Competing Against the iPad: Strategies Emerge

| Analysis

The Apple iPad was announced about 17 months ago and has been shipping for well over a year. Yet, to date, no credible competition has emerged. Now, however, a few companies are beginning to understand how to compete the tablet market.

A modern tablet’s major strength is its portability, simplicity and immediacy. You just pick it up, swipe, and start doing something anywhere you are. No power up and OS boot. No logins. Very little maintenance.

But if that were all there is to a tablet, anyone could compete with Apple, perhaps based on style and price. But that doesn’t work because there’s another key factor that drives the tablet’s success, and that’s infrastructure.

iPad 2

Apple iPad 2

Without infrastructure, a modern tablet is just a glorified DVD player. Or giant PDA. Or a super Kindle. In fact, a tablet must also have considerable infrastructure, both behind the scenes, at the retail level, and at the user level.

While it may not have been conscious, Apple spent a decade building two pyramids of infrastructure. The first is the technical infrastructure of Mac OS X, the developer program, the “Core” technologies (like Core Image), iTunes as first a CD ripper, then as a commercial store, then iOS and Cocoa Touch and then the App Store and iBookstore The iPad rides along on tip of this infrastructure. Developers love the iOS devices, they make money, and Apple makes money. Along with a strong focus on system and user security, this creates a pleasant, productive user environment that the prospective customer can feel, tangibly, as they make a purchase decision. Moreover, Apple protects its developers, as evidence by the recent Lodsys affair.

A parallel pyramid that Apple leveraged from is the retail stores. In those stores, you can see and feel the infrastructure. Retail sales people can show you how to set up accounts, show you how to integrate with your Mac, buy music and books, obtain training and support — and then insure your purchase (in a limited way) with AppleCare.

By the time the prospective customer is exposed to this twin pyramid of infrastructure, the sale is a done deal. Apple’s competitors have had a very hard time duplicating this infrastructure because it’s expensive to build quickly, from scratch. And it’s high risk.

Seeds of Competitiveness

Several companies have already figured out that they already possess a significant infrastructure for tablet support and, thus, don’t need to build it from scratch: Amazon and Barnes & Noble.

Amazon already has a strong eBook, music and video store. They have years of experience with eCommerce and customer support. The have brand recognition. The Kindle has shown Amazon that their legacy infrastructure is a natural fit for a tablet — or at least an advanced book reader. We’re all expecting Amazon to get more energetic with its tablet offerings.

Barnes & Noble may be in an even better position because of its long-standing relationship with other publishers. It’s a retailer, like Amazon, but also a publisher itself. While not as strong financially as Amazon, Barnes & Noble has learned how to do a few things really well: work “nice” with other publishers and develop a low-cost, friendly, Nook series that now includes the “all-New Nook.

Nook Color

Nook Color

This amazing New York Times story is required reading.  It’s chock full of insights in just about every paragraph as it explains how B&N has found a strong niche with women as end users and is also working closely with other publishing partners. Nooks appeal to women as a less geeky, less guy-oriented device. The delivery of magazines without a lot of exotic technology is just fine with many women, according to the NYT findings. Nook sales are booming because B&N has taken the standard business approach with other publishers: “You help me make money, and I’ll help you make money.”

Apple doesn’t think like that, and they can’t afford to. Any compromises that help an equal business partner make money detract from Apple’s vision and mission. As a result, Apple almost always has to go it alone and appeal to the popularity of its products to bludgeon its semi-business-partners into going along. That’s created the legendary adversarial relationship with publishers. The NYT article is a template for how B&N has backed into, apparently, second place by exploiting these Apple weaknesses combined with its own existing infrastructure and a nicely designed, low cost, well targeted tablet. Amazon probably isn’t far behind in this thinking.

You can see this infrastructure virtually bubbling up to the display of these company’s tablets and eReaders.

The Other Guys

Where does this leave Hewlett Packard with its TouchPad and Microsoft, as it must wait until deep into 2012 before it has a tablet-ready OS? Unlike my colleague, Bryan Chaffin, I am not so optimistic about Microsoft. In his essay, “Only Two Companies Can Compete with iPad: Amazon & Microsoft,” he cited Microsoft’s potential but admitted that the company may still not be able to execute. I agree.

For awhile now, many, including me, have been hoping that Hewlett Packard would provide serious competition to Apple with its HP TouchPad. It looks great, has adequate specs, and is being developed by a company with a strong technical background, adequate resources, and some ex-Apple people. But where is the infrastructure? HP has promised a summer delivery of the TouchPad, but has been very quiet about building the necessary infrastructure. The only thing we’ve heard so far are some idle boasts. I am doing my best to investigate the TouchPad infrastructure and will report as I find out more.

HP TouchPad

HP TouchPad

Summary

Eventually, companies will figure out the tablet secret, infrastructure, and how to compete with Apple. The only question is, will Apple’s lead and its resources guarantee that successful competitors will remain relegated to squabbling over 2nd and 3rd place? With all others falling by the wayside? Or will market forces, great partnerships, and Apple’s mistakes allow a few strong competitors to challenge Apple for dominance? I believe we won’t know for another 12 to 18 months. It’ll be fascinating to watch.

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Comments

Bosco (Brad Hutchings)

Two things:

(1) I’m not convinced that the Nook Color is “well-targeted”. More like “organic” and “focussed on what B&N knows how to do”. They also have not gotten in the way of hobbyists. The Nook Color makes for a great gift for Mom, wife, GF, etc. precisely because it’s $250 and if it doesn’t capture the recipient’s heart, it can be repurposed as a portable email and web tablet. Putting Cyanogenmod (a full-fledged Android distro) on it is a 15 minute ordeal, far easier than jailbreaking an iPhone.

(2) There won’t be one iPad killer. There will be lots of things that, put together, trounce the iPad. Ad-hoc infrastructure will catch up to Apple-planned infrastructure precisely because, as you make the astonishing admission, “any compromises that help an equal business partner make money detract from Apple?s vision and mission.” Just wow. Of course these companies, given no chance to share in Apple’s success, are going to focus a lot of time, money, and energy on carving their own pieces of the pie. As they do, they’ll work together, develop open standards, and offer something more compelling than Apple ever can as a sole source. That thing is an assurance that your vendor won’t screw with you the wrong way, because if they do, you can find another vendor.

Tom in NM

” Nook sales are booming because B&N has taken the standard business approach with other publishers: ?You help me make money, and I?ll help you make money.?

Apple doesn?t think like that, and they can?t afford to. Any compromises that help an equal business partner make money detract from Apple?s vision and mission. “

Another way to view it is that the past has taught Apple that partners are very unreliable and most ( if not all ) do not share Apple’s vision or agility and quality of execution.

When they do “partner”, it is very much like apps in iOS, very defined, self-contained and sandboxed.

Good? Bad? Like? Dislike? Right? Wrong? - - - for Apple and what they do, it has worked out very well. As for successful partnerships in the tech and electronics world, I cannot think of one that worked out well over the last 25 years.

jbelkin

Apple ultimately has NOTHING to fear from the Nook as the Nook software runs on an ipad and people can “upgrade” if they want to the ipad.

B&N has two key advantages over Amazon - retail stores where people can feel and touch a Nook and if necessary return it - while Amazon has a great return policy, it’s always a factor when you have to mail it back versus just driving it back. The second is color - even if it’s weak and sucks battery life (and the Nook is heavy), it’s still color and in this day and age, people expect color - and price is a reasonable price.

Most people presume they don’t want a tablet, but they’ll eventually come around - whiel the Nook & Kindle offers some web brwsing and email capabilities - at the end of the day, it’s weak compared to the ipad and if you ask everyone, they know the ipad is “the best” but for $115 or $250 bucks, they can buy a stopgap technology to eventually buy an ipad and when the ipad 3 rolls around, I’m sure Apple wil intro a $399 model - pushing the price gap so much closer that Apple wins again. (or: For $150 more, I can get ‘the best’ with EVERYTHING or essentially a book reader for just $150 savings).

For the Nook to compete going forward (keep in mind it’s a much smaller screen than the ipad), it has to go much lower in weight or include X dollars in ebooks, etc, etc ... while it’s not as useless as a USB picture frame, in a year, the ebook readers have to drop in price to distance themselves from a $399 ipad.

What the Nook actually hurts is Android. If you can get a friendly color ebook reader with some web & email capabilities for $250 that runs android OS, why spend more unless it’s to buy an ipad?

The Nook software is nice but typical non-Apple Os with its weird quirks that you put up with for $100-$250.

The Nook actually puts yet another pricing limit on Android tablets as no other tablet can hope to compete with B&N on dedicated retail locations. It will come to represent Android tablets for the general public so $250 or $199 in a year will be the max price comparison.

WIN is dead to consumers as a ‘full price” brand. $149 will sell a WIn tablet but not much more. HP? HP has mangaed to brand themselves as the super expensive inkjet printer comapny to consumers - bravo! Good luck wth gaining any traction as their PC’s are not highly rated either ... they have not really understood consumers other than to gouge them on ink so their company culture won’t allow them to figure out consumers. Hp tablets will sell as well as refrigerators with internet access.

It is the ipod again. Apple will hold 75% market share and 90% profit market share.

Jim Bowers

they?ll work together, develop open standards, and offer something more compelling than Apple ever can

...

What planet does this come from? When have any of them developed open standards (HTML?, USB?, VGA?) by working together? No, one of them develops a great idea that works better than all the other solutions available at the time and quickly comes to dominate the technology until the next big advance. (I.e., the iPod and VisiCalc/Excel and Windows XP and Word and Flash and Photoshop and ... well, you see the pattern by now, I’m sure.)

I know, you are the eternal optimist and just can’t give up on the dream that someday the tech industry (and all us benighted humans maybe) will find that “Truth and Love” are the key to satisfying happiness. (It is a marvelous dream!) OR, are you just hoping that Apple’s customer satisfaction is that temporary “flash in the pan?”

Bosco (Brad Hutchings)

@Jim Bowers: I should have written “open, licensable standards”. I’m no hippy. But as much as I’m not a hippy, I’m even less for the “not invented here” (NIH) that dominates Apple’s approach again. Examples of open, licensable standards include Windows, Android OS, TOSLINK, USB of course, and DLNA. If you make a device, you can include these without any hassle for scheduled license fees or negotiate a better deal. From Apple land… iOS, no. MagSafe connector, no. iPod connector female side, no.

That’s what I’m talking about. The fairly open exchange lets individual companies not have to specialize at everything, and focus on providing distinguishing user value. It also creates a high baseline of interoperability.

Nemo

John is wrong in saying that: Any compromises that help an equal business partner make money detract from Apple?s vision and mission. As a result, Apple almost always has to go it alone and appeal to the popularity of its products to bludgeon its semi-business-partners into going along.  Apple only opposes compromises that diminish the quality of the user’s experience, that unfairly or unreasonably prejudice Apple’s business interests, or that restrain its innovation.  Apple, as a matter of principle, only rejects compromises that do those things.  Apple’s history with its iOS devices and ecosystem shows that it hasn’t been reluctant to compromise to the benefit of its customers, its partners, and itself, provided the compromise does not transgress the three principles that I stated, supra.  Avoid diminishing the user’s experience, unfairly prejudicing Apple’s business interests, and/or restraining Apple’s innovation, and Apple is a fine business partner that one can make money with.

Can Apple’s competitors can replicate a successful infrastructure/ecosystem?  Perhaps they can, but they all have problems.  Android and Microsoft seem strong contenders, but Android in particular suffers from fragmentation.  Microsoft is dealing with fragmentation by imposing, as it can with its proprietary Windows Mobile 7, a virtual reference standard on OEMs.  However, Android lacks brick-and-mortar stores for distribution, top quality demos, and customers service.  Microsoft is still building out its stores, and once built they must wait until 2012 for Windows 8 for tablets and then will have too many tablets from too many OEMs for good focus.

Amazon has not yet build a tablet computer and may never do so, and Amazon lacks brick-and-mortar stores for service and distribution.  Third-party store can go only so far in supplying the need for great customer support/service and top quality demos.  And without a true tablet computer, Amazon can’t compete for those who demand apps.  Can Amazon transform its Kindle OS into a fully fledged mobile OS?  Hint to Amazon:  It is harder than it looks.

Barnes & Nobles (B&N) stores are book stores with no ability to provide customer support and service and are not built to provide it, though I suppose B&N can modify its stores and hire or retrain its staff.  And like Amazon, B&N has not built a tablet computer, so it can’t compete for users who want apps.  Perhaps it will and, thus, become another of the myriad makers of Android tablets.

I, like John, have/had high hopes for HP, because I think that HP can build a great tablet.  It has its own mobile OS, Web OS, which is pretty good, and HP is a hardware company, so it can make the whole widget.  But building out the rest of the infrastructure/ecosystem to compete with Apple’s iOS ecosystem is a daunting task.  Can HP build that ecosystem?

wab95

John:

I think your framing of this is right one, namely that tablet competition is not just about the device, but the infrastructure that supports it. Indeed, the tablet, in that context, can be regarded as the sharp end of a wider business concern.

In fact, I would argue that infrastructure is one of two pillars that makes such an enterprise (tablet) successful; the other being an objective backed by a strategy to achieve it. One starts with an objective - what is the business trying to achieve with its product (other than just sales), what is the strategy to achieve the objective and what is the infrastructure necessary to operationalise that strategy. Objective is supported by strategy, and strategy is supported by infrastructure.

That said, the very definition of objective defines the market, which is nearly always a subpopulation. A specific product will not appeal to everyone for a variety of reasons, even if they are in the market for such a product, generically defined. There is a market for automobiles, and within that market, there are sub markets for luxury, sports utility and hybrid cars, and within these are the different brands (e.g. Mercedes, Jeep, and Toyota).

I remain convinced that the core market for the iPad (and iOS devices writ large) are people in need of integrated solutions, including in their private and business lives. These are people who want to manage communication, media consumption and productivity at home and at work, with minimal effort and maximum efficiency and relative security, and are willing to pay for it. This does not describe everyone. However, for that market, Apple have first mover advantage, and for anyone to displace them, they are going to have to beat Apple on either service and/or price, but not specs. Unless a feature set translates into a practical advantage on the integrated solution user experience, it will have no measurable impact on that market.

This leaves Apple’s competitors with a binary proposition: to compete for that market, or to compete for another market (and presumably against someone other than Apple). I believe that Android’s native appeal, as currently configured, is for a different market, which confers upon Google both advantages and options (for example it could expand that native base while progressively competing against Apple for that integrated solutions market). In principal, MS can do this by appealing to those heavily invested in the Windows world, who do not want to migrate beyond it. It is less clear, at least to me, that Amazon and B&N are competing for (i.e. “appealing to”) the market dominated by Apple. At this stage, if I were running HP, MS, Dell or anyone else, I would identify and target a different market (e.g. enterprise, government or a different private consumer niche) - unless I could provide a palpably superior service and/or price point to those of Apple for the current one.

I am not convinced that Apple’s would be competitors see their options this way, but will argue that, until they do, they will continue to struggle as competitors and for market share.

Ross Edwards

while Amazon has a great return policy, it?s always a factor when you have to mail it back versus just driving it back.

Uh, they sell Kindles at stores.  Like Best Buy and such.  So you can, in fact, drive it back.

For the rest of your analysis, I generally agree that the iPad is the pick if you only buy one tablet, but I don’t think you are aware of (or accounting for) the value added by the e-ink display on the Nook and Kindle.  That is where the Nook and Kindle shine the most.  For e-reading, and no other particular purpose, e-ink blows away the LED displays on tablets like the iPad.  It is an order of magnitude easier on the eyes, it’s cleaner and clearer in appearance, and it allows for a battery life that is measured in weeks, not hours.

At the price of a Kindle or Nook, most folks could own both an e-reader and an iPad if they wanted to, and I see no reason why that solution should be disregarded, other than a general desire to unclutter to an all-in-one device.  And until we get SmartPaper with PixelDye(Tm), I don’t know that we can converge the two while maintaining the advantages of both.  I mean, they’re not going to put an LED on one side of the tablet and an e-ink screen on the other side, I wouldn’t think.

Morgan W.

I LOVE these articles and comment threads. I really do.

About once a week I pick an article or two pertaining to Apple, the iPhone, iPad, etc., read them, and then delight in the inanity that ensues.

Disclaimer: I have worked for Apple twice [late 80’s then late 90’s], am a full homer, and own nothing but Apple products. The likely hood of me purchasing with my own money an Android or Windows based product is slimmer than, um, I don’t know > very slim. Point made.

That being said, I do realize that other people like other things and Apple doesn’t make perfect products perfectly for EVERYBODY. I don’t see the need to talk down at people because I think I know better.

But others most certainly do. And it kills me. With laughs and grief.

I love how the guy at the start talked about how “once things sort out, [paraphrasing here], Android and others will trounce the iPad. Not one iPad killer but MANY!!

That is great man. And I love the line about how dropping some crazy @$$ gizmodo software on your nook is no big deal [unlike jailbreaking an iPhone].

Question > What percentage of the market wants to jailbreak their Nook or iPhone?

One percent? No way.

One percent of one percent? Maybe. WHO CARES?

That is the dumbest argument anyway. That tech products should be made for the infinitesimally small percentage of people who want to hack them and write on blogs or tech pages. So funny.

Why can’t the market bear multiple technologies? I hate Windows. Hate it. But I’m glad it is out there because it forces Apple to make better products. You Android and WIndows fannies should LOVE Apple.

No Apple = absolutely crappy Droids, HTC’s, PCs, Nooks, Netbooks, etc. No Apple means no “soon to be trouncingly great” tablet products either!

Get over it.

When Apple “personalized” the PC back in the day, leading the market and in marketshare, they lost [in the Windows v. Mac war] for a myriad of reasons. Not because of simply just “openness”. Fallacy. Also, they only had one product [basically] back then. Apple / Apple II, IIgs and then Mac’s. Now they have Mac’s, Macbook Air, MacBook Pro, iMac, Apple TV, iPod, iPhone, iPad, Apple Stores, App Store, etc. You get the picture.

The whole enchilada is much more diverse and the foundation or total ecosystem is much healthier, much more robust. Way better suited to continue to do well going forward.

Own the whole world? Doubt it. But why is that always the equation? Total dominance? I just don’t get it. But that is me. If you love the other side - that is truly good. God Speed. I will rock my iPhone, iPad, and MacBook and you can roll with whatever technology profile makes you productive and happy.

Lastly, I think it is incredibly humorous that Apple basically pulls a whole new category from thin air, exceeds even the most wildly optimistic reviewers and market expectations [by a factor of what, 3x, 5x?], has 90% of the current market and no end in plain sight, with not a SINGLE competitor with a product on the short term horizon that even truly interests people [other than the tech sector itself and geeks like us].

And yet, the Droid / Windows boys say the iPad will be TROUNCED!! Love it!!

Why don’t you just settle for a) actually putting a real product that can compete in the marketplace b) actually being competitive c) actually catching up, and then d) THEN, then you can trounce the iPad / Apple. You have my full permission. I can’t wait.

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