Monthly Archives: December 2013

Apple's Down Market Strategy

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fishjumpApple is way out-thinking Wall Street as they move down market.  "Talking-heads"  at Bloomberg, NBC, and securities analysts have argued they need  cheaper phones to stem the market share growth of Android. Apple has kept it's cool and devised the best of all compromising strategies... BOTH.

Both a) more affordable phones and b) maintaining revenue and margins for the premium product/ecosystem.  They did this by taking a strategy lesson from BMW and Mercedes. Enter lower price markets by selling used phones at Android pricing, and replace the high-end  with enhanced functionality (i.e. AC7). Would you rather have a used BMW 3 series or a Ford Focus?

Steve Jobs long ago recognized how to use Moore's law to fill out product portfolios. Rather than designing high, medium and low end products, he would ride Moore's law cost reductions to sell yesterday's functionality at lower prices. The Apple software and manufacturing ecosystem rides along for free. Once customer loyalty is captured, it is easier to up-market sell the high end. Engineered cost-reductions can focus on the most bang for the buck products.

Now Apple's marketing strategists have convinced the organization to recycle 4, 4s and 5 phones by providing trade-ins.  It extracts the residual value of Apple phones into Apple's pocket, helps the high and low-end customer, and is ecological to boot.

This is an example of a key idea in good strategy. Good strategy increases efficiency somewhere in the value chain. In Apple's case it is extracting value from the oligopolistic carrier distribution channels by leveraging it's stores. Retail became a necessary evil when telcos had to sell phones to people (mobile) instead of buildings (landline).  Apple uses retail to build customer relationships (genius bars) not an every 2-year visit to re-new a contract.

Apple knows these machines are "pocket computers" first and phones second 🙂

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Asymptotic Thinking

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asymptote

What if... a single machine could provide all of the goods and services that a country's economy currently produces?   Would human productivity (GDP per labor hour) be infinity ? Who should own the machine? Google? The government? Goldman Sachs? Would the end state look the same if we built such a machine over 100, 50, 10 or 2 years?

This is not rambling, this is "asymptotic thinking" and I believe it is a pre-requisite to good strategic thinking. In calculus it is  

lim_{ p \to \infty} GDP(p)

   where p=human productivity and GDP=Gross Domestic Product.

This thinking is important because we approach limits incrementally from a DIRECTION and in strategy, as well as calculus, the direction matters.  More specifically there can be discontinuities along the path, much like crossing a chasm in product marketing.

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How many strategies are there?

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Twenty?  As many as there are companies?

At the highest level of competitive differentiation there are 3 (but it is still hard to get it right).

Technology changes...strategy doesn't.  Change happens faster....strategy doesn't.

THE WORLD'S MOST FAMOUS BUSINESS-SCHOOL PROFESSOR IS FED UP WITH CEOS WHO CLAIM THAT THE WORLD CHANGES TOO FAST FOR THEIR COMPANIES TO HAVE A LONG-TERM STRATEGY. IF YOU WANT TO MAKE A DIFFERENCE AS A LEADER, YOU'VE GOT TO MAKE TIME FOR STRATEGY.

http://www.fastcompany.com/42485/michael-porters-big-ideas

PorterStrategies

 

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"Plan" vs "Strategic Plan"

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PlanWhat's the difference between a plan and a strategic plan? Most companies, departments and people have a plan. So what's unique about adding the word "Strategic". It is not just an adjective, added to appear more sophisticated or smarter. It should change the content and mold objectives as well as articulate action steps.

Here's why:

1) Critical Environmental variables WILL change over the "planning horizon"

2) Actual outcomes will MOST LIKELY be different (sometimes  a lot, sometimes a little)

3) It should FORBID certain resource allocations to enhance the CONCENTRATION of them

4) Plans are NEVER FULLY ACHIEVED  but assume a next interval of time sequence

A "Plan" can assume the critical environment it is operating in will remain relatively stable over the "planning horizon". A "Strategic Plan" cannot and should not. Liddell Hart in his military strategy classic has a chapter on "The Concentrated Essence of Strategy and Tactics".  Out of 8 items he includes "Take a line of operation which offers alternative objectives" which is rarely understood among business strategic planners.

 

 

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