A Big Apple Competitive Edge: Secretive Predictability
The other day, Kevin Tofel on GigaOM wrote about Intuit (INTU), but in passing touched on Apple (APPL) and some remarks by iPhone accessory vendor mophie. Although a minor point in that story, it brings up an underappreciated but critical aspect to Apple's success -- and an important lesson for managers.
Apple is usually so regular in product activities, you could practically form a calendar around announcement and release dates. In an industry where the term vaporware -- announced products whose ship dates are repeatedly delayed -- is decades old, managing a regular schedule in marketing activities becomes an impressive competitive advantage. Here's what mophie Vice President of Marketing Ross Howe said:
"With Apple," Howe said, "you can get an economy around your product and build around a standard life-cycle." Indeed, having a standard handset with only one type of connector makes it easier for a company such as mophie to build an add-on case that will work with millions of devices.The point was specifically that Apple ships large volumes of iPhones, which means an add-on product that fits one will fit all and have a large potential market. Contrast that to the digital camera underwater case business. I once spoke with a name manufacturer in that industry who mentioned that business had changed greatly since the introduction of the digital camera. Old electro-mechanical SLRs had lifetimes that could run into many years. As a result, a case maker could invest in tooling, create an underwater container that let cameras operate, and amortize the cost over a long period of time.
However, digital camera models change frequently and extensively. Vendors introduce new digital SLRs every couple of years. The case vendors, which aren't generally that big, can't afford to create cases for each new camera, so they must try to predict the winners that will see the largest sales volumes. It's the only way to make the start-up manufacturing costs pay off.
Compare that to the cell phone business. One of the big criticisms of Apple's strategy is that it depends on controlling a closed product ecosystem. Google (GOOG) talks of Android being open, but it's also a chaotic wasteland. Different hardware partners use a variety of versions of Android. Look at the Dell (DELL) new Aero, which runs on the now aged Android 1.5.
It's nuts, but happens, because Google depends on everyone making smart decisions. Sometimes that can work, but often it doesn't. The result is a fractious plane in which developers can't be sure of how to code and makers of accessories have to look at all the variations of devices.
Apple is highly secretive, but pretty regular in how it works. You can expect the new iPhone model announcement every other year in June, with availability in July. September brings the iPod announcement. There can be a little variation on when products appear, but nothing compared to a Microsoft (MSFT) release schedule, which is often a joke. When companies know that there will likely be X millions of products and new models get introduced about that month, they can intelligently plan purchasing, design, testing, manufacturing capacity, and support. Predictability increases profitability. And yet, by keeping new products secret, Apple maintains consumer interest, while still working with partners under strict non-disclosure agreements. It's a lesson many managers would do well to learn.
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