A profound and dramatic thing happened in the computer industry last week. And no, it wasn’t the introduction of the new iPad Air. But it was, not surprisingly, from Apple, which has proved that most important (and brave) of lessons to the rest of the world: cannibalise yourself before someone else does. Though, in this instance, Apple is cannibalising Microsoft.
Announcing a raft of upgrades to its existing computer line-up, CEO Tim Cook revealed that Apple’s new OS X operating system, called Mavericks, would be given away. Yes, free. Despite its dominance in tablets and premium smartphones, Apple remains a minnow in computer sales, with somewhere around 5% of global market share. But this is a noteworthy development and the standout feature of a raft of announcements that includes that of the new thinner, lighter, more powerful iPad Air (it is wonderful and likely to dominate sales, but the new naming convention is a bit trite).
Let’s be realistic, though. Apple may make software, but its real business is hardware. The iPod is credited with changing the way we consume digital media, but it also set the tone for Apple’s business model, which was already in place with its computers, for mobile devices, which would include the iPhone, the iPad, the iPad mini, the iPod touch, and more.
The concept has often been called the razor-blade principle in reverse. You can pick up a razor pretty cheaply, but will pay through your nose for the blades (consumables) themselves. It’s the same principle that has underpinned HP’s vast printing empire for the past two decades. (No amount of explaining the research & development and other work involved takes the sting out of the high cost of print cartridges for consumers, who use the product but loathe the company for it.)
Apple originally sold songs for a dollar but charged top dollar for its iPod. The success of this business model is replicated in the iDevices. Previous iterations of OS X may cost only US$20 a customer, but the total amount Apple is sacrificing is not small change, and it sets a marker for this cloud-linking, mobile computing world, where Google’s (mostly) free Android predominates. It’s further bad news for Microsoft which, despite turning in healthy results last week, is under enormous pressure from the smartphone and tablet explosion as consumers move towards mobile iterations of the personal computer and buy fewer computers.
There must be enormous relief and happiness over at Redmond, where Microsoft is based, that the devices of soon-to-be-acquired Nokia got such a glowing reception after being launched last week at the annual Nokia World, held this time in Abu Dhabi. Nokia showed off its long-awaited entry into the tablet and phablet markets with the Lumia 2520 and 1520. I played with both in Nairobi last week and felt immense relief on both Microsoft’s and Nokia’s behalf.
Microsoft has always been a corporate-focused company, and its recently updated Surface tablets clearly indicate that it still has no clue about the consumer market, where Apple has found such rich revenue. Nokia, on the other hand, makes the best-designed handsets and still has an unbelievable brand cachet, especially in Africa.
In this world of me-too imitations of the iPhone (sorry Samsung, Huawei, LG, et al), apart from Sony’s steel-rimmed, super-skinny Xperia Z range, the devices that look (and feel) the sexiest come from Finland. Nokia has wonderfully reinvented itself. It is known for its bright colours (SA cellular networks, bizarrely, still buy black phones only because they say consumers buy only black devices… but that’s because all they can buy are black handsets.) With a range of Lumia devices at a range of price points, Nokia has a healthy smartphone portfolio to match its brilliant midrange Asha phones and its funky cheap handsets that still dominate the low-end market. Good for Nokia.
This column first appeared on Financial Mail.
