Must read! A honest, open, and straight-forward analysis.
Money paragraph:
The time for joking has passed. Microsoft hasn’t exactly failed with Vista. But it’s more like a double than a home run. Apple is innovating not just with the software and hardware it creates, but with the value proposition it is building in the marketplace. Apple hasn’t ever been particularly good about that before. Sure, it’s managed to appeal to people’s aesthetic sensibilities, but almost never to people’s wallets. While Macs still aren’t cheap, you get a lot more bang for the buck than you once did.
CE/IO’s who are not considering as a way to reduce TCO are ignoring their fiduciary responsibility.
Scot addresses a point similar to the one I made in an earlier post:
Nothing lasts forever. The bloom is coming off the rose on Microsoft. I would never put it past the software giant to come up with a way to remake itself in a better light. But the current course doesn’t appear to me to lead in that direction. As much as Apple is doing things right, Microsoft is doing things wrong. That’s a great combination for Apple, if it can keep walking the current tightrope.
Corporate culture matters! The world moved on, but Microsoft didn’t realize it.
What this is about is that Apple is reaching the right people with its product, winning new converts, Windows user by Windows user — and creating buzz.
Where did I see something similar? Ah, yes: Tim Harford’s wonderful book, The Undercover Economist. I am going to apply something from his book to Apple:
1. Is Apple making products the right way?
Check. Apple has successfully emulated Dell’s highly vaunted and efficient supply-chain. Apple has switched from proprietary technology to standards based systems and every product is being produced with the least waste and careful inventory management.
2. Is the company making the right products?
Check. The Undercover Economist (TUE) says “The price of the product equals the cost to make it. The price also reflects the terms of which customers can trade-off one priority against another”. As Scot observes above, the Apple price premium has vanished (even if the perception that Apple is more expensive remains, especially among “pundits”). But, people have voted with their pockets: Mac shipments are up and iPods are – well, you know the story. The Apple TV and iPhone are tbd.
3. Are the products being made in the right proportions.
Check. In the generic PC and MP3 player world world, products are not differentiated and hence there is a glut. That is one reason prices are so low and firms are constantly under-cutting each other’s prices to retain market-share. In Apple’s case, as TUE states it, “price equals cost equals value” keeps things efficient. There are numerous entry points for iPod consumers and just as many for Mac adoption (and remember, Apple is not playing for market-share).
4. Are the products going to the right people.
Check. In the case of the iPod, it’s going to everyone! A casual look at college papers would anecdotally suggest that Apple’s promotion is working. “Experienced” people may prefer to stick with Windows because it is a change. Young professionals, techies, gadget-ophiles, and students adapt much easier. That’s why Apple’s marketshare is, err, edgy (right, Steve?) Talk about targeted marketing.
How do you measure buzz? You don’t. It’s something that experienced people in this industry can just feel. And that’s the condition Microsoft should fear. Because buzz can turn into something much harder to combat than sheer numbers.
