Apple’s Strength: It Isn’t Scared of Apple

by Chris Seibold Mar 11, 2011

Someday you might find yourself sitting around and wondering why Microsoft doesn't rule the tablet market the way it rules the OS market. It is a good question but one that if you regularly consider means you're a little too invested in the tech world.

The reason the question indicates that you're too into tech is because it means you are obsessed over what could have happened rather than focusing on the here and now. Time to get outside and talk to actual people. Face to face, even. The reason the question is good is because Microsoft (and Palm) had a huge lead in this area and they blew it. How Microsoft managed to miss the tablet market despite being already there reveals a key difference between Apple and Microsoft.

Microsoft's stab at this market occurred years ago and Microsoft called it Tablet PC. It was a lot like whatever the current incarnation of Windows was except you used a stylus instead of a mouse. This notion leaves most people stupefied. Why would you build tablet computer that was the same in almost every respect as a laptop except for the mouse? Didn't Microsoft get that it was a brand new form factor and that form factor could and should unleash a new way to do things? Then you'll conclude that Microsoft is full of unimaginative idiots who can't see the ten minutes into the future with a crystal ball and a weather report.

You'd be wrong. The guys working on the tablet PC did see that the Tablet PC needed to be new and different. The guys working on Office and Windows didn't see things the same way. For the Office guys to remain relevant they had to make sure that Office version on the Tablet PC worked like the version on the desktop. For the Windows guys to maintain power they had to make sure that the tablet PC didn't outpace the desktop version.

Those seem like boneheaded decisions in 2011, but when they were made they seemed smart. Office generated a big chunk of revenue (it still does) why shouldn't the tablet folks bow down to the wishes of the Office folks. The same thing with the OS. Why would anyone with half a brain expect Windows to make allowances for a tablet computer, Windows was everywhere and everything.

While it seems easy to think that Microsoft should have seen it coming when you are faced with the market ten years ago you can understand how obvious the decisions were.

Here's where Apple took a different path. Apple, against all conventional wisdom, stopped worrying (or never bothered to worry) about what the latest product would do to the companies current product.

There are many examples of this. When Apple went to Intel chips people howled; when Snow Leopard came out they howled louder. The counter argument will be that Apple had no real presence in the computer market at that time so who cares. Apple knows it has a certain number of consumers that will stick around no matter what. Sure, they'll whine and bitch but they'll do it while buying the next Mac. Hence, if switching to Intel will bring in more consumers (and it did) no problem.

Now consider the iPod mini. You'll recall it came in colors, sported a tiny hard drive that could hold four to six gigabytes of data. It was perfect. How perfect? It was Apple's biggest selling product. What do you do when you have a product everyone wants? If you're any company but Apple you update it and milk the cash cow until it finally dies.

If you're Apple you kill it and replace it with the nano. A pretty bold move, killing off your most profitable product to replace it with something the company could not be sure the market would embrace. Bold but forward thinking. The nano added a color screen and flash memory but took a step back in drive size. The gamble paid off and the nano was a huge hit.

Which brings us to the iPad. Where Microsoft worried about the Tablet PC cannibalizing sales of Windows, Apple didn't bother worrying about the iPad cannibalizing sales of anything running OS X. Since the iPad has been a hit it is easy to call the move a no-brainer, but the truth is far different. If you were CEO and presented with two options: selling a computer that generates $1200 in revenue or a lite Mac that generates only five-hundred bucks you would likely think about the bottom line and realize that if people buy this iPad thing instead of a laptop you're losing out on six hundred bucks of revenue. You'd likely reject the idea or cripple the thing as to maximize income.

That is the genius of Apple. Instead of asking: "How much money will this cost us?" And "How can this hurt us if it is not a hit?" Apple said: "Screw it. This is better, if it eats away at Mac sales, it's worth it!"

One supposes that some day this attitude will come back to haunt Apple: Apple will release some product that actually kills a higher margin product and the CPAs who work at Apple will go apoplectic with "I told you so's." But Apple won't be making one of the biggest mistakes of the competition, Apple will not be afraid of its own innovations.

 

 

 

Comments

  • First up I congratulate you for the proper use of the term “cannibalize”.

    But I disagree with you that back then it wasn’t a boneheaded decision to cripple the MS tablet just to please the Windows and Office internal constituencies at Microsoft.

    I’ve always maintained that one of the main differences between Apple and Microsoft is that Apple is willing to win its customers over and over again.  Microsoft on the other hand think that once they lose a customer, they can’t win him or her back.  (Which reveals a basic insecurity that their products aren’t really that good and that they got their customers basically by pulling the wool over their eyes.)  This has been just one big drag on innovation at Microsoft and why the most creative engineers have left it in disgust.

    The other main difference between Apple and Microsoft is that there is only one empire builder in Apple (and he sits at the only position in a company where an empire-builder does not harm the company) while Microsoft has a number of little petty empire-builders jealously guarding their turf and undermining the company’s overall well-being.

    I still cannot believe, and this is testament to Gates poor management skills, that after he publicly declares the tablet to be the future of PC computing and Microsoft in particular, he allows the Office division to so blatantly undermine him and on top of that lets the head of the Office division keep his job.  At Apple, once the company’s direction is set, everyone works towards the common goal and anyone who undermines it would be tossed into the street in a Jobsian minute.

    tundraboy had this to say on Mar 13, 2011 Posts: 132
  • Tundraboy,
    That is some nice analysis. Not sure I can disagree. Also not sure I can not not rip that idea off.

    Maybe you could not read for a few weeks?

    Chris Seibold had this to say on Mar 14, 2011 Posts: 354
  • I have to disagree with you on this.  Apple would never have released the iPad if they thought it would cannibalize either iPhone profits or notebook profits.  I am sure their analysis found that while it would steal some sales of other products, overall they would make a larger profit by releasing it.  This is why it is at the price point it is at.  Between notebooks and iPhones. 

    Also, most people who are buying the iPad already own a mac and an iPhone and aren’t using it as a replacement for those, but rather to supplement them.  Apple knew this.  I think the only thing they didn’t predict that people would jump on the iPad bandwagon so fast.

    But your analysis of Microsoft seems accurate.  They have issues with their units working together.

    The Deacon had this to say on Mar 18, 2011 Posts: 1
  • The Amazon Appstore opened for business, officially, on Tues, March 22. The proof is here: Amazon defies Apple lawsiut by opening Appstore The Appstore starting is in violation of a cease-and-desist order issued by Apple computer, who filed a trademark infringement legal action. This is one of multiple lawsuits over the use of the term “app,” all of which could possibly be driving up price to consumers.

    serajane m. had this to say on Mar 25, 2011 Posts: 1
  • Apple was developing alternative platforms to the Macintosh, such as the A/UX. Apple had also begun to experiment in providing a Mac-only online portal which they called eWorld, developed in collaboration with America Online and designed as a Mac-friendly alternative to other online services such as CompuServe. -Any Lab Test Now

    Ana had this to say on Sep 19, 2011 Posts: 76
  • It remains to be seen what bells and whistles the newest iPhone brings, but it’s sure to be another big hit for Apple. hire a java programmer

    Andrew Park had this to say on Oct 04, 2011 Posts: 4
  • Apple is a very creative company and my opinion is that one day they will provide the best private cloud services. I think they are building their new gadgets around this feature. So watch out for what Apple can do!!

    annekingsy had this to say on Oct 11, 2011 Posts: 22
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