As we’ve been reading though so many reports detailing the performance of various companies over 2012, I thought it might be interesting if I shared my thoughts on why competition is heating up for Apple, and perhaps why the company’s brightest days are in the past.
There’s no doubt that the iPhone was quite different to the rest of the pack when it initially launched. It was a well designed, sophisticated piece of technology, which offered users an experience which couldn’t be had on any other device. The problem is that Apple hasn’t moved on from that initial design concept. The quintessential iPhone experience hasn’t changed for some time, and the diminutive improvements from one handset to the next don’t fill an essential missing part of the smartphone experience.
The “if it isn’t broken, don’t fix it” mentality is fine, but in the meantime the market has diversified. There are now three clear distinct categories of smartphone; budget, premium and “phablet”, each of which offers a definable user experience. Yet Apple seem content to remain firmly in a single category. This is something that, in my opinion, Apple has totally misjudged; Apple products won’t appear if you want to compare sub $100 smartphones, and there’s no comparable product to Samsung’s Galaxy Note 2. What’s worse is that it’s now too late for Apple to change tactics. As we saw with the launch of the iPad Mini, when Apple tries to penetrate a market which is already saturated by competitors they struggle to gain traction. The iPod and iPhone have always benefited from being the best in the market from the beginning, but it works both ways. As Apple has previously neglected so many segments of the market, it now faces an uphill battle if it decides to broaden out.
Of course, Apple will say that it is refusing to lower standards to satisfy “cheap” consumers, which is fair enough. But when you make a stand like that, you run the risk of backing yourself into a corner. And this is the stage Apple currently finds itself in, it has a small range of perfectly good products, but the products are no longer head and shoulders above everyone else’s. Of course Apple fans will always pick an iPhone over a similarly priced HTC handset, but the preference isn’t so clear cut anymore for the average consumer. The prevalence of Samsung’s high end smartphones over the past couple of years has proven to be a real threat to Apple’s reputation as the superior handset manufacturer. The Galaxy S3 was chosen by many as the best handset of 2012, and constantly rivals the iPhone5 in almost every review. This change in reviewer perception certainly trickles down to future consumer purchasing preferences over time.
First world markets are saturated with technological goods; we can easily get our hands on whatever type of smartphone, tablet or PC we require to fulfill our technological needs. The scenario is very different in emerging markets.
Cheap handsets are very popular in China, India, and Africa which his something Microsoft, Google and even Firefox are aiming to take advantage of. However Apple again is choosing not to sell cheap products. But what happens when consumers in these economies start demanding more expensive handsets. Does Apple expect to just be able to walk in and compete against more established brands? Apple is really shooting itself in the foot by ignoring current demand, as well as future areas for growth, in emerging markets.
There’s a long running argument about whether a closed or open source platform produces better results. On one hand, Google, Linux, and Firefox believe that superior products are developed when there are lower barriers to entry and an open exchange of information. Companies like Apple, and increasingly Microsoft, prefer to maintain quality standards by tightly controlling their platforms. There are pros and cons to both ideologies, but there’s one major factor which usually prevails in favor of open source, and that’s innovation. Third party custom ROMs like MIUI, which has over 10 million registers users, and kick-starter projects like OUYA simply aren’t possible when you lock off your platform. MIUI has inspired an entire business spin off, with mobile devices running the ROM available to purchase. Similarly, OUYA, Gamestick, and Android TV devices will be bringing Android to your living rooms in ways no Apple product is even attempting. Whilst these products don’t directly benefit Google, at least financially, third part developers who take an idea and expand it can help to persuade customers over to other Android products in the future. This brings me on to my final point.
If you asked me what single thing saw Apple leap from a tiny market share to one of the market leaders, I would say that Apple was very clever at turning people onto their products after hooking them with a single good idea. The iPod was no doubt the first Apple product owned by many people, but it was the catalyst which resulted in users switching to iTunes, and ultimately made them more familiar with the Apple brand. The iPhone then integrated seamlessly with your existing setup, using the same accounts and software. Eventually many users even decided to switch over to Mac entirely, because Apple provided an ecosystem which worked so well with all their products. It was this slow and stubble persuasion which built up its market share, starting from a single innovative idea. However, Apple is no longer pursuing customers in the same way, instead Android is the platform subtly working its way in to most of your day to day technological experiences.
How many people use a Gmail account, Google Maps, Google Docs or Chrome web browser, even though they may not own an Android smartphone? How many consumers in the future will be gaming on an Android device such as OUYA, be using a cheap Android dongle to connect their TV to the internet, or be interested in futuristic projects like Project Glass? Google is already a big name, but it continues to spread brand awareness through new technologies, new markets and by letting other companies do the talking. Apple, on the other hand, is left only with its existing reputation to entice new customers.
Stagnation is often a problem which blights big companies and eventually becomes their downfall. Microsoft, RIM and Nokia are all companies which failed to keep up as consumer preferences changed, and they are now struggling to keep up with the more innovative developers. The fight certainly isn’t over, but as far as I’m concerned, Apple is going to have to change its approach if it wants to remain on top over the next decade.