April 19, 2011

iPod/iPad/iPhone Success: How Apple Eats its Own Children


I spend a lot of time trying to explain how Apple has been so successful over the last decade and why other companies struggle. There are a lot of aspects to this including driving marketing into the product early and funding it to how they initially present the product but one of the most interesting is Apple’s unusual habit of eating its children. 

An ugly term but one that is backed by solid retail science that basically means the successful company is the one that intentionally obsolesces its own products before a competitor can.   Apple took the music market from Sony and the Walkman and has never looked back and no other vendor has taken the market back even though iPods were replaced as a fad by Smartphones, and PCs seem to be giving way to tablets and Apple was on top and driving both trends. 

Let’s explore eating your own kids this week.

Product Cycles

We see this happen on a fairly regular basis, a product is hot and replaced by another product which then takes the limelight normally by another vendor. In the automobile space it was the 240Z, then the RX-7, then the Miata, then the VW beetle, then the PT Cruiser, then…Hmmm I don’t think there has been anything hot after the PT Cruiser.   In technology, we had the inexpensive computers which were hot in the late 70s and early 80s including the Apple II, Atari 400, the game systems of the 90s and last decade PlayStation, Nintendo, Xbox and then Apple stepped in.    Once Apple took the music market from the Walkman in the early 90s they never looked back.

You see we are pretty fickle and the cycle works like this initial influencers buy new products which we connect to their status, we then buy them in the belief it will add to our status, once most of the folks we know have the device the status is reduced and then the cycle repeats with another product.   Vendors lose track of how they caught this wave which the generally seemed to catch accidently in the first place and then wonder where their market went. With Apple this is no accident and they have turned this cycle into a science.  

Apple’s Cycle

Apple started with the iPod the Model-T of MP3 players you could have any color as long as it was white, any size as long as it was 5GB and it was available on any platform as long as that platform was a Mac.   In short there was only one.   But after a couple of years the iPod started to get old so Apple made it thinner, then it was being threatened by flash based players and Apple brought out the Nano and then the Shuffle.   Smartphones were becoming music hubs threatening to obsolete the iPod or make it redundant and Apple brought out the iPhone.   Most recently Apple looked at their Macs saw the threat that the Netbook represented and then brought out the iPad and likely were surprised that the iPad did what Netbooks did not and find a sustained demand that is arguably greater than the Macs have had in recent years.  

In each case Apple has seen the threat of losing market interest and responded to it. But you’ll also note that they will initially protect their market by disparaging the trend often saying a trend is stupid until they can build a product to address it.   This is highlighted in the post “Steve Jobs’ 6 Sneakiest Statements”.   So the full process is, see a threat, disparage the move to stall the market while designing a product to take advantage of the trend, then bring out the product with a massive release, seeding, and marketing so the company ends up owning the trend that might have damaged it.  

Wrapping Up: What Most don’t get about Apple

What most people don’t seem to get about Apple is that the company isn’t a product company like most tech companies it is a perception company.   It doesn’t sell products it sells dreams and controls the perceptions surrounding its solutions with an iron fist.    By managing perceptions it effectively delays and then custom tailors demand waves to favor its own products.    Its competitors allow this because they simply don’t get that Apple’s primary weapon isn’t the hardware it is convincing a market to wait and then favor a coming Apple product again and again.   To compete and win against Apple you have to willing to break this pattern but most don’t even realize it exists.  

This is how year over year Apple eats its own children, got a market cap greater than Microsoft, and became top technology company in the world.   Part of this can be found in the Carmine Gallo book “The Innovation Secrets of Steve Jobs” but you can learn this from simply watching Apple.   Given Apple is the only company, in or out of tech, which does this regularly you have to wonder how long Apple will be able to keep this up after Steve Jobs leaves.   Eating its own product children is a large part of what makes Apple successful and at the top of their game at the moment.   



Rob Enderle is President and Principal Analyst for the Enderle Group. To read more of his articles on TechZone360, please visit his columnist page.

Edited by Jennifer Russell



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