Disclosure - I have no finacial interest in any of the companies or technologies mentioned herebelow other than investments through mutual or index funds. Disclaimer - The contents of this article should not be construed as consulting advice. The views are based on personal observations. They don't reflect those of author's current or previous employers. You are free to use this article in full or parts as deemed fit as long as there is no liability on author or the publishing platform (s)
The lesson in most business schools and natural instict of most business leaders converges on one point - You need to gain major maket share to be able to command the value chain, premium and ultimately shareholders’ stake. The story goes around that Microsoft sold cheap and allowed third party apps to gain a momentum with their desktop OS that ultimately led to their world domination in technology space. The latest datapoints, however, suggest a totally different take…
Needless to mention , Apple continues to be most valuable company globally for about half a decade now. Let’s look at the market share of Apple in most categories they operate. Given the fickle nature of technologies , we will focus only on the recent year data ; that is from Dec 2016 to Dec 2017
Goes without saying Apple’s biggest bounty is iPhone. As of Dec 2017 , Apple has only 20 % market share worldwide. Their ace competitor Android , on the other hand, commands a whopping 73 %. Even in North America, Apple is neck to neck with Google with both commanding fifty fifty of the market.
The picture is even grimmer for Apple in Desktop space. Worldwide , Windows command absolute monoploy with 83 % share whereas MacOS has only 13 % share -an aboslute distant second. In North America , Apple improves a bit at 22 % but Microsoft still continues to be a dominant player at 73 % .
Google Chrome is reaching the critical mass with 55 % marketshare worldwide with Apple Safari a distant second at 15 %. In North America , Safari improves to 30 % but still far behind Chrome’s 50 % share.
One may argue that Apple makes money NOT from software or advertising ( as in case of Microsoft and Google) but surprisingly, Apple is not a leader even in devices market. Globally , Samsung leads the charts with 22 % market share in terms of number of shipments vs Apple , a distant second , at 12 %. In Q3 of 2017 , Samsung shipped 83 Million smart phones whereas Apple barely managed 47 Million.
Which brings me to the question - What is it that makes Apple so rich? Here are few thoughts.
People love the underdog. If you can build a community (read cult), you can always unite them as a challenger rather than as a monoplist leader. A bonus benefit is you will be saved from the anti trust cases. Even partners wont view you as a greedy grabber.
If you are less than a ‘cool second’, you have two options - try to be second or exit. Apple carefully does that. Most of the things ( devices or software) , they do maintain at least a second spot. Else very quickly exit the market. Case in point the routers business. Rumors are Apple is letting Airport Extreme and Express go . Same about Time Capsule. Not only products and apps. Apple is quick to discontinue laggard technologies. Floppy drives, CD Roms are few examples.
As a technology company ( and now it goes for pretty much all industries) ; you got to be with the latest . Sony and Sharp could not make the transition hence perished.
Though Apple is a distant second in most of the categories that matter, but they are second in all of them. Google and Microsoft are insignificant players in devices. Samsung has nothing in software. Even with-in software categories, Microsoft has lost the mobile OS and browser war with dream of Windows phone abondoned and their Edge at less than 2 % . Google has no presence in desktop OS (chromeOS less than 1 % share and now looking at Android Apps to justify its existence). A ‘Second in All’ strategy helps to build a walled garden for a dedicated customer base. It also means lot of hard work to keep a parallel universe alive. The idea of ‘Do only one thing and be the best at it’ doesn’t hold water any more . At least not if your goal is to be richest company in the world.
There is a difference between the ‘Latest’ and the ‘Cutting Edge’. For example , Apple has virtually no commercial presence in virtual reality gizmos. You need to time your battles very carefully. Most of the money is made in the mass adoption cycle. Before that , it is all brownie points. I am not saying you should not invest in R&D. But know the difference between R&D projects and commercial ones. For example , Apple continued their hobby of Apple TV . But its a hobby. It may become a main product five years down when we have gibabit ethernet in every home. On the other hand watch (fitness band) is here and now.
Bottom line - it was always known to marathoners that the second runner wins the race but business strategists always advised to gain a lead from get go. They are obviously wrong. Even in business, letting competitors gain lead on you is not a bad idea as long as you create quality products and build a dedicated user base.