Re:cannibalization, Apple is more than willing to cannibalize their products - just see iPod Nano v Mini, iPhone v iPod, iPad v Mac, iPad 2018 v iPad Pro. It's part of their playbook to cannibalize themselves, so that competitors don't wind up sneaking in market segments. This is enabled by organizing the company functionally rather than by product line, which lets them avoid the 'strategy tax' of pre-existing divisions that own products wanting to keep those products alive (bureaucracies self-perpetuate and all that).
That said, a phone that converts to a desktop (at least in how I think OP and others who bring this up think of it) is not part of the playbook, because its making the device do double-duty in UI/UX. See iPad not having a mouse.
I think Apple's perspective is that the glue that ties mobile UX to seated/desktop UX together is the cloud, and to your point, that involves multiple devices. The exception is non-interactive content (AirPlay), which third parties can license.
> Under Steve Jobs, Apple had a track record of cannibalizing its own products. In 2005, when the demand for the iPod Mini remained huge, the Nano was launched, effectively destroying the revenue stream of an existing product. And while iPod sales were still going through the roof, Jobs launched the iPhone which combined iPod, cell phone, and Internet access into a single device. Three years after the iPhone’s launch, iPad made its debut and raised the prospect of cutting into Mac desktop computer sales. So resolute was Apple’s determination in trading a highly profitable business for an unknown future that Jobs reportedly said “If you don’t cannibalize yourself, someone else will.”
> "The iPhone has to become so great that you don't know why you want an iPad," Schiller explained. "The iPad has to be so great that you don't know why you want a notebook. The notebook has to be so great that you don't know why you want a desktop. Each one's job is to compete with the other ones."
> Apple has shed light on this way of thinking before. During a quarterly earnings call with investors in early 2013, Apple CEO Tim Cook said the company's "base philosophy is to never fear cannibalization."
> "If we do, somebody else will just cannibalize it, and so we never fear it," Cook said. "We know that iPhone has cannibalized some iPod business. It doesn’t worry us, but it’s done that. We know that iPad will cannibalize some Macs. That doesn’t worry us."
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Meanwhile, Google is very cannibalization reluctant to the point of throwing away products that may impact its main revenue sources.
No, I do not believe Apple had reason to worry about market cannibalization.
The iPod was a new product. The line was segmented well, with each having clear differences in form factor, eg you wouldn't be confused between what a nano might be useful for vs Touch. This is in contrast to electronic manufacturers that flood the market with an entire spectrum of product capability.
The iPhone and Ipad are again entirely different product lines that share the same codebase. This is not very different to Windows everywhere espoused by Ballmer. The difference is in how capable the entire organisation was in execution. Although Apple is immensely profitable, it is because it focusses on creating highly desirable products in niches that are only profitable through vertical integration.
I recall Jobs lamenting the fact that they barely make any profit on their l
Laserwriterswhile HP makes all the money off toners. Apple today judiciously avoids this type commodity computing markets.
The main take away is to sell clearly differentiated products. Give them different names and use cases so that consumers cannot be confused over what each product does.
Apple has never been shy to cannibalize their own sales, in fact it's straight out of the Steve Jobs playbook (“If you don’t cannibalize yourself, someone else will”). I'd challenge you to find a company better at it than they are.
Examples include:
iPod mini cannibalizing iPod
iPhone cannibalizing all iPods
iPad cannibalizing Macs
iPad (2017) cannibalizing iPad Pro
iPhone XR cannibalizing iPhone XS
They're even organized to support product cannibalization, being functionally organized instead of divisionally. If they had an 'iPod division', that division would fight tooth & nail against the 'iPhone division' to keep their P&L running.
They're not doing a 2-in-1 because it's not a product they feel makes sense right now. That's all.
Companies don't just "abandon" $20B/year businesses, and it will sure take a lot more than a "few years" for that to decline to make a comparison to iPhone's inevitable cannibalization of the iPod. Additionally, they see iOS devices and Macs as completely distinct, thus not merging them into one like the Surface attempts. Your theories… are pretty much ludicrous.
The iPhone is a more profitable platform than iPod. Cannibalizing the iPod market was a move that maximized long-term profit.
Jobs wanted the iPad to represent a unique interface and experience that was distinct from a laptop. They failed to do that and the touchscreen is the only difference that remains. Merging these products is only likely if they doesn't reduce overall expenditure on Apple products in the long-term.
Apple's shown some willingness in the past to cannibalize their own sales (the iPod is a prime example), so my take is less pessimistic than yours. Though I also really want such a device (at least in theory), I think it's likely there are a lot of technical hurdles and trade-offs Apple finds unacceptable.
Apple famously cannibalizes their existing products deliberately, so I don't think that's what's holding them back. It's also strongly possible that Apple's eventual product will require an iPhone to function, so cannibalization might not even be an issue.
Apple also famously tries not to release products first, waiting until they can deliver something that fits well into their ethos. How well they succeed at that is an open question, and whether it's a wise approach is an open question, but it's their approach.
I'm not sure Apple can deliver another home run, but so far they've delivered more than anyone else I can think of, so I wouldn't bet against them either.
The best thing to do would be for them to disrupt themselves. Apple does that.
When has Apple done that? Apple has never had a market until the iPod that was large enough to be cannibalized. But they've never actually cannibalized the iPod/iPhone/iPad market.
Now pushing webapps over their appstore would be cannibalizing iOS. But simply shipping improved products isn't cannibalizing.
It's hard to see it now but the mobile phone is a dying product category. Apple in a way acknowledged this when they started their pivot to services and the market acknowledged this when they became fixated on whether Apple could maintain revenues for iPhone upgrades (they can't). They are capturing the value they can from iPhone before its completely unprofitable because of new paradigms of computing that Apple themselves will be delivering. Nearly every major change or product release in Apple is well gamed out and planned for 5-10 years in advance, some of these moves longer. Withering the iPhone with Ads is a very deliberate decision and done so on a timetable with many other priorities and strategies. Part of maintaining relevancy is cannibalizing your own business with newer, better ways of delivering value. This is a way that Apple can extract the most profit from their cannibalization of iPhone.
I'm not entirely sold on the "Innovator's dilemma" argument that "they can’t muster the courage to disrupt their existing revenue streams" in case of Apple - they seem to have been doing plenty of self-cannibalising since Jobs' return - Jobs slashed the numerous product lines to just 4 products when he returned; iPod Mini that cannibalised iPod sales, iPod Nano that cannibalised both of the mentioned, iPhone that cannibalised all iPods. They at least seem to be willing to compete with their own products.
Btw I don't think there's evidence that Apple has given up on the desktop. Only that their last few big product releases have been in the iPhone/iPad space. Like any company (and perhaps more so than Microsoft) they have a finite number of internal staff, especially in key roles and with key talents (eg. 1 Jobs, 1 Ive), and I'd bet that there would be some internal decision to focus and do something like a product/release sprint. Plus, there's probably a lot more room for innovation in the phone/tablet space than in the desktop space, so it seems reasonable to want to strike while the iron is hot. If you can link to some quote where Jobs has said something equivalent to "we're giving up on the desktop space", I'll retract my argument.
There is nothing particularly brave about cannibalizing a rather cheap product (iPod) with an insanely more expensive one (iPhone), that also turns out to become obsolete much more quickly. I should know: I bought one iPod Nano and my sister-in-law is still using it today, however I'm on my third iPhone already.
The iPad Mini cannibalizing the iPad, or the iPad cannibalizing the MacBook are much bolder moves. That iPad Mini Retina does look good...
iPhones cannibalizing iPods is true in theory but misses it in spirit. It’s not a hard argument to make to sell a product that is more profitable and a larger addressable market.
The Mac just had its best quarter - ever - before the release of the M1 Macs.
"Apple will become the Apple of the phone market much as it was the Apple of personal computer market."
No offense, but this is probably the most banal argument imaginable.
"There is a myth, more of a meme actually, about the 'inevitability' of commoditization. It is a view of the world that sees things linearly, in terms of singularities, and the so-called "one right path."
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.
This mindset is compelling because it is simple and familiar, but it also leads to blind obsequiousness.
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."
Later:
"The following inconvenient facts must be an affront to the horizontal, commoditized, open, market share zealots. 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.
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."
So you're arguing that the PC market, in which they are unbelievably profitable is, er, not a mature market? How about MP3 music players, which is so mature it's withering and dying and yet is still basically an iPod market? I don't think you've quite thought that argument through very far.
And still with this 'lost them the desktop market'. If Apple's market defining desktop business, which dictate the shape of the computer market by denying the profitable high ground for $1,000+ systems to their competitors, count as losing then you and I have very different ideas of what that word means.
If the iPhone's sales numbers last year and the year before that were high enough to sustain a highly profitable premium business, then bearing in mind their sales are still skyrocketing I just don't see where the risk is. Why is having a minority market share in desktop PCs a problem for Apple? What harm has it done them? How has it hindered their ability to prosper over the last 15 years? If it's not been a problem for them in PCs, why should it be a problem for them in mobile? bear in mind that their minority stake in the mobile market is a region thing. In the single most valuable market, the US, they have more market share than Android.
> The iPhone 5C actually increases Apple's profit margin over the 5. ...
I know, I don't know what the Andorid camp are going to do about it. I mean how can they compete when.... oh... hold on a minute. You're saying that's a problems for _Apple_. Er. Ok.
You mean like the iPod was cannibalized by the iPhone, more or less, and it's revenues have been steadily declining (-28% this quarter compared to Q4 2013)?
IMHO the Apple ecosystem was always about getting people hooked on one of their products and then up-selling them other products and services and thus set them up for a lifetime of buying the latest and greatest from Apple at regular intervals.
In the past few years, I've seen many long time Apple users opt for alternative brands. And not just because of the price points. I have friends that now have Android phones and windows/linux laptops where just a few years ago they would have been de-facto iphone and macbook owners as well as own a whole range of misc apple branded products. Apple had a really nice business tapping into these people's disposable income and it has been evaporating for a while now.
By squeezing their iphone and mac book user base too hard, they have started to bleed users. This is bad news because it means the upselling business is going to dry up as well. People with an Android phone are not going to want an iWatch or iCloud subscription. They are also not going to order anything in the Apple store or sign up for Apple Music. And raising prices there is going to shrink the user base even harder.
Apple has neglected some of their core product lines and especially their recent desktops have not gone down well with users. The pattern is the same across their product lines: sales revenue is up but volumes are down for the last few years and not just because of the price. They make more money with fewer users. Except, now they are making not as much money as they hoped with even less users than they expected. They squeezed too hard and the numbers no longer add up.
The fix is simple: they need to change course and get volumes up again by making sure that they have attractive premium products that people can afford. You don't get service revenues up if your user base keeps shrinking. A few well positioned products at the right price point could easily bring back lots of users that have dropped out of the ecosystem. More of the same is not what is going to make that happen.
What I don't understand is that we treat these businesses as if they're human; capable of only focusing on more or less one thing at a time. iphone's on their mind, so obviously iphone is what you're going to get. Everything targets the iphone.
But at the level of scale they're at, they should be far more than capable of appealing to both their current iphone market, and the older developer market. They should be trivially capable of producing both types of laptops, and researching both, and improving both.
They're magnitudes larger than the company they were; unless the cost of targeting developers has increased by similar magnitudes, they should be perfectly fine also operating as they did 10 years ago, while doing what they want with the iphone.
But somehow, they're not. Without splitting up the company, or creating a microsoft-style internal group wars, it's not possible for them to focus on multiple audiences simultaneously?
There is only a mystery if you assume that apple is really chasing the same strategy as google and microsoft, and not a model where they only really care about high margin products.
The current Mac ecosystem will not tolerate a rent seeking appstore acting as middlemen between app or content producers and the end users where as the vision of taxing the content producers are a reality on iOS. Or to put it differently the per user profit will trend to be lower for MacOS then iOS so if apple is going to follow though with their philosophy of only maintaining a few products in order to be able fuss over every detail, then it makes perfect sense to double down on iPads and sideline the MacOS lines as something that will one day be merged with iOS.
The mystery part is in explaining that Apple dont nesserily want a dominant marketshare if they have to compete on cost to get it and is totally willing to shed profitable product lines if they feel it distract mangement from the long term strategy. Weather or not thats a smart philosophy is a good question but it's pretty much at the core of how job's managed to turn two bankrupt companies into one of the biggest success stories of the post dotCOM age.
Re:cannibalization, Apple is more than willing to cannibalize their products - just see iPod Nano v Mini, iPhone v iPod, iPad v Mac, iPad 2018 v iPad Pro. It's part of their playbook to cannibalize themselves, so that competitors don't wind up sneaking in market segments. This is enabled by organizing the company functionally rather than by product line, which lets them avoid the 'strategy tax' of pre-existing divisions that own products wanting to keep those products alive (bureaucracies self-perpetuate and all that).
That said, a phone that converts to a desktop (at least in how I think OP and others who bring this up think of it) is not part of the playbook, because its making the device do double-duty in UI/UX. See iPad not having a mouse.
I think Apple's perspective is that the glue that ties mobile UX to seated/desktop UX together is the cloud, and to your point, that involves multiple devices. The exception is non-interactive content (AirPlay), which third parties can license.
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