. “Consumers aren’t this aware, normal people don’t even think about this stuff.”

        Yeah, that’s one reason why I wonder what I wonder.

        “Consumers aren’t this aware, normal people don’t even think about this stuff. You’re viewing things through that nerd lens again.”

        Just because consumer’s aren’t this aware doesn’t change anything. It’s their right to think about it, or not.

        1. My point is there is no motivation for Apple to do some of the things you think they’re doing, such as “having general users believing that Apple invented videoconferencing”. Even if Apple was trying to do this (which is silly) they couldn’t possibly succeed, because consumers simply are not aware of this. Consumers also don’t care, so even if you could make them aware, it wouldn’t matter. You really do have trouble viewing the world through a ‘normal person’ lens. But then, that’s a large part of why nerds don’t understand Apple.

          “But it’s presented as such. Smart. Very smart.”

          Well, taking the complexity out of a system is indeed very hard, that part could be said to be ‘rocket science’, but Apple always pitches jobs-to-be-done to consumers as simple and easy. That’s where the value is, in simplifying the user experience. What Apple does is very, very difficult, but the end result is simplicity. It’s no accident that Apple Pay is succeeding where others have failed.

          The basic concept of what Apple does is very simple, but the implementation is actually very difficult. That is why Apple is so hard to copy.

          1. Yet I often hear “I’ll Facetime you, i’ll iMessage you”. To which I answer that they can’t. They can Skype me, they can Gotomeeting me, they can Youcam me, heck they can even Netmeeting me. What they can’t do is Facetime me. They are bewildered as to why…

            I do give them credit for putting out solutions elegantly, no small feat. They do this partly by seeing where the pioneers fail. This too is wise. But they are perfectors, not inventors, of new features.

          2. Ah, I see, you’re annoyed that Apple has popularized many technologies, to the point where people say ‘Facetime me’, much like we say ‘Google it’. But I’ve never heard anyone say ‘iMessage me’, and I have four teenagers. Everyone says ‘text me’. And actually I hear ‘Skype me’ a lot more than ‘Facetime me’.

            “But they are perfectors, not inventors, of new features.”

            Heh, anything to downplay Apple’s achievements. I wonder if you realize how obvious you are.

          3. If you see it as a downplay that’s your problem. I see it as their most significant contribution.

            I was using the expression as an indicator of my initial question, that is, one of mindshare, and how they might have gotten it. My annoyance, if any, is that there’s no good reason, for the user, for Facetime to not interoperate. It would be the same for Skype if that were the case.

    3. “wonder how much the decision to keep Facetime and iMessages restricted to iOS users only,”

      Facetime was supposed to be an open standard, but Apple got sued by a patent troll and that scuppered any ability for it to be made available on third party devices.

      1. I’ll take your word for it. Why wasn’t it released as an open standard if they were unaware of infringement as per their testimony? And there weren’t other open standards that could be used?
        Yes, you could say end to end encryption. There are other standards (I think) that offer end to end encryption.

        1. Being waylaid by a patent troll is always a case of thinking that you’re using something that is unencumbered by patents. That’s why they’re called trolls — they hide under the technology bridge and surprise you when you try to cross.

          1. Here’s what I don’t understand. They did, in fact, launch Facetime. They launched iOS only. If it was their intent to launch as an open standard, why didn’t they? They would still be unknowingly infringing, but if that was the plan….? There could well be a good reason, but it’s not clear.

            It also doesn’t address iMessage, the “Hotel California”, messaging service which is iOS only and “you can never leave…”. 😉

  2. “Apple observers are forever predicting…”

    To paraphrase Sherlock, they SEE but they do not OBSERVE.

    If they did observe, these people would never accept as possible the idea that Apple would buy Tesla or manufacture cars. Or that Apple would enter into a cut-throat, price-sensitive consumer goods market like a flat-screen television. Or that Apple would become a wireless carrier. Or any of the other prima facie absurdities that have spewed by “Apple Observers.”

    Thank you for your observations. You ain’t one of them.

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