asymco

Commoditization or Commodification?

Seriously though, I predict that if one of these phone manufacturers gets enough market share (e.g.: Samsung) they will take open-source Android and make it their own (much like Amazon did) and rebrand it as their own operating system.  The only trick for Samsung would be to change the customers from being “loyal Android users” to “loyal Samsung users”.  Many of the new Samsung commercials targeting Apple (poking fun at the long lines outside Apple stores) oddly don’t mention Android.  They mention the Samsung Galaxy SII.  In the next round of commercials we will probably see the Samsung Galaxy S III, but Samsung will have to hire more actors to stand in line at the Apple store to make it look more realistic.  Look for “Touch Wiz” to be grow in scope if this is the way Samsung is planning to go.

Keep in mind that Samsung recently launched their own mobile advertising effort which also directly competes with Google.  I’m pretty sure that Google can see this coming (one manufacturer with too much control is why they parted ways with Apple).   This is one of the reasons Google acquired Motorola.  Also, Samsung is looking at the Motorola acquisition with a great deal of suspicion.

In the end, I predict that Android will end up as follows:

Google will produce true Android handsets via Motorola and bank on the “Android” name drawing the customers from Samsung.

Samsung will produce handsets and tablets based on the open-source Android, but it will be heavily modified and essentially be Samsung’s OS (they will have their own marketplace)

Amazon will continue with their own Android variants, but fragmentation will seriously hurt them here.

Nokia will produce Windows Phone handsets.

HTC will be a bit lost about what to do, they will probably look to Microsoft again, but Nokia will eat their lunch there…. They will likely go out of business.

LG & Sony will likely get out of the smartphone game, with Sony becoming a supplier to Apple and others for cameras.

I dunno about HTC dying — they have a reasonably loyal following for a non-Apple manufacturer. They’re kind of like Blackberry that way–

–ok, I just refuted my own point. Carry on. 

As a Google shareholder, competing head on with Samsung on hardware is one of my nightmare scenarios. But I can see it coming too. 

One other thing I realized from my own post above — while the other phone manufacturers see Apple as their competition, the carriers’ competition is also actually Apple, who is competing with them for control of the customer.

Apple is actually fighting a two-front war with both the traditional manufacturers and the carriers, who are natural allies (with the carriers dominating the alliance). And Apple is *winning*.

This is actually quite similar to what happened in music.

I wonder if this suggests that Apple can only be disruptive in markets dominated by either an oligopoly of producers or distributors where Apple can exploit potential end-customer dissatisfaction with the status quo being maintained against the customers’ own interests.

Yes, but that may be a market infeasible to enter, and there’s not a clear end-run around it, at least on the distributor side. It does seem like Apple is attempting to break the content provider lock, but there’s still an issue with delivering per-user high-bandwidth data streams which isn’t currently available, as I’ve mentioned here before.
It’s possible Apple could become a disruptive distributor using a new cost-effective last-mile technology, but I can’t see where they’d get it, and they don’t generally roll out totally novel tech, but rather do systems engineering to piece together existing advanced technology capabilities in well-integrated ways that are better than just the sum of the parts.

The only other way I can see Apple disrupting this situation would be to buy out a big cable provider, or Verizon’s FiOS, and I can’t see that happening for both business and regulatory reasons. Or they could go where Google seemed to be going and build out their own infrastructure, but that’s full of massive expenses and all kinds of regulatory hurdles. I suppose they could team with the electric utilities, which had some ambitions of going into the last-mile business a while back, and certainly own the necessary rights of way.

Just imagine what would happen if the politicians actually had voters on their side in the way Apple excites customers. Now thats a market ripe for disruption!

Buy SpaceX. Deploy network of satellites. Sell entertainment appliances. Profit.

Point taken, though the other requirement is the ability to enter the market with a significantly superior offering. This requires the ability to (a) actually enter the market and (b) actually improve visibly on what’s available now. In some markets, entry may be prohibitively difficult (e.g. Apple becoming a cell carrier). In others, it may be hard to make a substantial difference, like many indistinguishable commoditized products, e.g. dish soap, gasoline, electricity or network bandwidth.

It’s funny how these alliances of convenience can become such traps. Now Google, the Android handset makers and the Carriers are in this three-way standoff where anybody fires and they’re all dead.

Each of the players think they hold the cards but the game is changing so fast that nobody is really sure. The main reason the carriers need Android is to keep Apple from gouging them–otherwise the really don’t care. I mean it’s easier to sell iPhones than Android phones and Apple does the customer service and software maintenance.

The handset manufacturers think (or at least they did think) that they would just pit carriers and OS providers against each other and they would have it made. But Apple turned out to be the preferred source for both.

Strange bedfellows. 

I’m not sure we disagree very much here.

I said, “The main reason the carriers need Android is to keep Apple from gouging them–otherwise they really don’t care. I mean it’s easier to sell iPhones than Android phones and Apple does the customer service and software maintenance.”

I should have expanded on the “gouging” part, because it really means the whole issue of Apple taking control away from the carriers. And yes, they hate that. So I agree that the carriers want Android to succeed for that reason alone.

Those ads that you mentioned? The ones with Android all over them? Think how much money they would save if they didn’t have to pitch Android phones when iPhones sell themselves. But, they do it because they don’t want Apple taking control–like you said.

If I ran the store and had two products; one that sold itself and one that I had to spend money, time and effort to move, I would definitely go for the easy sale. Unless of course I was scared of being dependent on or marginalized by my own supplier. If the carriers weren’t scared of Apple (moot point, I admit, since they are scared) they would probably be perfectly ok with Android withering away.

And as a side note, there are a number of reasons why that carrier’s salesman might drag you to the Android shelf. Sales spiffs not being the least of them.

But the point I was really trying to make in the post above was that the carriers business model was not designed for a situation like this. They were used to dictating what the handset makers delivered and using competition between them to control them.

I said, “The handset manufacturers think (or at least they did think) that they would just pit carriers and OS providers against each other and they would have it made. But Apple turned out to be the preferred source for both.”

By “preferred source” I meant preferred by the customers. And this is what really binds the carrier’s hands and pisses them off so much. The mere existence of Apple interferes with their plan because the customers demand iPhones and they can’t play their power games.

So I don’t think we really disagree so much. You are saying that the Carriers want Android to succeed because they get control. I was saying they want Android to succeed because Apple threatens their control. I think that’s what we’re saying.

Am I right?
 

Apple was going to launch a GSM phone or they were not going to launch any phone.

Because GSM is the world standard and they could sell it in many more markets without having to redesign it.

 I suppose so… But I don’t recall the giants of consumer electronics being thoroughly incompetent until Apple came along and showed them how to do it.

I mean pre-iPod nobody was complaining that SanDisk and Creative and etc. were making shoddy interfaces and didn’t know how to create an ecosystem and didn’t know how to do great hardware design. In fact they were all pretty much considered cutting edge leaders in technology. They had fan clubs.

Same with phones: People were quite proud of their flip phones and candybars. Sanyo and Motorola and Samsung and the rest were all considered the leaders in the industry and nobody complained about the labyrinthine interfaces, the inscrutable settings modes, the simplistic voice commands. These companies were considered extremely competent.

Same with tablets. And electronic retailing. And music distribution. And voice recognition and…well, just about everything that Apple does.

There’s a tree-falls-in-the-forest question here. If a company has no better competition is it still incompetent? Does having a better company come along make it suddenly incompentent?

Perhaps calling them incompetent is too harsh. Just because Apple makes it look so easy doesn’t mean that what these companies do isn’t ridiculously difficult. Creating the iEcosystem seems like the most natural strategy in the world and one wonders how the incumbents could be bumbling as to not replicate it. But it took incredible vision, resources and execution to do it. So incredible that there may be just one company in the world that could manage it. Does that make everybody else incompetent?

I don’t really know.

 I understand how you feel. I too think the world is full of crappy products produced by people who don’t necessarily care a whit about what makes a good, usable thing. I had railed about the stupid interface on my flip phone long before the iPhone came out.

But I remember being in Kansas City with a (wonderful woman) friend when the original iPhone was introduced. I took her to the Apple Store to see it but she wasn’t all that jazzed at the prospect. The reason: she liked her flip phone just fine. Thirty seconds with the iPhone and she whipped out her credit card and bought it. She may have fallen instantly in love with the iPhone but it wasn’t because she was unhappy with the old one.

Now she’s a smart lady (smarter than me it turns out, but that’s another story) so her satisfaction with her old phone wasn’t because of lack of gumption. Her mind just didn’t work like mine–what with my constant, internal critiquing of everyday design.

Most consumers, I believe, are quite accepting of inadequate design until someone comes along and shows them something better. As Henry Ford said: “If I’d asked my customers what they wanted, they would have said ‘a faster horse’.”