The iPhone disrupted the mobile phone industry and did so with breathtaking speed. In Part 1, I described how it didn’t suddenly burst on the scene; Apple had introduced the iPhone and demonstrated its features a full six months before it was released, yet many pundits predicted failure. How could this relative alien enter a new market containing such entrenched, powerful companies? Was the iPhone a fluke? Or is something in Apple’s strategic approach responsible for the iPhone’s success?
Generally, a company may execute more than one strategy well, but usually only one ultimately drives its success. Most market strategies fall into four categories: 1) Gaining market share 2) Being least-cost producers 3) Innovation 4) Quality.
Market Share
In PC operating systems, Microsoft won the market share battle.
Least-Cost Producers
Dell, Packard Bell, Acer are companies that found success through efficiency, outsourcing and tight inventories.
Innovation
An innovation can start a revolution. In the tech industry, many innovations come and go, e.g., Zip, Palm PDAs, etc. The difficulty with innovation is that one has to continually pull a new rabbit from the hat, or transition to a market share, least-cost producer or quality market strategy. If asked for an example of a current innovative company, many people would mention Apple.
Quality
Nordstrom and BMW are examples of companies with low market share, but success because of their focus on quality. For the last decade in the PC industry, Apple has received high ratings for the quality of its products and its customer service.
I contend that of the four, it’s the Quality market strategy that drives Apple’s success. And not just a big amorphous Let’s-do-everything-well kind of quality to which everyone pays lip service. It’s a specific quality driver that can be isolated if you ask the key question for my business, “Who is the audience?” When one answers this question, the reason for the iPhone’s success is obvious.
Consider: Microsoft’s key strategy has been to gain market share by corralling enterprise computing. The audience was IT departments. Get one IT department and you’ll sell tens of thousands of computers with your operating system on them. You then get the individual users by trickle down. When Microsoft went into mobile, their strategy was to maintain Windows’ market share by extending it to the phone. RIM’s audience is also enterprise. It built phones delivering email with secure links to Windows enterprise systems. The primary audience: organizations and organizations’ needs.
Apple, on the other hand, has always been about individual empowerment. Think Different.
Until recently, I’ve often noticed that my non übergeek friends who used Windows computers at work generally disliked computers. Some didn’t even have them in their homes. The computer experience had been so confining that people wanted to be done with it after leaving work. This has changed, but more because of cloud computing and the new social media sites than because of desktop PC innovation. Mac owners, on the other hand, have tended to be ardent computer users. To paraphrase one of Steve Jobs’ statements from the early days of the OS wars: Our goal is to deliver a tool that will empower people who use it in thousands of different ways that we can’t possibly imagine. For Mac users, he achieved this.
The contrast of these two approaches puts the reason for the iPhone’s success in sharp relief. It’s because Apple focuses on a different audience than almost everyone else in the PC industry: the individual user. In terms of the four basic market strategies, Apple’s key driving strategy is to maximize the quality of the individual user experience.
When people got their hands on an iPhone, it was so different from anything they’d previously experienced that to many it seemed like having been launched into the future. The subsequent proliferation of new apps made the iPhone continually more useful and empowering in ways no one had anticipated, consistent with Jobs’ earlier vision and intent.
Maximizing the quality of the individual user experience is a very different approach from approaches like having more features than our competitors' products, building something we can sell for less than our competitors, building a product that appeals to the needs of the wireless quasi monopolies, acquiring company X, etc. It’s a strategy that just hasn’t seemed to occur to a multitude of B school graduates. Maximizing quality to meet the needs of the end user is at once common sensical, yet in today’s marketplace, brilliant.