The New Apple Advantage

  • Posted: 09 September 2011 11:04 PM

    John Gruber has a very long piece here discussing the New Apple Advantage. The entire article is worth a read, but this part particularly impressed me:

    So let?s be lazy for a second here, and attribute all of Apple?s success over the past 15 years to two men: Steve Jobs and Tim Cook. We?ll give Jobs the credit for the adjectives beautiful, elegant, innovative, and fun. We?ll give Cook the credit for the adjectives affordable, reliable, available, and profitable. Jobs designs them, Cook makes them and sells them.

    It?s the Jobs side of the equation that Apple?s rivals ? phone, tablet, laptop, whatever ? are able to copy. Thus the patents and the lawsuits. Design is copyable. But the Cook side of things ? Apple?s economy of scale advantage ? cannot be copied by any company with a complex product lineup.

    The newcomers to Apple only know the current Apple, the Apple juggernaut, the Apple that has both the best quality and the best priced products. For old timers like me, premium pricing was simply the cost that one had to pay in order to acquire the advantages of an Apple product. No more. Apple is thumping the competition on price. There is no lower cost iPod Touch. The iPhone is more expensive than some of its competitors, but as a premium product it’s very reasonably priced at $200 (plus a contract). A tablet comparable to the iPad simply can’t be purchased at any price. And the MacBook Air’s price (and quality) is simply crushing the competition’s copy-cat efforts.

    This is the new Apple. We’ve never seen an Apple like this before. I’m sure I’m leaving a lot of worthy people out when I say this, but this is the Tim Cook factor. Jobs say let’s do it, Cook makes it so.

    And the thing is, it looks like it’s only going to get better for Apple and worse for Apple’s competitors. Apple now has all their systems in place. Apple now has 78 billion in cash. When the Japanese Tsunami hit, Apple was able to use their purchasing clout and their bottomless pool of cash to turn what could have been a giant setback into a barely noticeable hiccup.

    There’s a saying in the military that amateurs talk of strategy and professional talk of logistics. Steve Jobs was like one of history’s great captains. Perhaps his genius is irreplaceable. But more battles were won by logistics and solid tactics than were ever won by brilliant Generals. Apple’s General may be stepping down. But the Apple army is stronger and more powerful and more prepared than at any time in its history.

         
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    Posted: 09 September 2011 11:35 PM #1

    FalKirk - 10 September 2011 02:04 AM

    John Gruber has a very long piece here discussing the New Apple Advantage. The entire article is worth a read, but this part particularly impressed me:

    So let?s be lazy for a second here, and attribute all of Apple?s success over the past 15 years to two men: Steve Jobs and Tim Cook. We?ll give Jobs the credit for the adjectives beautiful, elegant, innovative, and fun. We?ll give Cook the credit for the adjectives affordable, reliable, available, and profitable. Jobs designs them, Cook makes them and sells them.

    It?s the Jobs side of the equation that Apple?s rivals ? phone, tablet, laptop, whatever ? are able to copy. Thus the patents and the lawsuits. Design is copyable. But the Cook side of things ? Apple?s economy of scale advantage ? cannot be copied by any company with a complex product lineup.

    The newcomers to Apple only know the current Apple, the Apple juggernaut, the Apple that has both the best quality and the best priced products. For old timers like me, premium pricing was simply the cost that one had to pay in order to acquire the advantages of an Apple product. No more. Apple is thumping the competition on price. There is no lower cost iPod
    Touch. The iPhone is more expensive than some of its competitors, but as a premium product it’s very reasonably priced at $200 (plus a contract). A tablet comparable to the iPad simply can’t be purchased at any price. And the MacBook Air’s price (and quality) is simply crushing the competition’s copy-cat efforts.

    This is the new Apple. We’ve never seen an Apple like this before. I’m sure I’m leaving a lot of worthy people out when I say this, but this is the Tim Cook factor. Jobs say let’s do it, Cook makes it so.

    And the thing is, it looks like it’s only going to get better for Apple and worse for Apple’s competitors. Apple now has all their systems in place. Apple now has 78 billion in cash. When the Japanese Tsunami hit, Apple was able to use their purchasing clout and their bottomless pool of cash to turn what could have been a giant setback into a barely noticeable hiccup.

    There’s a saying in the military that amateurs talk of strategy and professional talk of logistics. Steve Jobs was like one of history’s great captains. Perhaps his genius is irreplaceable. But more battles were won by logistics and solid tactics than were ever won by brilliant Generals. Apple’s General may be stepping down. But the Apple army is stronger and more powerful and more prepared than at any time in its history.

    Good post though we’ll never know how many contracts Mr. Jobs negotiated.

         
  • Posted: 10 September 2011 07:31 AM #2

    One of SJ’s less commented on skills is creative entrepreneurial strategy; getting inside the minds of other organisations and creating the right contracts to negotiate. Three examples I’ve mentioned before:

    1. Realising Microsoft needed Apple as a “proof” that MS didn’t stifle competition; publicly acknowledging Microsoft’s dominance and sacrificing a legal case against Microsoft in exchange for a deal on Office Mac, Internet Explorer, cross-licensing and a bit of cash. Apple got a five year competition holiday during which to execute a really long term plan.

    2. The “impossible” “arrogant” revenue sharing demands that Apple initially made from the god-like carriers, keeping negotiations interminable, making everything else easier to agree. They even succeeded on revenue sharing with AT&T. But IMO it was never an issue for Apple; it’s better to receive 2 year’s revenue share up-front in the form of subsidy. But the carriers felt they had “won” when they got it. So the carriers now borrow billions of dollars against future revenues, and put them willingly into Apple’s hoard - giving Apple a 2-year holiday in which to switch strategy when it’s time for the carriers finally to lose control of the end-user service contract. Extra points for initially hiding this huge revenue under the guise of Sarbanes-Oxley.

    3. Getting a deal out of the music industry by appearing to offer a safe “test project” in the closed-off premium Mac-only, firewire-only iPod and iTunes environment. Apple could demand a user friendly license with music ownership, and most favoured nation terms, because only Apple could indemnify the studios by being able to force a firmware update on every iPod in the event of DRM breakdown.

    SJ treats business as a long term game of chess, making sacrifices and demands whose real purpose is rarely understood at the time.

         
  • Posted: 10 September 2011 11:37 AM #3

    sleepygeek - 10 September 2011 10:31 AM

    One of SJ’s less commented on skills is creative entrepreneurial strategy; getting inside the minds of other organisations and creating the right contracts to negotiate. Three examples I’ve mentioned before:

    1. Realising Microsoft needed Apple as a “proof” that MS didn’t stifle competition; publicly acknowledging Microsoft’s dominance and sacrificing a legal case against Microsoft in exchange for a deal on Office Mac, Internet Explorer, cross-licensing and a bit of cash. Apple got a five year competition holiday during which to execute a really long term plan.

    2. The “impossible” “arrogant” revenue sharing demands that Apple initially made from the god-like carriers, keeping negotiations interminable, making everything else easier to agree. They even succeeded on revenue sharing with AT&T. But IMO it was never an issue for Apple; it’s better to receive 2 year’s revenue share up-front in the form of subsidy. But the carriers felt they had “won” when they got it. So the carriers now borrow billions of dollars against future revenues, and put them willingly into Apple’s hoard - giving Apple a 2-year holiday in which to switch strategy when it’s time for the carriers finally to lose control of the end-user service contract. Extra points for initially hiding this huge revenue under the guise of Sarbanes-Oxley.

    3. Getting a deal out of the music industry by appearing to offer a safe “test project” in the closed-off premium Mac-only, firewire-only iPod and iTunes environment. Apple could demand a user friendly license with music ownership, and most favoured nation terms, because only Apple could indemnify the studios by being able to force a firmware update on every iPod in the event of DRM breakdown.

    SJ treats business as a long term game of chess, making sacrifices and demands whose real purpose is rarely understood at the time.


    Nice job, sg.  And worth revisiting.  Thanks.

         
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    Posted: 12 September 2011 05:35 AM #4

    Good quote on the military analogy. If I may stretch it a bit, it was Napoleon who said almost the same thing by saying “an army travels on its stomach.” We tend to attribute courage and vision to Napoleon but it was the post-revolutionary France which gave him the foundation: conscription army, devoted to a cause, the civil code.

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  • Posted: 13 September 2011 02:02 PM #5

    I think sleepy’s last comment is the most important these days. Apple thinks in the long term, not worrying about the next quarter or next month. This is a result of being confident and willing to take risks. I would say they almost run it like a private company in that regard. You can almost hear the finely tooled machine of Apple clicking into place at each announcement.

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    Less is More (more or less).

         
  • Posted: 13 September 2011 06:27 PM #6

    asymco - 12 September 2011 08:35 AM

    Good quote on the military analogy. If I may stretch it a bit, it was Napoleon who said almost the same thing by saying “an army travels on its stomach.” We tend to attribute courage and vision to Napoleon but it was the post-revolutionary France which gave him the foundation: conscription army, devoted to a cause, the civil code.

    I think you know your history better than I.

         
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    Posted: 13 September 2011 06:55 PM #7

    asymco - 12 September 2011 08:35 AM

    Good quote on the military analogy. If I may stretch it a bit, it was Napoleon who said almost the same thing by saying “an army travels on its stomach.” We tend to attribute courage and vision to Napoleon but it was the post-revolutionary France which gave him the foundation: conscription army, devoted to a cause, the civil code.

    Horace, you’ve forgotten more about this industry than I’ll probably ever know, but my recollection of world history is that the story of Napoleon didn’t have a happy ending.

    Just kidding, Monsieur Dediu, wish you posted here more often.

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    We filed for over 200 patents for all the inventions in iPhone and we intend to protect them. — Steve Jobs, 2007

         
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    Posted: 14 September 2011 12:41 AM #8

    JDSoCal - 13 September 2011 09:55 PM
    asymco - 12 September 2011 08:35 AM

    Good quote on the military analogy. If I may stretch it a bit, it was Napoleon who said almost the same thing by saying “an army travels on its stomach.” We tend to attribute courage and vision to Napoleon but it was the post-revolutionary France which gave him the foundation: conscription army, devoted to a cause, the civil code.

    Horace, you’ve forgotten more about this industry than I’ll probably ever know, but my recollection of world history is that the story of Napoleon didn’t have a happy ending. ...

    Did he lose the war?  If so, why are we learning from him?

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