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. The additional problem with a commoditised industry (e.g. PC clones) is that innovation is shunned since it costs more to develop, costs more in hardware, costs more to support and limits your choice if you begin to depend on the innovation.

    The only innovation is a lower price and less features leading to ‘bait and switch’.

  2. The additional problem with a commoditised industry (e.g. PC clones) is that innovation is shunned since it costs more to develop, costs more in hardware, costs more to support and limits your choice if you begin to depend on the innovation.

    The only innovation is a lower price and less features leading to ‘bait and switch’.

  3. People like to talk about the inevitability of commoditization, and in certain markets they are right. But as far as technology products go, computers have had a uniquely commoditized place thanks to the Windows economy. The auto market isn’t like that, though it came close in the late 70’s/early 80’s econo-box years. Pretty much every other kind of tech product is made to make you want it, want a better one next year, and want only one brand of whatever it is. Only generic PC boxes operate in a world where the hardware (theoretically) doesn’t matter. Hell… we’re convinced that there is a huge difference between one kind of razor blade and another. Now THAT’S a neat trick… Our sharp bits of metal are better than theirs! And next year we’ll add 3 or 4 more blades!!!
    Commoditization happened because one guy was at the right place at the right time to make a pile of cash. I don’t see it happening again. I certainly don’t find it inevitable.

  4. People like to talk about the inevitability of commoditization, and in certain markets they are right. But as far as technology products go, computers have had a uniquely commoditized place thanks to the Windows economy. The auto market isn’t like that, though it came close in the late 70’s/early 80’s econo-box years. Pretty much every other kind of tech product is made to make you want it, want a better one next year, and want only one brand of whatever it is. Only generic PC boxes operate in a world where the hardware (theoretically) doesn’t matter. Hell… we’re convinced that there is a huge difference between one kind of razor blade and another. Now THAT’S a neat trick… Our sharp bits of metal are better than theirs! And next year we’ll add 3 or 4 more blades!!!
    Commoditization happened because one guy was at the right place at the right time to make a pile of cash. I don’t see it happening again. I certainly don’t find it inevitable.

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