How do you beat Apple?
Product Manager Test
A quick test for would-be Product Managers faced with developing a product to beat Apple:
Insert the missing word:
‘If we made our product _______ we could beat Apple‘.
Agreed, this is business 101, because if you are like everyone else your product is not differentiated and you can only demand commodity prices. There are whole books on this subject, but the basic premise holds.
But Apple is not like everyone else.
Everyone else is like Apple. Or at least trying to be.
Apple sets the standard in whole range of areas.
- The benchmark for a tablet is the iPad, not any of the 100+ replicas
- The iPhone is the standard that new smartphones are compared to
- Macbook product engineering quality is unmatched by any competitor
- Apple stores have the highest revenue per square foot of any retailer
- No technology company comes close to understanding the unboxing experience
- The integration of iTunes and content is unsurpassed by any rival service
Apple changed the game.
It innovated (in a whole range of areas, not just the device, but the manufacturing as well), protected its intellectual property and established tightly integrated (and hard to copy) value chains. The iPhone and iPad are clear leaders in terms of revenue and profit by a long way over competitors. This revenue then provides a virtuous circle to continue R&D investment and innovate in areas competitors cannot afford (e.g. manufacturing and engineering) – not to mention out-market competitors. This success then brings its own network effects outside of Apple.
It takes time to get this right, but when this flywheel gets spinning, you have a very effective money making machine.
On top of this, Apple have high levels of customer satisfaction, unrivalled loyalty and a world leading brand that attracts a price premium that no few competitors have been able to match.
Not bad, but this took a long time to get right. The success you see today comes from years of iterative improvement and learning.
This didn’t all happen on day 1.
The stores are a recent addition. The genius bar was not a success initially. Early products were often too expensive to achieve mass adoption, and some like the Newton were market failures. What you see now in Apple is the culmination of many years of effort, and continual improvement. This combines into a ecosystem that to many competitors seems unbeatable.
So Apple are unbeatable?
In the short term, this is incredibly challenging, but over the medium and long term business history shows us that the chance of Apple retaining its current position is not great. That is not to say that Apple may not grow, and become even bigger (with some analysts predicting $1000 Apple shares), but competitors will certainly be able to compete in some areas.
So can a company compete with Apple and win?
The short answer is yes, but think small and think agile.
You need to find one market in which you can beat Apple, one demographic/segment/scenario in which you can better meet the user needs than Apple. This is not about having one core feature that is better, but a range of features that are more attractive to the buyer than the Apple proposition. This is not just about the product, but the whole product experience.
Every product or service is a compromise. It has to be. It is a combination of trade-offs. Price vs. performance, power vs. portability, flexibility vs. usability and so on. What you need to do is find a particular group of customers where you can deliver a better combination of trade-offs for them. The end result needs to be a product or service that is more attractive than Apple. This doesn’t guarantee success, but if you do this you are better informed than the majority of technology vendors that release products to compete with Apple, but fail to differentiate in a way that users care about. More importantly, they too often focus solely on the product and not the experience, thereby missing potential areas in which they could innovate or lead.
Can you think of examples of products fall into the following categories?
- New product is well received, but support is lousy and new customers quickly hear this and avoid the product.
- Great sales and marketing cannot mask a product that doesn’t work as advertised.
- Limited content or apps quickly discourage buyers who see a fail before the company does
It is surprising to see how many times companies make the same basic mistakes.
They continue to launch generic products to a mass market and have no success.
They launch products that miss key user features.
But there is a better way.
Instead of launching generic products to a mass market, launch GREAT experiences to a homogenous group of customers. Win these customers over, prove your product works, build your fanbase, and start the flywheel turning. The move to the next group, then the next one. However small the flywheel is, get it moving. This is always preferable to a large flywheel that will not move whatever you seem to do. However big your company is, launching a product head-on against a successful innovative market leader is rarely a smart move.
Better to smart small, win and grow.
Do not mistake starting small though with a lack of vision or ambition.
They are not the same. Your objective in launching a new product is to understand your customer needs and prove that you can meet these – both to yourself and your customers. You then improve and grow. Your vision can be world domination, as it was with Facebook, but start small and prove that you can meet customer needs. Facebook started with students in Harvard. When it won the students there, it moved onto other Universities, then other educational establishments, then country wide, then worldwide. All along, improving, listening to customers and building on success. The focus was on adoption and market penetration. Facebook was never about 10% market share. It was always about winning in the market it wanted to play in.
5 Tips for world domination
- Know thy customer. Focus on the outcome that they want to achieve and the experience you deliver to enable this. Understand the whole journey. Don’t focus on excellence in one or two areas if this means other areas fail, focus on not having any major fail areas. If you don’t know these areas, spend time with your customers and understand them. Understand what their human wants and needs are. Focus on the need at this stage, then you can define the solution. HP was never going to be successful with its tablet that was priced similarly to the iPad. It wasn’t as good in key areas and in many areas was noticeably worse.
- Prioritise. First things first. Always. Don’t launch new features if existing bugs are losing you customers. Fix what needs fixing. Keep adding to the list, keep reviewing the prioritisation and don’t be afraid to change this. Never drop the quality bar. This was what Zappos did. Innovate the experience, never, ever drop the quality bar.
- Don’t over-engineer. Put in the required amount of effort and no more. You can iterate to improve later. Do what is needed, then go back to the priority list. Improve, improve, improve.
- Know why customers want to buy your product. Test this with them. Many will lie, so test again. Adoption is your key metric here. You need to care about how many of your prospective customers are using your product. It is not about absolute numbers, but penetration.
- Get the customer stories as quickly as you can. Nothing is as compelling for sales as customer success stories. Make these your priority from the start. When you talk about what your product, talk about what REAL customers actually did.
That should allow you to start the flywheel spinning. When you have this going, your challenge is to keep this going. Make the next steps logical and simple. No big jumps. From one University to the next, to the next. Pick adjoining markets, similar groups. Stick to the original strategy, no radical shifts. Continue to prioritise and check with customers about the satisfaction with the product. Then repeat.
How do you know when you are being successful
There is one acid test for success. The incumbent player will react to you. Whether this is a competitive reaction or an offer to buy you, you will elicit a response from them. At this point you are free to decide to continue or cash in, your call.