The iPad and iPhone are game changers for personal computing – even a paradigm shift. Apple once again faces the “Mac problem:” figuring out how to maximize revenue from lightening in a bottle. The big question is: will Apple translate its current smart phone market domination in into domination of the new iPad-like category it is creating? Apple could do what it did with the Mac, educate the market to the consumer temperament and slide backward in a losing battle for market share (insert John Scully jab here). It appears that Apple is setting up the market for a very similar scenario. However this time, Apple has learned a few things and has some new tricks up its sleeve. It is possible for Apple to take the high ground with the sexiest most expensive hardware, proprietary software and still have inferior market share with superior revenues through more lucrative services.
The same conversation about “proprietary” vs. “open” frames the Apple market share conversation, again. What’s different from the Mac’s launch is that PC clones weren’t really open, and opensource UNIX has been gaining momentum for a decade. Opensource will continue siphon off proprietary innovation into competitive open products. Google could completely fail with Android, and yet another variant of opensource UNIX could take its place as the phone/tablet OS of choice. Apple doesn’t have the luxury of Redmond’s fumbling arrogance as it did with Windows v. Mac. This time they have to content with the juggernaut of Google and/or the whole opensource universe at large. This may prove their biggest problem: it’s Apple against the world.
In the next few posts I will examine the factors that control Apple’s fate in creating a market strategy to maximize its revenue and shareholder value for its new category. I boil the conversation down to three factors:
- Preservation of Apple’s unique user interface intellectual property.
- Ability to maintain a market for proprietary apps to the Apple iPhone OS, as opposed to HTML5
- The constant pressure of the “race-to-the-bottom” for knock offs or competitors.
Each one of these is a separate autonomous force that will slowly erode Apple’s current dominance. If Apple’s dominance today is measured in marketshare for phone hardware sales, tomorrow its dominance will need a different measuring stick. Since hardware is not a great business with all the pitfalls of inventory, support, moving parts, it’s not in Apples interest to plan to build “dominance” through hardware sales, but shift to other more profitable sales of soft goods and services.
