This week, I’m reading former Apple CEO John Sculley’s new book “Moonshot!” It is an interesting read on the topic of business strategy, and one of the things it made me remember was a mistake that Apple made against Microsoft after Sculley left the firm. It’s also a mistake that Google made against Apple. That mistake is losing track of the real goal.
In Sculley’s book, he highlights Apple’s mistake of trying to license the MacOS in order to compete with Microsoft. But really, it wasn’t the licensing that users cared about. What they wanted was an affordable product that worked well; a vertically integrated vendor like Apple should have had a huge advantage with regard to reliability.
Instead, Apple went after the corporate market, tried to copy both Compaq and Microsoft, and took its eyes off the user almost entirely. As a result, margins, profits and quality dropped and users fled to Windows 95, where they got more choices and more applications. Apple attempted to copy both Compaq and Microsoft while effectively wiping out its own advantages but it discovered that Microsoft could be a better Microsoft than Apple could be. Steve Jobs returned and pretty much fired everyone that had made those incredibly damaging decisions.
Now move forward a decade with the iPod. Users were frustrated with not being able to take their music with them. The Walkman owned the market but it was big, had poor battery life, poor capacity, and required you to buy CDs which, in terms of control, were (at the time) hard to customize. Those weaknesses became the iPod’s big initial advantages: You could easily get (a ton of) music into the much smaller device and it didn’t hurt that it was reasonably attractive. That’s not to say that the iPod didn’t have issues. It was a very limited device, it was relatively fragile, and it was expensive.
So Microsoft created the Zune, which could play video, was far more robust, and was less expensive. It seemed like Microsoft got it right, but the Zune was marketed as if it were an iPod. Microsoft offered no video to play, and didn’t even mention that the Zune was more robust. The advantage that Microsoft did market was legal music sharing, which only the record labels cared about. You also needed two Zunes to make the sharing work as well as a subscription to its music service. Microsoft completely lost focus on what it actually created the product to do, and fell back on copying Apple.
Google’s example is interesting because it actually tried to be a better Apple and it sort of worked. Google effectively cloned the iPhone with Android, and really ticked off Steve Jobs in the process. Mostly with Samsung’s help, Google created a cheaper knock-off and, in terms of volume sold, was incredibly successful. Once it had a critical mass of the market and the developers, Google started to diverge so there’s more of a difference now. But it showcases what the fashion industry has always known, and that is that people will buy knock-off products if they’re a lot cheaper than the original. Android was given away for free and Samsung operates under far lower margins than Apple. That should have been illegal, either for predatory pricing or for violating Apple’s intellectual property, but Apple doesn’t license its OS and by the time it was able to get its product-copying case through the courts, the damage had already been done.
Of course, you don’t make money off of “free”; the result was a separation of Apple and Google, which had been close allies until then. Google makes its money off of ads, Apple is a huge advertiser, and most of the Android ecosystem seems to be in some kind of financial distress. So the collateral damage from this move may, if we were ever able to see all the numbers, exceed the benefit, but there is no way back for Google.
Rob Enderle is President and Principal Analyst of the Enderle Group, a forward-looking emerging technology advisory firm. With over 30 years’ experience in emerging technologies, he has provided regional and global companies with guidance in how to better target customer needs; create new business opportunities; anticipate technology changes; select vendors and products; and present their products in the best possible light. Rob covers the technology industry broadly. Before founding the Enderle Group, Rob was the Senior Research Fellow for Forrester Research and the Giga Information Group, and held senior positions at IBM and ROLM. Follow Rob on Twitter @enderle, on Facebook and on Google+.