What Clayton Christensen Got Wrong (2013)
stratechery.com
stratechery.com
Yesterday he bought an iPad mini with his savings, I suggested him to get an Android tablet "hey, an android will cost you 1/3", but he declined, because all his friends had invested a LOT of time on their (iOS) games.
That's what puts the incumbent in an "innovator's dilemma": do you chase the high end and high margins, and if so which high-end niches do you chase (gamers who want graphics performance, design-lovers who want a precision machined marvel of industrial design) or do you go lower cost and high volume? The latter is a race to the bottom, so the incumbents tend to pick the former and retreat up-market. It's not unusual for the incumbent's profits to increase temporarily when this happens because of their focus on the most profitable customers.
The problem is it doesn't last: the low-cost producers who are already good enough for the low end of the market continue to improve, until they become good enough for the middle of the market too, and grab more and more market share and more and more profit share. And then, looking for even more growth, they head for the top end of the market (or get disrupted themselves).
Ironically, if there wasn't an up-market to retreat to, there would be no dilemma. Android and iOS would have to compete head to head for the same customers with the same requirements (rather than one taking all the budget consumers and the other taking the gamers and others with higher requirements).
As it is, we could be seeing a low-end disruption, and the high-end consumers will be the last to notice.
The entire point of the article is that competing on user experience pretty much side-steps the whole theory of low-end disruption.
The debate hinges on this: is UX a special basis of competition that can't be disrupted? Will consumers pay a premium for better UX forever? Will the cheaper alternative never be "good enough"? Won't people put up with a few minor annoyances? What if it saves them money?
I think UX is a hygiene factor: when it's bad it annoys you to the point where you do something about it, but when UX is good enough, most people start worrying about other things.
That's different from design: I think some people will continue to pay a premium because they love Jony Ive designs and they can afford it. And some will pay for a status symbol. And some will need the performance. But none of that is the mass market.
Android has been "good enough" for millions of people. From their ugly start to Lollipop, they have been good enough for many people to choose Android as their primary platform.
This is similar to many of Christensen examples, such as the mini mills disrupting "Big Steel" companies by providing "good enough" cheap steel, and slowly but steadily getting better and better.
Android right now is in that phase, getting better and better, and now is as good, if not better, than iOS.
Interesting times.
I read recently that Apple had a 5 inch prototype built in the iphone4 but it was not a compelling product at the time. Nothing is as clear cut as "Samsung forced apple into competing on screen size".
edit: I can't deny they're doing great in sales :)
The difference between consumers and businesses is that businesses that act too irrationally for too long are more likely to fail and get replaced by more rational businesses. I suspect that the statistics on rational businesses often suffer from survivor bias.
NB Apple was always careful to sell low end iPods like the nano and shuffle so they continuously disrupted themselves in that product market and kept other companies from doing so.
> Likewise, iPad market share is dropping quickly becausr there are few subsidies for that product.
You don't think it's because they essentially invented the market, starting out at 90% market share?
Apple essentially invented the harddrive digital music player with iPod+iTunes and maintained a +80% marketshare for the lifespan of that product
> I disagree. I think people shop for a phone the way many people (unfortunately) shop for a new car: On the monthly payment, not the sticker price. All that matters is that the carriers finance the phone, subsidies are dying. Every major US carrier now has installment options.
The monthly payments for cars vary widely with the differences measuring in hundreds of dollars per month. The monthly payments for contract cellphones in USA are mostly the same for a $0 low end phone or a $0 iPhone. Indeed for many years AT&T/Verizon/Sprint wouldn't give a discount on the monthly plan even if the consumer brought their own phone which made it slightly irrational to not sign a contract. It's impossible for the low end to disrupt when the high end is the practically the same price.
Not sure why, but they do still have a subsidized 2-year plan, but the monthly rate is higher and you end up paying more than the cost of the phone over 2 years.
http://www.businessinsider.com/apple-verizon-iphone-2013-7 (NB the numbers were wrong, and iPhone demand and growth keeps increasing, but the underlying business relationship is as described)
I think it's interesting to identify a consumer focus on status/UX/psychological benefits, but I actually think it's wrong to say that the consumer isn't paying for more functionality because I think the iOS app ecosystem actually provides pretty compelling additional functionality in addition to the incremental, but still relatively meaty, upgrades between phone models and nominally nicer UX.
I mean, the App Store is still much better curated than its open Android counterpart. The iOS development seems to have more robust developer tools, offer better return, have a more or less standard device structure for testing, etc etc. (http://thinkapps.com/blog/development/platform-build-first-i...)
The iOS ecosystem isn't just the handsets. It's the App store, the developer tools, etc. This allows developers to better create functionality on top of all these Apple devices and enables Apple to surface those quality apps/functionality better and faster. That's a significant benefit.
In the example of clothing and fashion - the consumer really buys buys psychological value(status, attention, etc), not user experience with his extra money, and i'm not sure those goods can be "good enough", because some have arms-race logic build internally(for example status).
In a sense, the same applies for the BMW - you could probably get as great car as the BMW , for much less , but the BMW holds important psychological advantages.
And as for consoles - i'm not sure we've reached "good enough" level of graphics for true gamers. When we'll reach that - it would be interesting too look at that market.
So yes, consumers aren't rational and for some thing you can never satisfy them, but i'm not certain user experience is one of those things.
please explain the difference, other than what seems to be your pejorative value placed on psychology. Why would it be bad to want to feel good when using a piece of tech and prefer it over another piece of tech that is better on other metrics? Psychology (broadly stated) is the user experience.
I think that's what the author is saying - businesses don't buy printers thinking about how the printer will make their staff feel, whereas when people buy iPhones, how they feel is a big part of the decision. The idea that I can afford to buy an excellent user experience for myself is very much part of that status value. Apple has exploited those feelings so that its design value outweighs the economies of scale that can be achieved by modularisation.
BTW, modularization is also supposed to offer faster time to market, and we've seen that with large screen phones and Apple's slow response to them(probably because it system was integrated ,hence harder to adopt to a different module).
The low-end disruption is cheaper music (iPod) and cheaper computer (iPhone). Computer in that many consumers initially saw iPhone as a way to do email, web and apps without paying for separate computer and Internet.
The OP, however, is quite good. In a nutshell, it argues that (1) disruption theory assumes rational actors and (2) consumers are much less rational than businesses.
There are lots of situations in which consumers do not behave according to an observer's (non-economic) notion of "rationally". This is rarely a failure of economic rationality, and much more often a failure of the observer to understand the consumer's notion of utility or cost (or both).
I can say with a high degree of confidence (but not 100%) that I'll switch back to iphone next year.
The reason centers on two things: Google's baffling lack of design sense (google's own apps look bad), and google's inability to filter out sham reviews on their app store.
The google app store and the apps are just awful. There are some diamonds in the rough, but they are few and far between and hard to find because nearly all the apps (good or bad) have 4+ stars.
There are tons of crap apps on the apple store too, but the good ones are easier to find because the ratings still have meaning on the apple store.
There is something seriously wrong with google's store. The AT&T app, which is a marginal semi web app, has 25,000 5 star reviews on google's store. It averages somewhere above 4, I can't remember the exact number. I'm sorry, there is just no way 25,000 honest people gave that app 5/5 stars. It's ridiculous to even consider.
It's barely a 3 star app on apple's store and that sounds about right. I'd give it 3 just because it is functional.
I think the real problem behind it is the concept of freemium apps. Apple has it too, but I think because of scale android/google are head of the game in terms of the damage caused by fremium apps.
I think the best way for either company to fix it would be to not allow in-app purchases on free apps. The reason I think it would fix it is that both app stores require you to have the app to vote on it, but with free apps it's no big deal to download-vote-delete an app. This opens you up to mechanical-turk type exploitation.
If it costs a buck to download, you've raised the cost of buying a vote, you've raised expectations of buyers. It has a side benefit of destroying the freemium market which in my opinion can only be a good thing.
My gut tells me that google could filter out sham reviews if they wanted to. I'm sure they can detect the download-vote-delete pattern easily, and if 25000 come in over the course of week or something, well, it just seems like it'd be obvious if the spent time mining the data.