Clearly, Apple’s latest iPhone announcement has left me in awe of their dominance of what should be a mature market. As of March 2018, Apple accounted for about 20% of the smartphone market, and captured around 80% of smartphone profits. Every year they seem to cannibalize another phone, and every so often they cannibalize a whole product (RIP iPod). Why can no one seem to touch them? What can we, in similarly mature businesses where our products and services barely change from year to year, learn from their success?
In The Four by Scott Galloway, he says (paraphrasing) that it’s not enough to build higher walls, but you also have to dig deeper moats. Walls are a metaphor for barriers to entry. The more mature an industry is, typically the lower the barriers to enter are. Moats are a metaphor for brand. A company’s reputation takes time and effort to build. In Apple’s world, Samsung or Google can try to get over the wall by building an incredible phone, but they won’t have the retail experience of the Apple Store to help really sell it. These are separate and distinct strategies.
Benedict Evans and Steven Sinofsky at a16z compared Apple’s current position to the auto industry. They point out that in order to successfully introduce a new car every year, you need to fulfill these three steps: make incremental improvements, don’t break anything, and ship on time. Like every car, every iPhone has a few new features, they reliably work right away, and while product availability has tripped them up a bit in the past, we’ve now had five September’s in a row of new iPhone announcements. We’ve been trained.
What can we do to meet similar criteria? I’ll pick on the finance industry with examples.
Higher walls: just about anyone can give advice or join the finance industry. Invest in qualifications like schooling, designations, or anything that highlights our ability to communicate and curate relevant information better than the competition.
Deeper moats: reputation must be earned over time. When we put ourselves out into the world, we must do it with our reputations in mind. Having a local or niche presence can always be a competitive advantage.
Incremental improvements: look at what can be done with tech? Email, text, cellphone access – these are all part of our everyday lives. As we make improvements, no matter how small, we have to show them to people so that they know they’re there.
Don’t break anything: don’t mess up the simple stuff. Quality control matters, so take pride in the work and celebrate reliability.
Ship on time: This goes well beyond calling when we say we’re going to call and setting annual reviews. Like quality control, we have to set expectations and meet them, continuously.
Apple has created something unique. Only time will tell if they can sustain their business, but for now – we should look at them as a living case study of how to sustain a solid business at the highest possible level.