Watching Success at Apple

by Colin Berkshire

I hold a very different view of why Apple was so successful from that of most people. If my view is correct, Apple is now messing up big-time.

I think the reputation is that Apple builds premium-priced artistically designed stuff. I just flat disagree with this.

Apple’s success has been when they sell simpler products at a price the competition cannot match.

When the iPad came out no competitor could match its prices. It was expected to sell for $1,000 and it retailed for $500. It sold like hot cakes. It was an incredibly powerful device that was cheap. It was lighter than competitors could make. It had more connectivity than competitors were capable of. It was smaller and lighter than a netbook, it contained cellular connectivity, and it cost only $500. Quite simply: the competition just couldn’t make such a device for a number of years.

The MacBook Air had a similar history. When it came out, it was incredibly small and impossibly light. Yes, the thing was expensive, but competitors couldn’t make one as small, or as light or as cheap. Quite simply: Apple found a price and feature point that it’s competitors couldn’t reach for several years.

When the iPhone came out it was the same story: it was smaller and lighter and simpler than anything that preceded it. This commanded a premium price. But even still, competitors couldn’t match the quality, or the features, or the price for a couple of years.

If you look back at Apple’s history this pattern started with the Apple II computer. It was smaller and lighter and far simpler than anything before it. It was all in one case, had no expansion boxes, and yet it had a full-size wonderful keyboard. It was incredible light. (It actually had space built into it to mount weights.) it was expensive…except when you compared it to comparable computers like the TRS-80 once you expanded it out…and the it was cheap.

The iPod tells a similar story, smaller than the competition. Bigger capacity than the competition. And incredibly cheap. The iPod line continued this pattern with the original nano and the touch. (Have you seen an iPod touch? It’s unbelievably thin!)

The truth is that under Steve Jobs Apple made aggressively priced devices that had as much value packed in as possible. The success of Apple was that their products had the BEST price/performance ratio.

The best price/performance ratio is rarely obtained at the low end or the high end of a market. This opportunity exists in the mainstream sweet spot. Steve Jobs sensed this and all of his products targeted this sweet spot where you get good volume and super profits by offering the best price/performance.

Apple failed in the 1990s because they didn’t have the best price/performance. I worry that today Apple no longer focuses on the price/performance of products. New products aren’t aggressively and shockingly priced or featured.

The Apple Watch seems to demonstrate that Apple is now just a big, expensive, lethargic company building bloated and complicated trinkets. They see to think they are Burberry or some other premium brand…not the price/performance leader that made them a success.