Apple’s iOS platform is kicking Google Android’s butt all over the Smartphone playground. This battle has been fascinating to watch because it seemed to have been driven out of a similar conversation between two leaders, one of them being the same guy that drove the Windows vs. MacOS battle. Recall that Bill Gates and Steve Jobs argued Apple should license out their OS. Decades later, Google founders and Steve Jobs had a similar dialogue resulting in Android, which seemed to be on a similar path but the outcome is far different. Apple is now stronger than ever and the Android eco-system seems to be weakening.
Let’s talk about why.
Back in the 1980s when Apple was first coming up the vast majority of computing industry power resided with IBM and most individuals couldn’t justify the price of a full PC. The highest selling computers actually came from Commodore and Atari. It was a business driven world and Microsoft pivoted to partner with IBM to dominate the world that was.
The Smartphone market is very different. While most of the phones may still be paid for by businesses they are selected by users, and the company that is most dominant isn’t IBM (they aren’t even in this market) but Apple. In Smartphones, Apple is where IBM was in terms of market power, and Apple isn’t exactly helping Google’s case. Now Samsung is clearly a power but they have never been a big power in the personal computer segment, can’t spell the world “solution” and they are clearly having issues with their Google partnership.
In the 1980/90s when Microsoft was dominant, Microsoft was a pure play software company, they didn’t build hardware which allowed them to leverage HP, Compaq, Dell, Acer, Asus, and IBM to overwhelm Apple. Today Google specs their own phones and tablets under the Nexus brand creating conflicts with far less focused vendors like LG, Samsung, Lenovo, and a variety of smaller companies. HTC most closely maps to a Dell or Compaq but instead of flourishing they are struggling to stay alive.
So in the PC cycle IBM gave a portion of their massive power to Microsoft and then Microsoft used it to build a nearly unstoppable consortium of very successful OEMs. In the Smartphone cycle, Apple took the power from Research in Motion (Blackberry) and Palm to dominate the industry and Google has been unable to forge a similar powerful dynamic largely because their OS is free.
The Problem with Free
When you charge for a product you can afford to market it and spiff (create incentives) for the sales channel. The more profit you make the more
able you are to drive demand. Microsoft was able to give back some of their profits to fund OEM marketing programs and create incentives in retail. For Google Android is a cost center so they manage the costs down and their OEMs don’t get any marketing co-funding so they often try to create iPhone clones so they can slipstream Apple’s marketing. Revenue also helps keep the developing company focused on customer satisfaction because unsatisfied customers don’t buy. But with no revenue Google hasn’t been that focused on OEM or customer satisfaction so they let the engineers drive the process, which has created really uneven execution.
The end result is that Apple, while not perfect, is executing better than Google. And, not only retains dominance, with a few strategic moves they are in a position to almost lock Google out of the market.
Wrapping Up: Pick and Choosing a Model
It is clear Google used a combination of what they learned from Microsoft and Apple to come into the Smartphone market. However it is what they left out that has turned them into an underdog. By not making Android a profit generator they lost the ability to generate demand and lost focus on the customer, by doing a lackluster job of the end to end thing they didn’t gain the customer control, retention, and customer satisfaction that Apple enjoys. It fascinates me when I see companies cherry pick from successful strategies and then wonder why they aren’t working out well.
It’s not that Android is bad, it is that Apple knows what they have to do and then they do it. Google is choosing to mix and match parts of successful strategies suggesting they don’t know what needs to be done, and these things don’t get done as a result. Apple isn’t Google’s problem, Google is Google’s problem. Until that is fixed or Apple stumbles badly, iOS will dominate Android as a result.
President and Principal Analyst, Enderle Group
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