Lessons Learned from Apple: Why It Wins and Why It Loses

Rob Enderle

Apple had a difficult year in 2007 but weathered the challenges generally rather well. While the company does not really sell to the enterprise, a number of things it does showcase both the right and the wrong things to do when approaching a market, particularly today's market. As we get ready for the MacWorld vs. CES battle, let's chat about this.

 

What Apple Does Right

 

Marketing: Apple understands the need for demand generation marketing. An Apple advertisement tends to focus on the one or two things that a buyer would find attractive about a product. iPod ads are basically people having fun with the product. They don't talk about features much and tend to avoid technology like the plague because buyers are seldom easily motivated to buy technology; they are motivated to buy products that solve a problem, or that they think they will enjoy.

 

In many ways, this is marketing 101, but it's far more difficult than it looks because it doesn't give credit to the features and the people who created the product, which is often important to the folks inside a tech company.

 

In addition, marketing leads a product. When a product is conceived at Apple, folks are thinking about how it will be sold. This is almost the exact opposite of most technology firms, where marketing only gets involved when the product is near final. That is why so many products seem to come to market seemingly incomplete. The customer defines what "complete" is, not the developer. Marketing should, but seldom does in firms other than Apple, bridge that gap.


 

Advocacy: Apple nurtures its advocates. In its stores, it has "genius bars" where advocates can congregate. It uses its advertising dollars to target and support its advocacy sites, some of which appear to operate as part of Apple's marketing machine while seeming independent. This last appears brilliantly done. Only occasionally, like with the Think Secret shut down and the PC World resignation, do you get a sense of the behind-the-scenes power plays Apple appears to regularly implement to ensure it is portrayed positively. It has both a carrot in that it rewards with free products those that cover it positively, and a stick that can go beyond its marketing spend.

 

Buyers rely on people they trust to make product decisions. The Apple advocate was critical to both Apple's survival in the 90s and its success this decade. I'm not aware of any other company that puts the kind of effort into grooming and maintaining its advocates that Apple does.

 

Out-of-Box Experience: Apple presents its products to customers in an elegant fashion. Opening the box of an Apple offering is a surprisingly good experience. Unlike other PC vendors, it doesn't load its hardware with hard-to-remove third-party offerings, which can contribute to crashes or a poor initial experience. It doesn't load on third-party brands either. From the outside to the inside of the box, it conveys the high quality of the experience. Few companies do better in this regard. Even Microsoft has used it as a guideline for how things should be done. This now famous video was created internally at Microsoft to drive a needed change; if you look at the Zune packaging, you'll see that group, at least, apparently learned the lesson.

 

Complete Offering: Often products are held to release dates and when they make it to market, they aren't finished. Apple seldom makes this mistake. Generally, it will delay a product rather than release it early incomplete. The first iPod and iPhone were complete offerings when they came out; this created a solid foundation for future products. When a product is released incomplete, people form their initial impressions on that release and may never come back to future offerings, or will develop a pattern, based on that initial offering, of looking for the shortfalls rather than the successes.

 

Partnering: There is a saying in Silicon Valley that "no one ever partners with Apple twice." Apple seems to have the motto that anyone that partners with it deserves what they get. The tech market is littered with companies like IBM Microelectronics, HP, Motorola and PortalPlayer that have painfully learned this lesson. Microsoft was the only company that materially came to Apple's defense when Apple's future was at most risk, and Apple is the only partner/competitor Microsoft has that does attack ads on the company. Even retailers who resell Apple products have taken exception to Apple's behavior towards them. At a time when Dell is actually doing well in this space, Apple still appears, based on channel feedback, to be the vendor that these folks most hate, providing significant opportunities to Apple's competitors.

 

As we move through this decade, partnering with companies like AT&T and Disney will be critical to Apple's continued success. The inability to partner well will undoubtedly create a significant drag on that success. Microsoft's success is directly connected to its massive number of partnerships.

 

Untrustworthiness: While other vendors try to let their customers know what is coming, Apple is both secretive and misleading. Being secretive actually works for the company because you don't know what is dropped out of offerings. Apple can better position products if it creates the first impression. But, the move to Intel and flash-based MP3 players was preceded by statements that it wasn't ever going to make these moves (even though it was planning them at the time). Trust is a critical asset with any vendor. If you bleed out that trust, you can find your non-advocate customers (which make up most of your market) become very disloyal.

 

In the consumer space, where the customer is already very fickle, this hasn't yet been a huge problem, but were Apple to do this in the corporate market, it would find market share increases very difficult to come by. Microsoft is another company that has had trust problems, and it was a decrease in trust that contributed significantly to IBM's decline in the late 80s. With the exception of the 80s, IBM has always had the lead in this area, but is being challenged by HP and Oracle. Microsoft has always tested as both one of the most and least trusted companies in the segment (and is the only company that seems to have this massive dichotomy in perception by customers).

 

Public/Analyst Relations: Apple has one of the worst PR organizations in the segment. Surprisingly enough, Google seems to be chasing it in this regard. While this isn't a problem when things go well, when things don't, coverage can quickly spin out of control. Offsetting this somewhat is that a lot of prominent journalists are Apple users and many of these are Apple advocates. Apple remains the only firm that PR folks I know avoid because they fear they will damage their careers.

 

This is more a policy problem than a people problem. Much of the bad press Apple has experienced over the years can be connected right back to its inability to do good PR. PR is a critical resource that is often poorly coordinated, under resourced, lacks the appropriate support by the executive staff, and is measured against impossible metrics. This is one area where Apple is not a good example. One of the companies I've used over the years with regard to PR excellence is Oracle (though that may be changing), and with industry analyst relations, HP (the HP guys have left and reformed SageCircle).

 

Wrapping Up

 

Understanding what a company does well and doesn't do well can both help you with regard to what you emulate and how you work with the firm. Companies that build solid products but market or do PR poorly will require you to take up the slack when you justify your purchase of their products. Companies that partner poorly should have you avoiding products that depend on that partnership or anticipating partnership problems and factoring them into what you do with the offering. Companies that you know have strong advocates may require you look to make sure the person you are depending on for a recommendation is doing so based on the merits of the offering, not their personal attachment to the vendor.

 

Like building a friendship or a marriage, knowing as much as you can about a vendor -- or as a vendor, knowing what the best practices are (the equivalent of knowing to put the toilet seat down) -- can lead to much better and much happier relationships.



Add Comment      Leave a comment on this blog post
Jan 4, 2008 2:14 AM Rob Enderle Rob Enderle  says:
I'm sorry, I can't get over the fact that so many people think doing things like the iPhone and Leopard in one year are easy. Would love to know how many times their companies perform at this level. Difficult simply means hard and risky, for some reason Apple fans evidently don't believe Apple can do difficult and, I guess I don't understand that. Let me put it another way, how hard would it be for your company to come up with a product like the iPhone, run against Microsoft during a launch year, and bring out a new major OS? Can you think of one other company that has ever done this? To me that sure doesn't seem easy. For any other company this would have been impossible, I simply said it was difficult for Apple. Now Google does the impossible and their stock is up 600% since launch, I'm guessing the market rewards impossible more than difficult... Reply
Jan 4, 2008 2:42 AM Also Flabbergasted Also Flabbergasted  says:
In the English language that the rest of us use, "a difficult year" doesn't mean that someone or something worked really hard but was incredibly successful. What it means is that the subject had all kinds of problems during that year. I don't think that anyone constests the idea that Apple's employees work incredibly hard to do what they do, but to characterize what was, by any objective standard, an staggeringly successful year as "difficult" is, at best, an illustration that you don't know what the word means, and, at worst, a pathetic attempt to smear a highly successful company.In light of your perpetual attempts to call Apple "doomed", I'm sure that the readers of this blog can draw their own conclusions. Reply
Jan 4, 2008 5:29 AM Rob Enderle Rob Enderle  says:
Of course this simply could be you folks putting words into my mouth. While I've said difficult a lot, find where I've used the word "doomed" and Apple once. Apple lives on the hit product and they have had more, so far, in the last decade than any other company I can think of. Having one is unique, but it was far from an easy year for them and they clearly had problems. Leopard was called "Leoptard" after launch, they had to drop the price of their flagship phone by a third to get it to sell well, and they had anti-trust issues. (Which expanded this year). Granted I did say if Apple didn't move to Intel they would be gone by the end of the decade, but then they moved to Intel and that statement is consistent with others where I said if they don't do "x" then they'll be in trouble and they typically have done "x". Here is a geat piece that blasts me for saying Apple would do a video iPod, a flash based iPod, move to Intel and a few other things that came to pass shortly thereafter. http://daringfireball.net/2003/12/enderle Recall that Jobs had said he would never move to Intel, that Video on an iPod was stupid, and that flash based iPods were even more stupid. Kind of amazing that I've turned out to be a more reliable source than Jobs...Granted I do tend to be about a year ahead of the actual event but given most critical of me didn't see this stuff coming at all... Reply
Jan 4, 2008 12:54 PM Flabbergasted Flabbergasted  says:
"Apple had a difficult year in 2007 but weathered the challenges generally rather well."What planet are you on? Apple stock appreciated more than 130% in 2007. If that's a "difficult year", then I'm sure that Apple shareholders would love to see some more "difficult years". Reply
Jan 5, 2008 4:39 AM James James  says:
Rob,Occasionally I see your name quoted. You have a reputation of being a prominent analyst. This is the first time I read some of your blogs. An analysis is only as good as the facts it is based on. Looking at your recent blogs Im horrified concerning your fact-research and fact-distortion.I could pick your last contribution apart, but it would take too long. Just two examples from one paragraph (and Im not even going to be exhaustive):1. I agree with you that Apple resents being disappointed by its partners, but to say Apple only partners once and never again is simply not true. Certainly not for the examples you give. Motorola partnered at least three times with Apple: developing chips (long partnership), cloning computers, and then a few years ago using iTunes on the ROKR. (Best Buy would be another example of a kiss-and-make up partnership with their Apple store-within-store.) So you are patently wrong.2. To infer that Microsoft came to Apples defense when Apples future was at risk is a total distortion of facts. I assume you are talking about the 150 million dollar investment of MS into Apple. As if MS did it altruistically. It was a mutually beneficial deal a settlement of sorts. Benefits to MS: Apple would stop its litigation (on MS copying Mac OS paradigms). IE would be the default on the Mac. Good PR for MS when they were having all sorts of monopoly image problems and court cases. (As it was MS made some 300 to 400% on the investment when it converted and sold the shares in 2003 or so. Could have made many billions more had they held on.)Benefit to Apple: Ensuring Mac development of MS Office. Establishing confidence in the Apple stock and Mac viability. Having MS publicly commit to supporting the Mac platform. (No doubt, it was a smart move for both companies.)If you would just do a check on the facts you use apart from a self-check on your biases that would only help you integrity. As it is, you prove yourself a dupe (and self-dupe), which is too bad.James Reply
Jan 5, 2008 10:08 AM Bill Twyman Bill Twyman  says:
Mate! You reckon Apple had a bad year!Your favourite firm Microsoft (what is it with you and Bill?) gave us a system upgrade that nobody wants, and an mp3 player that comes in brown. Be still my heart!You make yourself look silly with all this nonsense, especially the bits about how you saw it coming first. Why didn't you tell Bill? Reply
Jan 9, 2008 2:20 AM Dr Vikram Venkateswaran Dr Vikram Venkateswaran  says:
Hi RobSteve Jobs may be one the last few geniuses of our times, thought i totally agree with you on the fact that marketing drives Apple and the consumer is the focus of their offerings and this may lead to the developers feeling slightly let down if the features are not extensively talked about during marketing campaigns.But i would not agree with you on the statement that Apple had a bad year(2007). If the problems with the iphone is your focus then i dont think it was much of a new product, as such borrowing heavily from the Newton and as amatter of fact it was a brilliant defense startegy launched by Jobs to protect the ipod market from the likes of music phones. Since the iphone has been unveiled the ipod sales have jumped 21%RegardsVikram Reply
Jan 9, 2008 12:49 PM Rob Enderle Rob Enderle  says:
I said there was a saying in the valley that no one partners with Apple twice, I didn't say it was a fact. The reality often is the same executive seldom does it twice. But Microsoft has remained a partner of Apple's since the beginning and worked with them on several projects.My point on Microsoft was, when Steve Jobs went out and asked for help, they were the only firm that stepped up. Yes Steve made it worth their while but they could have also tried to put the firm under while it was at its weakest. Where were Apple's other partners when they needed them? Bill personally stepped in to help and it is Bill he makes fun of in the Ads. Now point to any other tech firm that does this. I'm just saying these are not things that fall of the positive side of Apple. Reply
Jan 10, 2008 9:37 AM Frank Frank  says:
I am the IT manager at an ALL APPLE medical supply company. 4 Xserves, 2 Raids, 50 work stations from an eMac 400 to a MacPro Tower. Apples failing is in reaching the Enterprise market. It may be higher initially for the hardware, but the money we save in having less licensing fees, less support people, and to offset the higher hardware cost we are able to depreciate the equipment longer. Where Apple fails is in the support of Enterprise support.It's a bitch going to a retail store and waste an hour to talk to a "Genius" when a moron like me already diagnosed the issue. Reply

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