When a company like Apple launches a sexy new product (iPad), one can react (Amazon) or get caught flat-footed (Adobe). It's easy to look at today's market situation and say who's winning or losing. The more interesting conversation is to determine what someone can do to compete or take advantage of this changed topography. That's what I hope this post can serve to do. From what I know, a lot of developers within the O'Reilly Radar community are competing with, or looking to maximize, their business models in relationship to these big 3. So I thought it might be helpful to discuss each company's competitive play, AND the achilles heel that creates opportunities for others. .
We'll start with Apple.
Everyone's aware of the second coming of the Newton, called the iPad. You might think I'm unfairly comparing Jobs to Sculley, but the incredible hype of the iPad leads me to draw the analogy. Some analysts claim the product will let Apple capture 50 million units in the market. Like the Newton's hype machine, it dominated the industry gossip and speculation for weeks of leaks, "Moses tablet" comments on Twitter, and culminating with front page coverage at the Economist with Steve as Jesus himself.
There are three things Apple is doing very well. First, Apple is setting the standard in the mobile device space. You might remember a time when RIM proved the mobile data market existed by hosting its own MVNO and causing every operator to then line up to resell Blackberries. What you might not remember is that before Apple's iPhone technology, touch screen technologies for phones were readily available but no mobile operators wanted to carry them (phones must have keyboards like RIM's BlackBerry, they said!) until Apple showed up with its mesmerizing technology. Within what felt like minutes, every mobile provider wanted touchscreen phones. 2nd, Apple is skimming the profits of the industry, which is going to reduce every other vendor's ability to invest and innovate. 3rd, Apple is mesmerizing the market to think it is the center of the universe. Apple has claimed an incredibly large share of voice in both social and traditional media because of its public relations machine. Every other smartphone (and soon, netbook) vendor has to first address "how will you compete with Apple" before they can move on to any other question. And there's a fair amount of validation that Apple is enabling a different kind of location-aware mobile application development which will impact many participants in the larger technology ecosystem.
Apple's competitive strategy is what I call: "Force the Competition Onto Your Turf". Not to be confused with first-mover advantage, this is about owning the mindshare of influencers, and making all other competitors respond.
If you were trying to take out Apple or beat them in the market, what would you do? Well, there are weaknesses in their position. First, they are now using superlatives. When you really have a revolutionary product, you don't have to say it's revolutionary. See Apple's recent positioning for the iPad: "magical", "revolutionary" "unbelievable". 15 words, 4 superlatives.
It seems to me that we need to get Steve on stage with Kara Swisher at All Things D and deflate the magic PR machine in play. More interesting than the adjectives is that there no category name. Whenever you see this, what a company has done is created a tool looking for a use. That's wonderful but it means that someone else (likely you, a developer) is going to create the application or usage that adds real value to the iPad. Apple is forced to do leaks and they have to use hype to create the level of manic interest that will cause developers to pay attention. The untold secret with the Apple platform has been that, while Apple is making huge amounts of money (see above link), most of its developers are not. Most of the apps currently selling on the Apple iPhone platform are being distributed for free. The original business plan for developers had them selling apps for $9.99 then $4.99 and now $.99. There are several companies I've worked with that say it's been a disappointment, to say the least.
To win against Apple, another platform (say, Google with Android and HTC) would need to create a viable way for developers to actually make money. Then, the source of differentiation (interesting, compelling apps) would be drained away from the Apple platform and the competitive play would deflate pretty quickly. I'm not saying this is easy but developers will of course respond to a better financial model and there is plenty of money to be made in a viable mobile ecosystem. Google has the market power, technology prowess, and relationships within the web world to create it. Unlike Apple's closed vertically integrated system, Google could establish an amazing open garden. If I were a developer, I would form a consortium of peers, to have a whiteboard session with Google to do just that. 2 years from now, we'll look back at the iPad announcement with a different lens.
That said, it's hard to displace the competitor who already has dominant access to the microphone. You need to have a more compelling vision, over time, to cause the influencers to move. But that's the Google / developer opportunity and potentially the one that we'll see play out in the next few years.
Moving on...Amazon's play
The company most impacted by Apple's announcement was Amazon.
For the first time since launching Kindle, Amazon was finally forced to give some guidance on how many had been sold via a coy reference to "millions of kindles sold" With 3 years of sales, Amazon was only able to say "millions". Now, Kindle is being compared on a point by point basis to the iPad even though the customers' usages could be quite different. Comparing the iPad, being a Swiss army knife product, to Kindle means Kindle will never quite be "enough" or -- worse -- better than the iPad. It's an unfair comparison but Amazon is having a hard time telling their story right now.
Amazon's recent public (and in my mind, distasteful) interaction with Macmillan shows it is getting desperate to control its platform. Macmillan and Amazon were effectively having a fight over who was in charge of price and distribution -- and Amazon's capitulation will be remembered as the "day the Kindle died". But power and control are key to Amazon's competitive play. This has been the cornerstone of every strategy they've done, with the notable exception of their cloud strategy.
The competitive strategy Amazon is playing is to "Transform Distribution". They want to disintermediate the publishers from the market and offer authors their own "route to market" (with better margins and so on). What they forget is that most authors don't choose publishers because of their belief that publishers can market (no offense to O'Reilly - my publisher of The New How), but because publishers lend credibility to an author. Self-published authors are the type of people you avoid at parties, and by self-publishing, they miss the value add of the editor/publisher to make the book/product worthy of a broader audience. Amazon is going to keep finding ways to be "efficient" in brokering relationships and serve a Wal-Mart kind of role to ecommerce. To defeat Amazon, someone would need to counter with a different "value creation" in the distribution chain. It's not about eliminating publishers but about figuring out how to get valuable content created, marketing, and found. The actual Kindle hardware unit isn't the interesting opportunity; it's the content or e*book market and where that market evolves. Apple says it will do that, and perhaps it will. Amazon had several years where they could have done this so their window might have already passed. We'll see what the next Kindle announcement brings.
Adobe in the Crossfire
The company caught in the crossfire of the Apple announcement was Adobe.*
I cringed when I heard Jobs say Adobe was lazy. Flash, once from Macromedia, now with Adobe has been a standard for some time. However, Flash-equivalent features are now built into HTML 5. As more units of netbooks or mobile devices ship without native Flash-capability built in, developers who currently create "heavy" sites with Flash will need to rethink their strategy because their content and experience won't work across multiple browsers. This becomes a tax for every developer and I sense a "Tea Party" moment coming from this.
The implications to Adobe are huge: how do they compete in an open world without risking their revenues? Do they release their proprietary platform of Flash/Flex to the market to be more "open" and risk their revenue stream, or do they continue pushing their proprietary systems when ubiquity is key to the longer-term value proposition? Part of this tension is one of their own making. I'm not sure how many of you remember that when Bruce Chizen left Adobe, he did a media tour as part of his exit. During every interview he talked about how he was leaving Adobe in GREAT (not just good) shape financially, post-Macromedia acquisition, with a very strong implication the only place to go was up. He created an expectation among investors and financial analysts that Adobe was set to continue to deliver consistently high results. The implication of course is that if the next CEO doesn't do that, it's, ahem, his fault. Risking the revenue base of Flash and Flex is not quite part of that plan. One thing about being a big company with huge market cap is that you have to keep being a big company with huge market cap and deliver consistent results. My guess is there isn't enough financial room in market expectations to make growth investments or take risks, and that's the fundamental tension within the walls at Adobe.
The competitive play that Adobe has been doing is called "Get help from partners". As a tools company, Adobe makes money by enabling all participants in the ecosystem (across multiple platforms, browsers and devices) with development tools. But the Google/MSFT battle, and now the Google/Apple battle is leaving them in a middle of an open field with lots of ricochets and cross-fire. Whereas the mobile market fragmentation could be an opportunity in past times, they have not yet displayed a strategy to go forward in the new context. Without some really significant changes, Adobe's Flash business could be at serious risk -- regardless of what they do. To change the playing field, Adobe could do one of two things. First, it could decide to release its flash technology into the open marketplace. They must know that this is a "pay me now, or pay me later moment". No company, not even Adobe, can be both a "switzerland" to the community AND take a stake in pushing a proprietary technology. Both the web app and mobile world need strong tools during this time, and Adobe could be a stronger partner in that ecosystem by being more open, partnering to serve the developer market, and then figuring out how else to make money. The second thing that Adobe could do get its Flash partners to put pressure on Apple. I expect those are background conversations taking place today.
Competing with Adobe is all about creating the tools that allow developers to work across platforms. Mobile infrastructure companies like Alcatel-Lucent, Openwave or ByteMobile could all serve this role and whoever does find a way to solve the developers' problems to "write once, run everywhere" will win. And win big.
Each of the three companies: Adobe, Amazon and Apple, are playing competitive moves that use their core assets. Apple is exceptional at design and integration and so they should set the standards. Amazon is amazingly strong at disrupting and improving value chains, and Adobe has always been able to serve many partners by being Switzerland. But the thing about any competitive play is that they are all strong, until they are not. And if you can disrupt the strategies they're playing, then you can make your own value-creating move. I encourage that.
I've only touched the tip of the iceberg for a large discussion of competitive plays in the marketplace by talking about Adobe, Apple and Amazon. These are just 3 of 20 different plays. Working with Michael Mace on my Rubicon team, we came up with quick case studies of companies that changed the competitive rules in their industries, and how they did it. It's a quick read in presentation format, covering examples that range from Visa vs. Mastercard to Apple vs. Nokia. It's publically available here on slideshare. Any comments, contributions, and questions to this train of thought are welcome, of course.
*Disclaimer: yes, it's true I've worked at Apple (89-96 or, as I like to refer it to it, the dark years between Jobs eras) and have consulted with Adobe mostly during the Chizen years. And yes, I aspire to work with Jeff Bezos. But my comments and strategies here are formed purely as an industry participant.