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Asymmetric Competition

Thanks to Angel Lamuno for sending me to a dry and boring lecture by Dr. Israel Kirzner from Feburary 1988. It got me thinking again about competition and how confusing it can be.

The lecture was in part about how the word “competition” is used by economists with directly opposing meaning from that of the layman and how that leads to confusion about the role of free markets.

I won’t dwell on that, but instead I want to explain how this word can also be contradictory in meaning when applied in everyday usage in business analysis. Nowhere is this more evident than when we argue whether Apple competes with X or Y or Z.

Does Apple compete with Android or Google or Samsung? How could Apple compete with Google and yet cause it to be the default search engine in Safari thus enriching their competitors? How could Apple compete with Samsung and yet select their semiconductors for the heart of its most important and profitable product? And how could the people across the table from Apple agree to terms on these deals while being sued by them?

Some have tried to characterize this situation as “coopetition” or the co-habitation of conflicting strategies for a balanced optimum. I find this characterization uncomfortable and unsatisfying. The balance sought will be very fragile and change daily and no optimization is practically possible. It seems contrived.

Rather, I think about these situations as examples of asymmetric competition. This is competition where companies are rivals but they have different definitions of the basis of competition. In a way, they are like gladiators who have weapons which cannot be brought to bear or wielded effectively to counter the opponent’s.

Consider the following question: does the iPhone compete with the Galaxy SIII? Well, obviously it does. The products have similar attributes. If we define competition as rivalry in a market for similar products then, by default, they compete.

But what about non-consumption? What if there aren’t enough of either product to go around and people cannot actually face a purchase decision where both products are in front of them at the same time, under identical terms and conditions, waiting for a purchase to be made.

It gets worse. What if there are network effects related to each product such as brand loyalty, platform switching costs, media and data tied to either one that make them impossible to switch? What if advertising spending is skewing the buyer’s knowledge of competing products?

If a product is unavailable, invisible or requires burdensome switching, does it really compete? When these exceptions are raised, you’ll hear people say that Apple (or Samsung) don’t compete with X or Y. They compete with themselves or with products outside the category. There may be many ways of rationalizing that  what appear to be similar products don’t compete because of “differentiation” or “positioning”.

In fact, jobs-to-be-done theory suggests that the only successful competition is against non-consumption, especially if you’re an entrant. Non-consumption is easy to beat (because the alternative is no solution to the job) while an entrenched incumbent is very difficult to beat, and it’s often inefficient to even try even if you have the resources. This is what I describe in talks as the “David vs. Goliath” approach vis-à-vis the “Charge of the Light Brigade” approach.

So the theory that competition exists on the de-facto basis of a similar feature set fails a whole series of tests in the real world. Consumers decide based on complex criteria and businesses actually conspire to make the choices as complex as possible reducing the decision to a single option.

But I want to step back and think about the situation from the competitors’ point of view. In other words, how should management think about competition? Is it possible to develop a competitive strategy or should one even bother with competitive response?

Let’s take a basic question: Does Apple think of Samsung as a competitor? When did it begin to think about it as such? What can it do to win?

Let me answer this by asking another hypothetical question. Assume it’s 2008 and Apple is in the process of planning its product roadmap. Whom would they decide to count as competitors? Android devices have not yet shipped and the gorilla in the space is the BlackBerry with Symbian still overhanging the market with a huge volume lead. Should they then build products to compete with RIM and Nokia?

Assume further that their decision will define how developers will build apps and content makers will target your product. They have to account for the time scales that developers think about and they have to match hardware innovation to the rate of OS innovation and API innovation and toolchain innovation, etc.

So did Apple consider Samsung a competitor in 2008? A time when Samsung did not actually make smartphones? It seems hard to believe they did. Now you may answer that things have changed since 2008 and they have. But the decisions made in 2008 regarding the platform remain in place today.

Furthermore if you happen to look at the dozens of hardware designs that are making the rounds today (as evidence for a trial with Samsung) you’ll see familiar designs first penned in 2004 or 2006. You quickly realize that the product design process is lengthy and largely isolated from the froth of main street (or mall) sales fistfights.

Few people appreciate the disconnect between the design process and competition. This because few people have spent time in an organization building mass market consumer phones. The time scales are staggering. If your product is a platform product you make decisions six years in advance. If you are a “fast follower” you can make decisions six months in advance. This is maddening, asymmetric competition.

One competitor sees one basis of competition and another sees it completely differently or sees a completely different basis. They are competing with each other but more as a guerrilla fighter competes with a nuclear missile.

Which brings me to another discipline. In military circles asymmetry has been noted as a valid form of warfare for some time. At least since 1975. It was in use long before it was recognized or studied, (e.g. in the American Revolution.) But the situation now exists where it’s taken for granted that modern conflicts are almost always asymmetric. Drones vs. insurgents and citizens vs. armor and, the most sinister of all, unarmed-but-tightly-integrated-through-communication protest against established regimes. The impact of this realization is affecting governments around the world.

So it’s time to elevate our thinking about business competition along the same lines. Yes, Apple competes with Samsung but it does so asymmetrically (as it does against Google and dozens of others). It’s a multi-dimensional rivalry and one which requires a different form of analysis. It is something which I do instinctively but it’s not something that is easily explained. Disruption theory helps. It turns out that asymmetric competition is the only form of competition that matters in a rapidly disrupting industry.

It is also why this site is called Asymco.

  • http://chrischelberg.tumblr.com/ Chris Chelberg

    Very interesting. I like how you bring in military theory while keeping things grounded with disruption theory.

    • jan6

      Except it doesn’t quite fit. Samsung isn’t an under armed guerrilla army. It’s more like the red army. Lots of shitty tanks, but tanks non the less. The smartphone competition is much more symmetric than asymmetric warfare.

      Yes the innovator has an advantage over the follower. It is the knowledge of how to implement and integrate your own technologies. AutoSave, Document Versioning, iCloud for Documents and PowerNap all go hand in hand.

      When you are the copycat, your problem isn’t so much that you only have six month to go to market. It is that you can see enemy troop movements but you can’t see the greater plan behind them. So the copy ends up with lesser quality.

      You can’t copy the whole package, only viewable parts of it. Your product will remain inferior to the original. You can’t win one on one. So you need more tanks. It’s an mass production war.

      • Sacto_Joe

        It’s mass production battles in part. And that’s why Apple’s ramping up of its production capacity has been so vitally important. But this is a multi-front war being fought on many different levels, including the patent battles and the continued innovation battles. Exciting times for long term Apple watchers and investors like myself!

      • http://profiles.google.com/simon.hibbs Simon Hibbs

        iPhone vs Galagy S is symmetric competition, that’s why their are fighting it out in court. Flash memory manufacturing is asymmetric though since Apple doesn’t make any Flash and Samsung makes a large portion of it, so Samsung ‘wins’ and gets to sell to Apple.

        The OS layer would also be asymmetric, except that Google levelled the playing field by handing out free weapons (Android) to Apple’s opponents, playing the role of Russia arming communist regimes and insurgents during the cold war who otherwise couldn’t hope to stand up to American military might.
        In fact this whole industry wide battle mimics the cold war, with the superpowers (Apple, Google and Microsoft) fighting proxy wars through third parties such as Samsung and Nokia.

      • Onibi

        I wouldn’t always assume a copy will end up being of lesser quality. In my opinion its more to do with market entrenchment. The copycat will generally/always arrive late to the market and would generally need to oust the current incumbents.

        One quick and dirty way to do this is to simply copy the current incumbent’s spec list and increment it by a wide enough margin. Which is probably why they’re so concerned in having the biggest guns for their tanks, not necessarily more although it helps to address the niches.

  • klasseng

    It’s great to see another more comprehensive way of looking at the situation. But I don’t know how much of that analysis Apple did . . . They may in part transcend it by their focus on creating great products. If they can create the best products for an undeserved job, they compete effectively.

    • http://www.asymco.com Horace Dediu

      Of course. My assumption is that Apple did not consider competition in their decision making. I take Jony Ive at his word that competition has no role to play in their decision making.

      • http://twitter.com/WalterMilliken Walter Milliken

        I suspect they do consider “the competition” to a small extent — to identify where they are *not* doing their jobs, and thus opening an opportunity for Apple. Classical competition analysis does pay lip service to this sort of thing, but usually gets reduced to feature checklists, which is clearly not Apple’s way of analyzing competing products.

      • jan6

        Apples decision making is concentrated on innovating in fields where no one else has. Thats an indirect kind of considering competition. They are competing in that they try to do something different than everyone else. So when it comes to comparing iPhones and Macs to their supposed to be alternatives, there is no competition in what only Apple can offer.

      • jan6

        Apples decision making is concentrated on innovating in fields where no one else has. Thats an indirect kind of considering competition. They are competing in that they try to do something different than everyone else. So when it comes to comparing iPhones and Macs to their supposed to be alternatives, there is no competition in what only Apple can offer.

    • http://www.asymco.com Horace Dediu

      Of course. My assumption is that Apple did not consider competition in their decision making. I take Jony Ive at his word that competition has no role to play in their decision making.

  • Canucker

    And a small mystery disappears…. At 18 months, your lead time for the planning of the Asymco meaning reveal slots nicely between the innovator and the fast-follower.

    Will be interesting to see how the Apple vs Samsung trial develops. I think Apple chose Samsung because it initially built TouchWiz as an iPhone interface skin rather than as an Android OEM skin. The hardware design is slippery, but software is infinitely variable and the other Android OEMs took a distinctly different path (and suffered for it). The recent public “not fair” remonstrations about rectangles coming from Samsung and the poor attempt to blame Apple for copying Sony designs (subsequwently excluded) suggests a level of legal realization that the case is not going their way.

  • GaneshNayak

    Good article… Asymmetric competition can also explain why Apple using patents to fight competition is so much beneficial for Apple. If they loose, the amount is short change. But if they win, it would be huge portion of profit for the competition

  • Walt French

    In the early years of the millennium did Apple anticipate Samsung as a competitor? Almost certainly not. But I like another of your themes, the “value stack” (which I understand quite imperfectly), as the explanation.

    Apple certainly knew of “competitive” efforts at Palm, Google, Blackberry, Microsoft, Nokia, Sun and the feature phones. At the introduction of the iPhone, Jobs attributed their advantage to the UI/UX expertise that they had carefully developed. Almost certainly, Apple also foresaw the network effects that has become an incredible value to customers.

    After 5 years, and with Google’s quick take-up of tech (liability for which, partly dismissed; partly TBA), Google has sharply eroded Apple’s UI/UX advantage. Google’s original intent of destroying Microsoft’s OS value wildly succeeded, and also has been substantially realized versus Apple. Thanks to Google, Samsung didn’t have to put the years of hard work into UI; it was able to concentrate on where it had (or could build) significant advantage: parts, manufacturing, distribution, home field advantage, breadth of line and pricing.

    Seems to me that Samsung’s value stack is all in the hardware, access and pricing, while Apple’s continues in the polish and media/services. By 2010, Google had utterly disrupted Apple’s 2006 business model, and Apple has pivoted to up the ante on services and apps, where it continues to have a strong advantage, at least in the US.

    • http://twitter.com/WalterMilliken Walter Milliken

      I also see Passport as a stealth market disruptor going forward. While most of the analysts see it as a simple grab after the mobile payment space, I have strong suspicions that Apple is thinking something slightly different and larger, and the name chosen signals this: a secure mobile identity that makes identity-demanding services painless for the user.

      This would put them more in competition with RSA (SecurID) and Facebook’s growing login-credential use. It would also put them into the mobile payments space, and that’s where there might be additional profits, but an infrastructure that would make it possible to avoid all the multiple web logins, especially for sensitive services like banking and shopping is where I see real potential for adding value to the Apple owner user experience.

      So I’m wondering if identity is Apple’s next true disruption….

      • Charlie White

        FWIW, it’s called Passbook not Passport – which may impact your line of reasoning.

      • Rj

        Passport is/was a Microsoft product from some time ago that was intended to do all of the things you suggest.

  • Walt French

    Regards co-opetition: companies are playing the long game. If perhaps Apple was able to sharply diminish the attractiveness and/or profitability of Android phones, Samsung can still make a boatload of profits from components. Had they refused to sell chips & other parts to Apple, Apple would’ve had to subsidize the creation of competitors to Samsung’s parts, which would’ve knocked out that profitability.

    Neither firm is willing to go for broke. The temporary advantage of sales for a few years before another competitor arose, would be more than offset from the backlash or a bad roll of the dice in a courtroom or regulator’s office.

    • theothergeoff

      it parallels the nature of world politik… the way the US is a trading partner with China and Russia, yet considers them military threats. The long game is to co-opt them into partnerships for the benefit of all…. however everyone realizes there can only be one ‘alpha producer,’ and a either a hierarchy appears, or there will always be this asymmetrism.

      I think in general question of ‘supplier-competitor’ vs standalone competition. Apple is one of the few corporations that eschews the revenue enhancements that being a ‘supplier’ provides. It’s definitely related to ‘laser focus’ on a single set of customers (non-corporate middle class consumers).

      Apple’s game is closer to going for broke, at least in maintaining any core technology inhouse or controlling the source’s output of componentry.

      Samsung on the other hand, is in the same game as RCA, IBM, HP, Panasonic, etc, etc, producing parts and finished branded products. Few are in the same game as they started out, and none have a quality consumer brand now.

      I’m more curious of the ‘bandwidth’ and ‘media/data/apps’ partnerships that Apple has with AT&T, Google, NetFlix, Facebook, etc. Just like the experience starts with unboxing an Apple Product, it ends with delivery of the ‘job’ you ‘hired’ it to do. With Maps, Messages, and FaceTime, you see Apple leaning against this edge of coopetition… Those are minor $$s now, as you see with Android, Amazon, and now Samsung, it’s that end of the production line that generates ‘stickiness’ as well is the long game for revenue as the HW side commoditizes (see iPod).

      • Walt French

        This is why several commentators have suggested that ultimately, Apple will license its tech, as Microsoft does: both nuking Iran and trying to eliminate your competitors is NOT in the world’s interest, and ultimately, not in Apple’s.

        Making them compete with their OWN innovations, yeah, that’s in Apple’s AND ultimately the planet’s interest.

      • Ian Ollmann

        Platform licensing fees for mobile platforms seem unlikely to support such an approach. Watch Microsoft to see if this strategy succeeds.

      • Walt French

        What do you mean by “succeed?” Microsoft is reportedly looking at VERY roughly $15 per handset, not too shabby in terms of the relatively small fraction of IP that the phones get from Microsoft.

        Microsoft shares with Apple the desire to get compensation for its patent works, but also has a very different set of priorities than Apple, apparently unmotivated by need for product differentiation.

      • Onibi

        Problem that i see is, they are not apple. Would they risk exposing its tech to another party if it might result in sub par quality product?

      • Onibi

        *Would apple risk exposing its tech…*

  • actualbanker

    Not just a pretty face.. sorry… Not just pretty charts. More articles like this please!

  • JohnWCox

    You have mentioned “jobs to be done” theory and disruption theory in other postings before. Can you point me to any online resources that expand on these? Or to an Asymco post where you do?

  • ernest

    I think there is additional mileage to be gained in business analysis by evaluating the potential impact of product design choices and business decisions.

    Take for instance Apple’s decision to stick with a 3 inch screen iPhone form factor. This was a self-imposed constraint with far reaching consequences.

    Samsung saw this as an opportunity it could address immediately by introducing competing smartphones with bigger screen sizes.

    Aside from price, a product form factor is perhaps one of the most significant factors that will influence a buying decision, especially for the less tech-savvy consumer.

    By not offering a choice in the iPhone form factor, Apple allowed Samsung to capture a quite significant smartphone market share, outselling Apple two to one in the last quarter alone.

    Apple is not going to repeat the same mistake twice, so we will now soon see both a bigger iPhone and a smaller iPad to round out its iOS offerings.

    It will be interesting to see how Apple and Samsung will compete once the smartphone screen size will no longer be a critical decision factor for the consumer.

    I expect the story will unfold during the next quarter and will become really interesting one release after the iPhone 5.

  • jan6

    A lot of questions. Can’t answer them all. So why do companys cooperate while also competing against each other? Because they must! Their is not one market to be devided between all competitors. Every company is in the business of creating value for their own customers. If there is value generated a market comes into being.

    Googles customers are advertisers. Apples customers are users. So would an iPhone without Google Search be more valuable to the user? Would being the default on iPhone be more valuable to another search engine provider? No and no. You just can’t compete with Google on search.

    But you can compete with Google on maps. Apple always aspires autarky. Thats why they have their own WebKit browser engine and their own iWork office suite. They learned this lesson the hard way, when Microsoft used its Office monopoly to press them for giving up QuickTime playback on Windows.

    Samsung and Google don’t have the luxury to be a one-stop hardware, software and services company. They must make more compromises. Google must give Android away for free; hoping they can make up the loss on mobile search. Samsung must treat Apple as a valued customer for their chip business. They have no alternatives.

    The real question always is, what is the value only you can provide and others can’t? And how much do you rely on others to create it? If you don’t rely to much on the other company, you can call it a competitor.

  • suddy

    Hi Horace,

    Thanks for this wonderful post. So my first question is, how could have Apple planned to compete with the Samsungs when they laid out their platform strategy in 2004? They might not have known that it would be Samsung, it could have been blackberry, Vizio, who knows. The point is how do you compete Asymco with competitors when you launch a platform product? do you nip it in the bud?

    I heard you mention in another post that they creamed iPhone for a long time with AT&T. I don’t think the answer lies in carrier contracts or exclusive tie up’s. I think this way since the iPhone had a good adoption rate, but still had only single digit market share for the first few years.

    Suddy

    • http://www.asymco.com Horace Dediu

      You can’t plan to compete against a target as that target may not be relevant in a rapidly changing market, especially a market you define. The answer to the question of competitiveness is to do the best you can and solve a job consumers have. That’s what design is all about. Think about the problem and think about the solution. It’s best to pick a problem that nobody has solved as that’s when you will have no competition. If your solution is copied, try to protect it but also try to move to a position where competitors can’t touch you (either through volume production, or integration of multiple solutions or platform lock-in). If you can be easily copied, you have not done enough.

  • newposition

    Why doesn’t Apple go after Android in the courts. It would seem easier to prove that Googles software copied iOS rather than Samsungs hardware copied Apples?

    • http://www.asymco.com Horace Dediu

      First, because Google does not own any part of the infringing software. Android is open source and it therefore is not anyone’s property. It cannot be sued. Second because patents are infringed in their implementations which means it’s in the form of a product that is sold. The manifestation or implementation of a violation is in the product vendors sell. It’s the phone vendor that is in violation, not the software itself (for most claims that Apple is making).

      • David Leppik

        Not technically correct. If it were public domain, they wouldn’t own it. As it is, the portions that Google wrote (not the Linux kernel) are licensed under the Apache 2.0 open source license, which means that Google owns it but allows others to copy it or make derivative works (including proprietary derivations), so long as they publicly acknowledge Google’s contributions. As a practical matter for developers, it is nearly identical to public domain. But from the standpoint of ownership– which includes liability– Google is the owner of the distinctive portions of Android.

      • Joe_Winfield_IL

        The OS itself is not causing Apple harm in a vacuum. The infringement comes when the OS is applied to a piece of commercially available hardware. Google has not taken in any direct revenue from Android, so it is a difficult target. Of course this all changed when Google closed on its Motorola acquisition, but the legal process takes F…O…R…E…V…E…R.

        In the meantime, Samsung is the biggest infringer in many ways (volume of units, profits from phone sales, commitment to the forgery, etc.) The legal wrangling has been two years in the making, and the decision in this case may set a very strong precedent for Apple to use against other Android device manufacturers. Should Apple lose the case, it’s hard to see where the company will turn next in its legal strategy.

      • http://profiles.google.com/simon.hibbs Simon Hibbs

        Ownership isn’t the issue. You can only sue a software author and distributor on the basis of copyright infringement. To launch a patent suit there must be a product as software patents are only valid in the context of a hardware product running the software. This is also why Microsoft goes after Android handset manufacturers for patent licenses, not Google.

      • tca

        No. The reason is the law is far behind technology and licensing.

        The code infringes and Google is owner of big IP chunks of the code, but law still does not recognize the code as real violator.

  • kankerot

    In fact, jobs-to-be-done theory suggests that the only successful competition is against non-consumption, especially if you’re an entrant. Non-consumption is easy to beat (because the alternative is no solution to the job) while an entrenched incumbent is very difficult to beat, and it’s often inefficient to even try even if you have the resources.
    Which explains Apples strategy quite succintly. They are going through the courts to restrict and stop competition thus leaving the only viable option as nothing or an Apple product.
    Apple is pursuing rivals over look and feel – which due to a weak patent system is being exploited.

  • kankerot

    In fact, jobs-to-be-done theory suggests that the only successful competition is against non-consumption, especially if you’re an entrant. Non-consumption is easy to beat (because the alternative is no solution to the job) while an entrenched incumbent is very difficult to beat, and it’s often inefficient to even try even if you have the resources.
    Which explains Apples strategy quite succintly. They are going through the courts to restrict and stop competition thus leaving the only viable option as nothing or an Apple product.
    Apple is pursuing rivals over look and feel – which due to a weak patent system is being exploited.

    • Kizedek

      Definitely, it is a good strategy for anyone to pursue “competition” primarily against non-consumption rather than going head to head with a strong incumbent in exactly the same way. If not, then as Horace says, you probably aren’t conducting your business correctly.

      So, we can see that strong incumbents have been left behind, such as Windows phone/OEM, Nokia/Symbian and RIMM, because the terms of competition changed and they were disrupted as Apple went around them and found new ways to attract non-consumers. Google changed the course of Android to follow Apple, and now Samsung is trying to replicate Apple’s success among non-consumers.

      So, I am not sure what you are trying to say. Are you trying to suggest that Samsung using Android is an entrenched encumbent that Apple has no hope of competing with unless it goes to the courts to “restrict and stop competition”?

      I think that mischaracterizes what is happening. Rather, Apple is saying, go for all the non-consumption market you can get… just don’t use our innovations to do it — beat your own path.

      What’s also interesting here is that you acknowledge Apple’s ability or strategy to go for non-consuming markets (remembering that smart phone penetration of all mobile phones is only at some 50%), but apparently, according to many analysts and the popular mantras of Android and Windows fans, Apple is in dire straits and in imminent danger of losing its phone business tomorrow and having no where to grow every time another product from a rival is even breathed about, much less launched. Eg. “it’s all over for Apple now that the Surface is *here*!”

      It’s just interesting that whenever this topic is discussed, non-consumption and disruption, etc., it’s Apple that is supposed to watch out for the others to come and eat its lunch as though Apple got the low hanging fruit because it was fast, but now its chance is over. Funny that it is never the Microsofts and Samsungs and Nokias and RIMMs that are told to watch out for Apple. It’s the same old meme: apparently Apple got lucky, but now that the others have seen how it’s done and know the way forward, they can not only follow, but they can go faster, better and surpass Apple and eat it’s lunch…. until Apple innovates and disrupts in a different diction and we get to see a whole repeat and everyone gets to repeat how lucky Apple is.

      • kankerot

        This competition with non-consumption is simply accepting that if you want to compete with some organisation then change what you compete on (ie wii competed on interaction rather than high level grahics). MS and Sony responded with their own takes on increased user interaction.
        Apple changed the way we saw and used smartphones and Samsung/ Android followed quickly. Now Samsung/ Android provide a possible alternative to buying Apple – not a complete alternative but viable to many. Apple options are then to redefine the space again or create non-consumption by suing Samsung/Android to the point its not a possible alternative.
        The court cases where Apple is trying to enforce the “look and feel” of a design patents shows just how warped and idiotic the system has and the agencies are in granting patents where an aspect can be “rounded corners” or where real world metaphors like a sliding lock can become patentable if put into software.
        Samsung/Android is not the incumbant it’s a possible alternative to a person who is coming to smartphones for the first time ie non-consumer. As an Apple lawyer mentioned in their case against Samsung in Australia if someone buys the Android tablet its a customer lost to Apple forever.
        It’s currently a land grab for users – once you invest into an ecosystem it becomes hard for you to leave it unless some competitor redefines the space.

      • kankerot

        The Apple vs Samsung case is absolutely ridiculous. It centers around 4 design patents and 3 utility patents.
        The two iPhone design patents include placement of the iPhone’s round “home” button, rounded corners, edge-to-edge glass and “uncluttered” front of the iPhone
        The iOS design patent addresses the grid layout of icons in iOS
        The iPad patent, like the two from the iPhone, has to do with the shape and size of the device. A thin bezel and minimal aesthetics of the front and back are the primary aspects.
        According to the USPTO, “the design patent protects only the appearance of an article, but not its structural or functional features.”
        In defending the validity of its sweeping design patents (which are the origin of the middle panel, above), Apple is in the bizarre position of having to claim that the functional aspects that make a smartphone desirable: flat and pocketable, no sharp edges, etc., are purely ornamental, and not useful at all. This fact led to ridiculous expert testimony from Apple arguing that Samsung had many alternatives available for its devices, instead of using Apple’s strictly “ornamental” design — alternatives such as:
        “front surfaces that are not rectangular, not flat, and without rounded corners; display screens that are more square than rectangular or not rectangular at all, display screens that are not centered on the front surface of the phone…”
        and
        “overall shapes that are not rectangular with four flat sides or that do not have four rounded corners; front surfaces that are not completely flat or clear… and profiles that are not thin”.
        But that just proves how ridiculous Apple claims are but puts it quite clearly their strategy is to compete against non consumption by outlawing rectangualr flat tablets and phones with rounded corners.

        http://www.readwriteweb.com/mobile/2012/07/apple-vs-samsung-whats-behind-their-high-stakes-patent-clash.php

        http://www.project-disco.org/intellectual-property/design-protection-utility-patents-and-the-apple-v-samsung-foodfight/

  • http://www.isophist.com/ Emilio Orione

    Is it competition the best behavior to accomplish your goals?
    A bunch of premises.
    Since Locke “homo homini lupus” natural behavior has been seen as a fight to survive. But in nature cooperation is more spread than competition and surviving is easier with cooperation than competition.Business as a war is an old concept that has been surpassed by more newer theories based more on cooperation than competition.You must have both aspect in your behavior, you must be able to cooperate or to compete or to kill when the situation requires you to do it.Every company has or should have a goal a mission to accomplish, values that are at the hearth of the company, products are the exemplification of their values, money is a result, it is always a result not the goal.

    Given all that what is the optimal behavior to accomplish your’s company goals inspired by your core values?
    Surely it’s not competition in itself a goal or a value. In apple competition is not part of the decision making process. Their value is simplicity, thinking different, making great products. These values produce their goals, make the best phone for instance (best in term of problem to be solved) etc…
    Do you need to win it all to accomplish your goal?
    Certainly not, if no one else makes a phone your product does not evolve, good ideas are everywhere and the iphone for instance is now better than the first one also thanking competitors ideas that have been acquired (notification centre for instance).
    So competitor can affect your results (money) but not your goals. But if your goals does not meet demand you have the wrong goals, it’s not a fault of your competitors.
    It’s like in nature if a predator has too much success it will arrive to a point with no more preys and starve to death.
    You need success and failures to grow, you need cooperation to create a market, the idea itself of the use of a smartphone is the result of the pressure of all smartphone producers against non consumption.
    If apple alone would have made smartphones few people would have made up their mind in buying one.
    Killing competitors it’s not a goal, it’s a result of their inability to address goals that solve problems for their customers.
    Cooperation between company it’s a good thing, it helps all of them to create a market and make it vital.
    The only competition you need is that companies must not manipulate the market and make secret agreements.
    Microsoft made it’s smartest move saving apple from bankruptcy when Steve Jobs returned to apple.
    The best decision apple can make it’s not to try to attack competitors to block their niche of the market, like making an ipad 8″ or a low price new iPhone, but to think only to the next big thing, leaving other companies to make their products and define with them the market in which buyers will spend their money.
    It’s a long therm goal, monopoly are due to die, at least for law’s reasons.

    You just don’t want other companies to brutally copy your work, they must make their own transpiration, don’t they?

  • http://sumocat.blogspot.com Sumocat

    If you’re analyzing who Apple viewed as a competitor in 2008, the big name to consider isn’t Samsung but Google. As a mobile phone maker, Samsung would always have been seen as a potential rival (Apple’s stated target was the entire mobile phone market). Google, on the other hand, was welcomed as a partner, not a threat. Eric Schmidt was on Apple’s board of directors and was involved with the original iPhone announcement. Google had their hands deep in the iPhone from the start. The release of Android completely turned that relationship around (which surely drove Steve Jobs’ sense of betrayal towards Google). That’s what really surprised Apple and what led to Samsung’s current rise.

  • John

    You should write a book, Horace. No seriously. I have been studying economics, marketing and leadership based on both European and US-based models and theory but I find your thoughts much more compelling and thought provoking than everything I have learned during school and courses.

    The highpoints during my education have always been to have real non-teacher business leaders with visionary ideas talk at lectures and your experience in this field and mindset is certainly much more rewarding than most subjects I have studied in the past.

  • Mike Wren

    “It is something which I do instinctively but it’s not something that is easily explained.”

    Horace, can you give some insight into how you developed this intuition that few others have? Your Harvard MBA professor Clay Christensen also has it. Many of us know your history. Maybe how you developed your instincts also cannot be easily explained.

    Wikipedia Clayton_M._Christensen — http://en.wikipedia.org/wiki/Clayton_M._Christensen

    Wikipedia Horace_Dediu — http://en.wikipedia.org/wiki/Horace_Dediu

    Maybe some Asymco readers who are also Wikipedia editors can add to Horace’s Wikipedia page. It has the highlights of his education and his eight years at Nokia but not his entrepreneurial ventures.

    • Mike Wren

      I didn’t get any response to my comment about someone editing Horace’s Wikipedia page and so I am going to edit it myself. I will make the following changes:

      I will fix the broken asymco link in red. It currently points to a nonexistent Wikipedia page. I will redirect the Asymco page to Horace’s page.

      I will replace “an analyst” with “a business development manager and industry analyst” in “Dediu was an analyst for Nokia in Helsinki, Finland, from February 2001 to April 2009, with responsibility for Research in Motion.”

      I will add:

      “This was preceded by six years of software development and management in a startup environment, two years of IT management and five years of computer science research in an industrial laboratory.” It will link to the “People | asymco” page.

      After “He founded asymco in April 2010.”, I will put:

      “Asymco stands for asymmetric competition as applied to business, analogous to asymmetric warfare, that occurs when a disruptive innovator takes on an established player in a market and often wins. It can be a David versus Goliath battle. Dediu states that he has an instinct for asymmetric competition and that it ‘is the only form of competition that matters in a rapidly disrupting industry’ such as that in the smartphone and tablet markets.”

      I will link the above paragraph to this page. I link “asymmetric warfare”, “disruptive innovator”, “smartphone” and “tablet”. I will link “asymmetric competition” to a nonexistent Wikipedia page leaving it in red and hopefully someone will come along and add it someday.

      I couldn’t find a good definition on asymco or anywhere else on the web of asymmetric competition or what asymco stands for. (Maybe asymco needs an About page.) So I made up a definition. I wanted to allow for Apple being a disruptive innovator and they aren’t David. Does anyone have any better ideas for a definition?

      I’ll probably make the edit this weekend. Hopefully there are no Wikipedia hive mind edit wars. :-)

  • sne

    Thought-provoking post as always. I was thinking about this as I was scanning the financial news today, and believe that your view of competition as complex gets obscured by the simple market share view or patent war reporting that dominates the daily news.
    The first thing that struck me is Apple vs Samsung is a bit misleading. It might be considered (Apple + Samsung Semiconductor) vs. (Samsung Mobile). Samsung components, of course, also make up Samsung smartphones, but I suspect Samsung Semi much prefers supplying all the phone manufacturers over watching them go to other component makers in a Samsung-dominated smartphone market. Just thinking of “Samsung” makes it seem like the conglomerate is a unified set of interests, which it almost certainly is not.
    Second, today saw a flurry of reports about AT&T and Verizon reps promoting Android phones over the iPhone. This isn’t a surprise, given that carriers pay a higher subsidy to Apple, and services like iMessage eat into high-margin carrier services. In light of that, should Apple view its carrier/distribution “partners” as more of a competitive problem than other phone makers? Should it respond by buying/creating a captive carrier, or sharing more of the iPhone profits with carriers to create an incentive for them to promote it?

  • http://www.facebook.com/people/Jesper-Mathias-Nielsen/626289009 Jesper Mathias Nielsen

    An enjoyable and extremely well-conceived post. I’m wondering if I could bug you for an elaboration on why you find a coopetitive characterization unsatisfying and overly contrived?

    • http://profiles.google.com/simon.hibbs Simon Hibbs

      I can’t answer for Horace obviously, but to me it’s because it just describes what is happening and doesn’t explain why or what the motivations are. It has no analytical power, compared to the concept of asymmetric competition.

      • http://www.facebook.com/people/Jesper-Mathias-Nielsen/626289009 Jesper Mathias Nielsen

        I can definitely see where you are going, but if you view a coopetitive situation from a game theoretical perspective (coopetition theory is largely based on game theoretical considerations) as a positive sum game in which inter-firm relationships can be evaluated on their level of synergy creation, leveragability and negative-reverse impact, you could argue leveragability i.e. the potential for Samsung to exploit the insights gained from cooperating with Apple beyond the scope of their contractual agreements and negative-reverse impact i.e. the extent to which Samsungs use of knowledge acquired during the cooperation negatively affects Apple sales are at the heart of the problem. Admittedly, these depictions appear to me as being very similar (and to some extent I actually prefer the one outlined by asymmetric competition). However, it is this exact similarity which causes me to wonder if there is something I’m missing and, hence, my question why the coopetition characterization is unsatisfying? Is it simply because the idea of asymmetrical competition better captures the situation on the product market (how costumers perceive an Iphone versus a Galaxy SIII) instead of focussing simulaneously on resource and products markets?

        Ultimately, like Intel’s flirts and pushes for video conferences to drive the adoption of new processor generations, there’s a lot to be said for the interaction between Samsung and Apple driving new phone generations, generating synergy and additional value while not competing directly.

      • http://www.asymco.com Horace Dediu

        I find game theory as a tool for decision making to be impractical. It depends on data which is never available. We can’t be sure of motives or of the actual decision process of opponents. It seems like an optimization problem which further implies that data is necessary and sufficient to make a decision. The “fog of war” permeates everything and data is just not going to be there for us.

  • Henry

    Horace, traditional economics is designed to think about problems like these, and well-trained academic economists wouldn’t find competition in the computer and smartphone industry confusing. I think you’d really benefit from (and really enjoy) more formal economics training. I don’t mean this to be condescending (although I fear it will come across this way)- you’re obviously brilliant and I learn a lot from your posts and podcasts. But there is a big difference between MBA-style economics (e.g., disruption theory, coopetition, positioning, etc), which is heuristic in nature, and mainstream academic economics, which is more structured and rigorous (for example, what appears in scholarly economics journals like these http://www.aeaweb.org/aea_journals.php).

    There is a place for both MBA-style economics (e.g., Christensen style) and traditional academic economics, and I can see the synergies of using them together. However there are orders of magnitude more traditional economists and economics research, so there is value in using this huge knowledge base and not reinventing the wheel. Further, in the last couple of decades, there has been a revolution in data-based research that has made economics less abstract and more relevant for real-world problems.

    As a side note, I don’t know Israel Kirzner’s work and he probably has brilliant insights, but he hasn’t published in a mainstream economics journal since 1962 and would probably be considered fringe.

  • @john_ryu

    Horace, great post. However, I feel the need to champion the notion of co-opetition. This term has nuances that are more interesting when you tie it to Brendenburger and Nalebuff’s concept of the Value Net (as described in their book, “Co-opetition”). I believe that this version of co-opetition is more consistent with your logical and clear thoughts on asymmetric competition. Cheers.

  • http://twitter.com/grzegorz_maj Grzegorz Maj

    I do not agree. Samsung competes with Apple one to one. There isn’t any maneuver, encirclement warfare, attacks from flanks etc. It is just two opponents sitting in their trenches. That is why this whole idea of lawsuit. Samsung copied Apple as far as it could and used Apple’s weakness: one model with relatively small screen. Look at new Samsung services like Music.
    Amazon lately acquired some company related to mapping – Kindle tablets do not have maps. It turns out every mobile ecosystem has to have: maps, music, storage, books, payment services, voice search, games. When everyone wants to have the same services this is not asymmetric. This is plain one to one competition, symmetric competition.
    One can do long planning and designing when product under work is not yet on market. When competitor has it, you have easier job because you know what works and what not, so 6 months are enough in that case.
    Look at Apple TV set. It is unannounced, Apple can work on it any time it wants, but when it is announced, Samsung in a week will create new TV set + Android division, and in a couple of months they’ll have working product, and only patents can stop this.

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  • fl1nty

    Horace The video linked seems to have been deleted. http://vimeo.com/9181211 this has the same video(i think?)