Apple’s segmentation strategy and the folly of conventional wisdom

Apple Store“There is a myth, more of a meme actually, about the ‘inevitability’ of commoditization,” Mark Sigal writes for O’Reilly Radar. “It is a view of the world that sees things linearly, in terms of singularities, and the so-called ‘one right path.'”

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“In this realm, where commoditization is God, horizontal orientation (versus vertical integration) rules the roost. How else to define consumers, not in flesh and blood terms, not as spirits that aspire to specific outcomes, but rather, as a composite set of loosely-coupled attributes,” Sigal writes. “This mindset is compelling because it is simple and familiar, but it also leads to blind obsequiousness.”

Sigal writes, “Historical edifices are held as indelible fact. ‘It’s Microsoft v. Apple all over again.’ ‘There has to be one absolute, dominant leader.’ ‘Open will always prevail — and should prevail — over proprietary systems.’ ‘Market share matters above all else. Even profits.'”

“There is one small fly in the ointment to this ethos, however, and its name is Apple,” Sigal writes.

“The following inconvenient facts must be an affront to the horizontal, commoditized, open, market share zealots,” Sigal writes. “Apple has launched three major new product lines since 2001: the iPod (October, 2001); the iPhone (July, 2007); and the iPad (April, 2010).”

“The company’s stock is up 3,000 percent since the launch of iPod, 125 percent since the launch of iPhone, and 20 percent since the launch of iPad,” Sigal reports. “In that same time period, the major devotees of the loosely coupled model — Microsoft, Google, Intel and Dell — have been, at best, outpaced by Apple 6X (in the case of Google dating back to the launch of iPod) and at worst, either been wiped out (in the case of Dell) or treaded water (in the cases of Microsoft and Intel) in every comparison period.”

There’s much more in the full article – very highly recommended – here.

MacDailyNews Note: Additional reading:
• The iPhone is not the Mac, so stop trying to compare them – December 23, 2009
• The iPod is not the Mac, so stop trying to compare them – August 13, 2004

[Thanks to MacDailyNews Reader “iWill” for the heads up.]

48 Comments

  1. Buster, if you write a lot, you should probably know, and care that “alot” is not a word so you don’t embarrass yourself when it matters. It’s not such a big deal here amongst 13 year olds (whether actually or just mentally), except to set an example.

  2. Buster, if you write a lot, you should probably know, and care that “alot” is not a word so you don’t embarrass yourself when it matters. It’s not such a big deal here amongst 13 year olds (whether actually or just mentally), except to set an example.

  3. @ChrissyOne

    Insightful, I agree there are many many ways technology products can differentiate themselves, a la auto’s, by hardware construction and software functionality.

    The problem with Apple competitors is that their products have to work with every other product out there. While Apple owns it’s OS and has effectively differentiated it from the slow to boot and less secure windows, I can’t see how HP, Dell, et al, could possibly follow this strategy because key software products, like Microsoft Office, wouldn’t be available. Thus they are trapped into nice hardware that can only run Microsoft’s poorly written software. That’s why Apple owns the high end of the computer market.

    That was the genius of Job’s way back in 97 when he declared the PC war over, and got Microsoft to commit to maintaining MS office through the transition to OSX. Now the customer demand and (profit) will not allow Microsoft to stop supporting OSX. While MS tried to cripple Office on the Mac with the last release, the backlash was so significant, they are stepping up to parity again in the next release.

    With iOS, Apple is further segmenting the market, and is now setting up to “own” the high end (profitable portion) of each segment. And it makes complete sense to customers and the market.

  4. @ChrissyOne

    Insightful, I agree there are many many ways technology products can differentiate themselves, a la auto’s, by hardware construction and software functionality.

    The problem with Apple competitors is that their products have to work with every other product out there. While Apple owns it’s OS and has effectively differentiated it from the slow to boot and less secure windows, I can’t see how HP, Dell, et al, could possibly follow this strategy because key software products, like Microsoft Office, wouldn’t be available. Thus they are trapped into nice hardware that can only run Microsoft’s poorly written software. That’s why Apple owns the high end of the computer market.

    That was the genius of Job’s way back in 97 when he declared the PC war over, and got Microsoft to commit to maintaining MS office through the transition to OSX. Now the customer demand and (profit) will not allow Microsoft to stop supporting OSX. While MS tried to cripple Office on the Mac with the last release, the backlash was so significant, they are stepping up to parity again in the next release.

    With iOS, Apple is further segmenting the market, and is now setting up to “own” the high end (profitable portion) of each segment. And it makes complete sense to customers and the market.

  5. The article’s author uses some serious vocabulary and terrible business jargon. The irony is that he uses some of his big words incorrectly (like “ediface,” which means building especially an imposing one). It’s better to use a simpler word right than to use a big word incorrectly.

    That article needs a serious unsucking.

    http://unsuck-it.com/

  6. The article’s author uses some serious vocabulary and terrible business jargon. The irony is that he uses some of his big words incorrectly (like “ediface,” which means building especially an imposing one). It’s better to use a simpler word right than to use a big word incorrectly.

    That article needs a serious unsucking.

    http://unsuck-it.com/

  7. @Pooloo…you are absolutely correct and I saw it after I hit the send button but as most posters here at MDN know, and are frustrated by it, we cannot post-edit the comments.
    Don’t automatically mistake typing errors for ability. I am sure Hemingway punched out a a few typos in his time….hell I know I do.

    Regularly too if you read enough of my posts (I need glasses and am going to go get them….soon)

  8. @Pooloo…you are absolutely correct and I saw it after I hit the send button but as most posters here at MDN know, and are frustrated by it, we cannot post-edit the comments.
    Don’t automatically mistake typing errors for ability. I am sure Hemingway punched out a a few typos in his time….hell I know I do.

    Regularly too if you read enough of my posts (I need glasses and am going to go get them….soon)

  9. @ chaz

    Jobs was wise to bail out of the PC war, because he knew, before anyone else seemed to, that computers wouldn’t be typewriters forever. So MS won the desktop war… great, let ’em have their victory. Jobs was looking at tomorrow, which we’re now seeing happen today.

    And you’re right, of course. Widows dug its own grave by it’s marketing strategy. By demanding its hardware partners standardize on essentially one samey version of Windows, there was no room for innovation, other than paring down the supply chain, which is the ONLY reason that Michael Dell now lives in such a big house. It works for a while, but once you’ve saturated the market then there’s nowhere to go.

  10. @ chaz

    Jobs was wise to bail out of the PC war, because he knew, before anyone else seemed to, that computers wouldn’t be typewriters forever. So MS won the desktop war… great, let ’em have their victory. Jobs was looking at tomorrow, which we’re now seeing happen today.

    And you’re right, of course. Widows dug its own grave by it’s marketing strategy. By demanding its hardware partners standardize on essentially one samey version of Windows, there was no room for innovation, other than paring down the supply chain, which is the ONLY reason that Michael Dell now lives in such a big house. It works for a while, but once you’ve saturated the market then there’s nowhere to go.

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