Only Apple, Only Google, and Only Amazon

Ben Bajarin / November 4th, 2013

Every company, in order to compete, must have a secret recipe. Something that helps their offering in the market standout from a sea of competitors. Those companies best poised to succeed in the future and adapt as necessary in a fast paced industry such as technology are the ones who know exactly what their recipe is and why it is successful. This is something I believe only a few companies have a strong grasp of.

Sports provides a context that I feel helps to best understand the idea of the secret recipe. All good sports franchises understand this concept. The secret recipe runs deep into a team’s philosophy, playbook, recruiting, culture, etc. While preparing to compete a team must understand what its strengths are and what its weaknesses are. This is the best way to create a plan that not only caters to your team’s strengths but also exploits your opponents’ weaknesses. The best teams in sports build around what makes them unique and creates a path forward based on that recipe.

Three companies in tech–I believe–do this well.

Only Apple
Tim Cook has said a phrase several times over the last few earnings calls that consistently struck a chord with me. Several times  Tim Cook ended with “only Apple can deliver.” Tim Cook understands the secret recipe at Apple, perhaps better than any current CEO of any company.

Apple’s vertical approach, specifically its deep desire as a part of the recipe to own hardware and software, was the single biggest roadblock to  success in the early days of computing. In that time, Apple was an incompatible player in a market that grew based on compatibility. However, where Apple’s recipe was a barrier then, it is an enabler now. Apple has spent the last 37 years perfecting the recipe. Everything from philosophy, playbook, recruiting, culture, etc., has been focused on being the best at this recipe. This recipe, and this recipe alone, yields genuine differentiation. Genuine differentiation is the only way to fight the battle against commoditization.

Apple’s recipe is obvious, it is clear for all to see. Yet extremely difficult to duplicate.

Only Google
Google also has a secret recipe. Google is the largest machine learning project in the history of computing and it is evolving before our very eyes. Only Google can provide the kind of superior search experiences it delivers. Google’s recipe is based fundamentally on cream-of the-crop engineering related to web search, web services, machine learning algorithms, and more.

In fact, I could create an argument that only Google could have done with Android what they did. Android’s role is often overlooked. When Google bought Android with the intention of releasing a free OS for smartphone makers, I do not believe it was targeting it to be an Apple competitor. Android was developed and driven by Google to go specifically where Apple had no intention–the low-end. This is where 85% of Android’s growth comes from. Android was released as a defensive play for Google to go after the market where Apple’s recipe simply doesn’t enable them to go. Android was deeply strategic to keep Microsoft from going after the part of the market Apple never would and it did its job well.1

Google has done as good of a job as any as building its playbook based on its recipe. This again is everything from philosophy, playbook, recruiting, and culture.

Google’s recipe is obvious, it is clear for all to see. Yet extremely difficult to duplicate.

Only Amazon
Amazon is another company with a unique recipe whose success is tied fundamentally to this recipe. Amazon is a retailer, fueled by the best e-commerce experience on the Internet. It has built arguably the best logistics, inventory management, and supply chain infrastructure outside of Wal-Mart. Every business Amazon invests in becomes profitable. Once it does, those profits are re-invested in new businesses that eventually become profitable.

Like Apple and Google, Amazon has a clear philosophy and playbook and its recruiting and culture support the unique recipe.

Amazon’s recipe is obvious, it is clear for all to see. Yet extremely difficult to duplicate.

Concluding Observations:2
What is interesting is who is left out of this conversation. For example, Microsoft. When I think about this, what strikes me as intriguing is what is Microsoft’s recipe? For a company that did so well for decades it is intriguing to me that it is having so much trouble adapting to current market conditions. Its recipe was built with business customer in mind and that recipe is being challenged. Intel is another whose recipe may need adaptation. What about the PC OEMs, smartphone OEMs, wearable technology companies, Facebook, etc. There are many companies for whom this analysis can be done.

What are the secret recipes of these companies that are not only defensible but difficult to duplicate? Every company has to wrestle with what they are uniquely positioned to deliver and recognize it as a key to strategy planning.

  1. Google did buy Android prior to the iPhone be released. Regardless of what then CEO Eric Schmidt may have known about the iPhone prior to its launch, I still believe he targeted Android at the low-end and specifically to disrupt and keep Microsoft from dominating mobile devices. []
  2. Each of the three companies outlined above make up the majority of conversations I have with Wall Street analysts. Fascinatingly Google and Amazon’s secret recipes are viewed as valid long-term barriers for competition yet Apple’s is not. Something I strongly disagree with on yet I’m not surprised by. Until Wall Street can evaluate Apple with a fresh set of eyes, the company will continue to defy their logic and outdated templates. []

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
  • Sunil

    What about IBM? do you think they have a secret sauce. Their meandering ways is the playbook that Microsoft will follow. Ballmer was always enamoured by IBM and its methods.

    • Excellent point. How many computer-related companies have died while IBM lives?

  • stefnagel

    Watching Microsoft do consumer is like watching a drill sergeant try to sell dresses. Drips flop sweat.

  • Walt French

    Regards Microsoft: their hold on the Enterprise for major functions remains untouchable. Yes, a lot of the web is powered by linux, and Apple is showing up everywhere thanks to BYOD, but the problem with the desktop is not Microsoft’s ownership of it, but that Microsoft hasn’t been as savvy as Apple at determining when the technology allowed for expansion into say, tablets.

    Which leads to an observation about Apple: The latest excerpt from Vogelstein’s forthcoming book spells out how intimately Apple’s product innovations are tied to a knowledge of how close to the bleeding edge you can go. Run, don’t walk, to read the short piece if you want to really understand what it means for Apple to be a valuable innovator. Apple has been superb at combining its knowledge of what customers will want, together with what it can do at a given price level, because it keeps its eye on both well enough to spend the years developing the software that can glue the two together.

    Contrast that with the Samsung watch: yes, a lot of people like the idea of a minimal computer always at hand, but the battery tech isn’t there yet for it to be practical given how Samsung has architected the device. Given the battery limitations, gobs of functionality had to be sacrificed, resulting in a bit of a joke when it comes to why you’d want one. Not that Sammy doesn’t want to be exalted for its innovations, it just doesn’t have deep enough roots into consumers, technology and software.

    • TheEternalEmperor

      What short piece?

      • Walt French

        http://www.wired.com/opinion/2013/11/one-ipad-to-rule-them-all-all-those-who-dream-big-are-not-lost

        …The problem was that the tablet hardware was unusable. The energy-efficient processors that would eventually drive the iPhone and the iPad were not yet powerful enough to run software that would appeal to consumers. The tablet needed a hard drive, which took up too much room in the case because flash storage was still too expensive in the capacities they needed. What that left was a machine without a keyboard that was not much lighter, cheaper, or better powered than a laptop.

        Apple shelved the project before Jobs revived it to build the iPhone. Only after the iPhone came out in 2007 did Jobs start to reconsider a tablet.

        Vogelstein seems to get closer to what makes Apple tick than any other writer.

  • Reagan

    Google may have bought Android before the release of the iphone but how long was Eric Schmidt on Apple’s board leading up to that purchase?

  • Mauryan

    Microsoft’s recipe is to thrive on mediocrity as much as possible, for as long as it lasts.

  • sceptic101

    ‘Every business Amazon invests in becomes profitable. Once it does, those
    profits are re-invested in new businesses that eventually become
    profitable.’

    Very bold statements.I assume you have some kind of evidence backing them up?

    • benbajarin

      http://www.eugenewei.com/blog/2013/10/25/amazon-and-the-profitless-business-model-narrative

      From a former employee. Our analysis has been tracking this model for quite some time.

      • sceptic101

        I see your Eugene Wei and raise you a Horace Dediu!

        http://www.asymco.com/2013/08/07/the-anti-apple/

        Anyway I’ve read the article by Wei, it also appeared at:

        http://seekingalpha.com/article/1776702-amazon-and-the-profitless-business-model-fallacy

        I’m rather doubtful that the opinion of an employee that left some 9 years ago can be taken as evidence of anything, especially in explaining why the formerly profitable Amazon has all of a sudden become unprofitable. However I do not really want to digress the thread any further.

        • benbajarin

          Horace and I have talked about this and we are on the same page actually. Amazon’s model is clean cut. It is evidenced by all their financial data. Look at the quarters where there is a dip and it correlates with when they invest in new businesses.

          There is no profit ‘switch’ there is just less aggressive spending in new growth. It is very similar to Apple. Apple can just about print an extra 100m dollars with each new store they open. This has stayed consisted. Amazon can do the same with each new business or new area they seek to expand in.

          In the words of my friend Benedict Evans, Amazon taking a profit now is just a wasted investment. http://ben-evans.com/benedictevans/2013/10/27/simplicity

  • aardman

    Microsoft has, or had a secret sauce: it’s the acquisition, extension, and perpetuation of monopoly power through shrewd contractual arrangements with its downstream and upstream partners, backed up by occasional ruthless and sometimes criminal intimidation and coercion. The contract that got Bill Gates started on the road to tech overlordship was the masterstroke of a sucker deal (non-exclusive!) that they got IBM to sign when they picked MS-DOS for the PC. The ones that sent MS to the financial stratosphere were the contracts where the clone makers were strong-armed into paying for a DOS-Windows license for every machine they sold, even if Windows wasn’t installed. That was the one that killed any meaningful OS competition on the X86 platform and sealed Microsoft’s monopoly. (And held back PC innovation for about 20 years, thanks Bill!)

    Thankfully, monopoly is its own suicide pill. Microsoft never really learned to profitably build and sell products that people actually will choose to buy if given a choice.

  • Majipoor

    Both Apple and Amazon recipe are actually about making their customers happy and thus making money, but Google’s recipe as described here is not about making their customers happy as end users are not Google’s customers.

    I thus think that Google’s recipe for success as a company is not clear at all as it is quite difficult to analyze the relationship between Google’s free products and services and their ad business which is their actual money maker.

  • revolving door

    Pointless article. Obviously this guy has nothing to write about.

    • benbajarin

      Understanding the articles on our site and the goal with them does depend on where on the food chain in this industry you fall.

    • Just admit you didn’t read it.

  • whatsa2

    I think one thing that is left out is
    the companies mentioned all have new and vertical markets.
    I think that they will need a few iterations where they dont just drop the ball and run away.
    This is where I do not trust the above players.
    The issues for apple and google is how well they support older devices.
    So far this does not look good for either….
    Apples limited OS upgrade ability and older models become redundant quickly
    (by that I mean you get one or two before it wrecks the device)

    ( which makes me question also the incorrect inferred value at resale)

    And Apples history of dropping the ball on versions and HW is not great.
    run away and its not their problem.

  • I have tried the google phone and it is really mind blowing. Has been using it for some days now. You can find what is hot in it in my blog. Please read this
    http://www.xowned.com/blog/android-kitkat-4-4/

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