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Jean-Louis Gassée writes at Monday note that Apple’s most recent quarterly numbers broke a number of laws:
Law 1: Larger size makes growth increasingly difficult. The Law of Large Numbers predicts the eventual flattening of extraordinary growth. "And yet, last quarter, Apple revenue grew 30%, breaking the Law and any precedent," writes Gassée. "iPhone revenue, which grew 57%, exceeded $51B in one quarter — close to what Google achieved in its entire Fiscal 2014 year." Apple’s recent numbers show, the iPhone seems immune to modularity threats.
Law 2: Everything becomes a commodity. As products are standardized, margins suffer as competitors frantically cut prices in a race to the bottom with the PC clone market serving as a good example. "At the risk of belaboring the obvious, a rising Average Selling Price (ASP) means customers are freely deciding to give more money to Apple," says Gassée. "We’re told that this is just a form of Stockholm Syndrome, the powerless customer held prisoner inside Apple’s Walled Garden." Yet according to Tim Cook “…fewer than 15% of older iPhone owners upgraded to the iPhone 6 and 6 Plus. The majority of switchers to iPhone came from smartphones running Google Inc.’s Android operating system.” Apple’s recent numbers show, the iPhone seems immune to modularity threats.
Law 3: Market share always wins. With a bigger market share comes economies of scale and network effects leaving minority players condemned to irrelevance and starvation. Yet despite its small unit share (around 7% worldwide, higher in the US), Apple takes home about half of all PC industry profits, thanks to its significant ASP ($1,250 vs $417 industry-wide in 2014, trending down to $379 this year).
Law 4: Modularity Always Wins. In the end, modularity always defeats integration. Clayton Christensen points out that in the PC clone market, modularity allowed competitors to undercut one another by improving layer after layer, smarter graphic cards, better/faster/cheaper processing, storage, and peripheral modules. Yet, as Apple’s recent numbers show, the iPhone seems immune to modularity threats.
"I have no trouble with the Law of Large Numbers, it only underlines Apple’s truly stupendous growth and, in the end, it always wins. No business can grow by 20%, or even 10% for ever. But, for the other three, Market Share, Commoditization, and Modularity, how can we ignore the sea of contradicting facts?" concludes Gassée. "As Apple continues to “break the law”, perhaps we’ll see a new body of scholarship that provides alternatives to the discredited refrains. As Rob Majteles tweeted: “Apple: where many, all?, management theories go to die?"
(Score: 3, Insightful) by TheRaven on Tuesday February 10 2015, @12:53PM
Those of us who used to build desktop machines were flummoxed by the lack of modularity in laptops and saddened that it is only getting worse with embedded devices. Go ahead and try to upgrade the RAM or flash memory on your smartphone.
In particular, for anything portable you have a trade between being easy to modify and being compact. Every removable panel, ZIF socket, hinged door, and so on adds to the volume (and to the cost). In a market where the easiest upgrade is to buy a new device and in a market segment full of people with more spare money than spare time, which way would you expect it to trend?
There were two big advantages to modular desktops. The first was that you could build a machine that had the specs that you wanted, even if you were a niche market. The problem with this is that it means that anyone in that market is not going to be a big-voume customer (though there might be higher margins). The second was that it let you upgrade gradually and spread out the cost. With mobile phones, there are usually financing agreements that do this (and carriers that are happy to lock people in to a 1-2 year contract that comes with a 'free' phone that's really a phone financed by a 50% APR loan incorporated into the contract cost).
sudo mod me up