Sunday, October 27, 2013

Hardware, Software or Content?

Competition between Google, Apple, Amazon and Microsoft has led to each company adopting a different business strategy.  Apple makes money on hardware, Google on advertising and Amazon seeks to sell devices at cost in hopes of making money on content.  Microsoft, the company that once dominated the industry sees this competition in a different way.  According to CEO Ballmer, Apple is all about being fashionable, Google about knowing more and Amazon about being cheap.  Under this paradigm, Microsoft is all about doing more.  Which strategy will prevail is anyone's guess, however, each competitor appears to be branching out into all four.  This can already be seen in Microsoft's push of Bing and Apple using Siri.  Additionally, each company's aggressive push into developing their own operating system, hardware and mobile technology suggests a need or desire to control all aspects of the user experience.  Perhaps, as discussed in "What is Strategy," the company that knows and serves their customers the best will win the day.  
The following article is very interesting and discusses this strategic challenge in more detail:

Apple vs. Microsoft, Google and Amazon: Why the future of ‘computing’ is a free-for-all

Talking about Apple’s new Mac lineup yesterday, CEO Tim Cook had this to say about the unnamed “competition.”
“They’re confused,” Cook said, showing the slide above to represent Apple’s view of the competition’s direction. “They chased after netbooks. Now they’re trying to make PCs into tablets and tablets into PCs. Who knows what they will do next? Well, I can’t answer that question. But what I can tell you is we have a very clear direction, and a very ambitious goal. We still believe deeply in this category, and we’re not slowing down on our innovation.”
Later, Apple announced that it would be offering the latest version of OS X for free, and also giving away its iWork and iLife apps with the purchase of new Macs.
Those might seem like bold words and moves from a company with single-digit market share in traditional notebook and desktop computers. But increasingly it’s becoming outdated to think of “computers” in that way. The market is converging, blurring the lines between smartphones, tablets, notebooks and desktops, and creating a competitive free-for-all.
This new world was captured in these projections from Gartner this week, showing operating system shipments encompassing everything from smartphones to desktops.
The trend in combined iOS/Mac OS market share — fueled by the iPad — helps to explain why Cook is feeling his oats.
But the rapid growth in Android also shows that this new world is much more complex than the old Mac vs. PC battle. Google is also a major force here. And it’s not just Android. Last week, after Google beat Wall Street’s financial expectations, CEO Larry Page touted the fact that Chromebooks “are growing fast and defying the more general decline in laptops.”
HPChromebook11_StackedThis new era is fascinating in part because of the different business strategies from each company. Apple makes its money on hardware. Google makes its money on advertising.
And then there’s Amazon, with its strategy of selling devices at cost in hopes of making money on content.
“It’s very early days in the tablet arena,” said Amazon CEO Jeff Bezos in a recent interview about the new Kindle Fire HDX. “If it’s horses running, we haven’t even come around the first bend. It’s early.”
Microsoft CEO Steve Ballmer has his own way of looking at the competitive landscape. Apple is about being “fashionable,” Amazon is about being “cheap,” Google is about “knowing more,” but Microsoft is about “doing more,” he said during Microsoft’s recent company meeting, according to a Reuters report.
In his subsequent annual letter to shareholders, Ballmer said the company’s plan is to make money by “leading with devices and enterprise services.”
Which company’s approach will prevail? We’ll have lots of fun debating that, and watching what happens, but the latest developments leave little doubt that the market for “computers” has already changed radically.
Here’s another chart, also based on Gartner’s latest data, that sums things up.

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