by Tim Bajarin, president of Creative Strategies Inc., a technology-industry-analysis and market-intelligence firm in Silicon Valley.
One of the more interesting questions I get asked about as an
industry analyst who’s followed Apple since 1981 is why Apple is so
successful. It’s an honest question because to those unfamiliar with
Apple, the company’s rise and current dominance in non-PC devices is
somewhat puzzling.
Most people have a working understanding of the fact that Apple lost
the PC wars to Microsoft, and only nominally understand that when Apple
created the iPod and then the iPhone, the company started to go in a new
direction. And anyone who’s gone into an Apple store knows full well
that Apple’s customer service and stores represent the gold standard for
selling and supporting tech gadgets. But beyond that, the reasons why
Apple is really successful are still a mystery to many.
There are plenty of books about Apple that talk about everything from
Steve Jobs’ history to tenets of Apple’s business models to secrets
about Apple’s internal-management ideas. However, after years of
watching Apple up close and personal and having to deal with every one
of their CEOs, as well as interacting with various Apple execs over the
years, I would like to suggest that the reasons the company is
successful can be boiled down to six key principles that make it very
hard for competitors to compete with Apple.
1. For any product that Apple creates, the people who create it have to want it themselves
So many times with projects I do with other tech companies, the goal is
almost always based around the technology first, followed by whether or
not people really want to use it. Geeky engineers are dazzled by the
technology at their disposal and often create something because they
can. But Apple’s approach is quite different. The engineers who are
creating Apple products actually make them for themselves. And Jobs was
the chief “user” of Apple products when he was alive. All of Apple’s
products are based on the fact that Jobs represented the real customer.
And his engineers had to come to grips with that when designing a
product. It has to be something that they personally couldn’t live
without.
2. The products have to be easy to use
Jobs was a stickler on this point. While industrial design is a critical
component of any product Apple makes, if it is not easy to use, it is
considered worthless to the consumer. This is what drove the company’s
user-interface designs from Day 1 and is still the mantra pushed to the
software and hardware engineers every day they go to work. All of the
products they create have to be intuitive and easy to understand and
learn. As technology has become more intricate and users want more
features, the task of keeping things simple is sometimes difficult. And
Apple creates tools for power users and rookies, which can mean a broad
range of ease-of-use issues. But even with that, Apple is the only
company I deal with where ease of use is more important than the product
itself. Apple makes this a critical goal of its approach to creating
anything for the market.
3. Keep things simple
I was in Paris in the past two weeks and had talks with various French
telecommunications officials about many mobile-computing issues. But one
conversation I had in particular emphasizes this keep-it-simple point.
We were discussing how to compete with Apple — a major pastime for all
Apple competitors and carriers these days — when the question of why
Apple is really successful came up. And one exec nailed it when he said
he felt that the real reason Apple is successful is because it has one
product; in this case the iPhone. It minimizes the decisionmaking
process for the consumer by making things simple. The person speaking
was with a carrier in France, and he said that in their stores, they
have to have as many as 25 different models of phones available. That
makes it hard for his staff to be really knowledgeable about all of them
all of the time, and their customers just have too many options to
choose from.
But Apple only has one iPhone model, and anyone who has gone into an
Apple store understands that every staff member there knows a great deal
about each of the four major products carried in its stores. Apple
doesn’t have five iPhone models to choose from; it has only one. While
this may seem limiting given the amount of smart phones available to
users, the truth is the reverse. Our company has done consumer research
for over 30 years, and consumers constantly tell us that while choice is
nice, in reality they want the process of choosing a tech product to be
simple and not complicated by a plethora of choices.
Yes, there are tech-savvy people who like more choices and sometimes
even like complexity, but from years of experience as a market
researcher, I can tell you that in the end, the majority of users are
not tech-savvy, and keeping things simple for them is a plus. Apple
understands this in spades and is never tempted to add multiple versions
of an iPhone, iPad or even more than one or two types of iPods. This
makes buying an Apple product simple. And consumers seem to appreciate
this considering the huge number of iDevices that are sold each year. I
know the tech media and techies are the most vocal about this issue of
choice, but in the end, while choice is good for competitive pricing,
what nontechie consumers really want is simplicity.
4. Offer great customer service and in-store experiences
Jobs understood one of the major conundrums of technology: even if you
create products that are easy to use, the variety of things that people
want to use technology for often creates complexity. Because of this,
consumers at all levels may need some hand holding from time to time. I
was one of the most vocal critics of Apple when it introduced its first
retail store in Tokyo in 2002. I thought it was crazy for Apple to try
and go into retail. At the time, and even today, tech retail stores are
in decline while big-box stores like Costco and Walmart sell products on
price and nothing else. I thought that if price were the issue, an
upscale retail store would be DOA. Wow, were other naysayers and I wrong
about Apple’s retail strategy.
Apple uses this conundrum to its advantage. Because it keeps product
SKUs simple, the salespeople inside the stores know the products really
well. Notice that when you go into an Apple store and are greeted by one
of the sales staff, you’re not asked, “How can I help you?” Instead
they ask, “What would you like to do today?” They go right to the heart
of any technology user’s question, a question that’s always related to
what they want to do with the technology the user is interested in.
And once you explain your needs, they take care of it on the spot in
most cases. Or if you need more hand holding, they turn you over to the
Apple Geniuses. No wonder 50% of people buying Apple products are new to
Apple. Apple’s products are simple to understand and use, but if you do
have a problem, Apple can take care of it at their stores or over the
phone quickly.
5. Apple only makes a product if Apple can do it better
Apple normally doesn’t invent a new product or product category. Sure,
the company did invent the first commercial PC with the Apple II, and
the Mac improved on PCs with a graphical user interface and mouse input.
But since then, all of Apple’s other products have been recreations of
existing products. Apple did not invent the MP3 player; Apple reinvented
it and made it better. Apple did not invent the smart phone; Apple
reinvented it and made it better. And Apple did not invent the tablet;
Apple reinvented it and made it better.
As Apple designer Jonathan Ive said recently,
“Our goals are very simple — to design and make better products. If we
can’t make something that is better, we won’t do it.” Clearly, Apple
applied that thinking first to iPods, then smart phones and more
recently, to the iPad.
6. Apple stays at least two years ahead of its competitors
This is the one that scares Apple’s competitors the most. While those
competing with Apple are just getting products to market that are
competitive, Apple is already working on the products at least two years
out. For example, the new iPhone that will most likely go to market in
October was designed and signed off on two years ago. And the iPhone the
company is working on now is for the fall of 2014. The same goes for
the iPad. The new iPad that we will most likely see next March was
signed off on two years ago. The one that’s being worked on now we will
probably see in 2015. This is a nightmare for Apple’s competitors and
will continue to be for some time.
Besides having geniuses in design, software and retail, Apple also
has the cash to invent components, manufacturing processes and things
like that, which almost makes it impossible for the competition to make
any real headway against Apple. And don’t let the fact that Android has
become the No. 1 smart-phone operating system make you think that it’s
the big winner. Yes, Android has gained ground by the sheer numbers of
companies and products pushing Android. But the real measure of success
is in the profits, and Apple is making as much as 70% of all the profits
in smart phones and about 85% of the profits in tablets. Just ask any
Android competitor which they would like more, market share or profits.
You’ll get the answer relating to the real measure of success in this
market.
These six principles may seem a bit simplistic given the fact that
Apple also has great software, industrial design and a powerful
ecosystem of content, apps and services as part of the company’s success
equation. However, I can tell you that from my three decades of
following Apple, it’s these six key principles that are what really
makes it successful. And as long as it adheres to them, it’s pretty
likely that Apple will continue to grow and command a relatively large
share of the market in the company’s product categories where it
competes.
kumaran nadaraja
