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Apple’s Options

February 13th, 2004 · No Comments

Apple has become one of the most interesting companies in the computing landscape. Shrikant Patil pointed me to HBS Working Knowledge, which has an interview with David Yoffie about Apple. Some excerpts:

There are at least three different ways in which you can imagine Apple going forward.

One is to say they’re going to build their business off of the digital home, the iPod, iTunes, iPhoto, etc., and become more of a service and software digital home application company. The strategy going forward is going to be more like a consumer electronics company, making hardware and software, rather than being a computer company. The Macintosh will be the core businesses that they milk and then they will build these other businesses for the future. The question is, can they sustain the huge premiums they earn with today’s iPod when Dell is coming in with much lower-priced products and other competitors are entering the market? They’re also running into the same challenge of selling a proprietary solution. (Music on the iPod can’t play on non-Apple devices.)

A second strategy for Apple is to really go back to the Mac OS licensing business and try and generate a large enough volume so that the economics of their operating systems business will make sense in the future. For many years I thought that Apple’s OS business was dead because they lost and Microsoft had won. Today it’s a little less clear again. The reason is that so many of Microsoft’s customers are unhappy with Microsoft pricing, and there is a new willingness to entertain new concepts, new ideas, new products, that didn’t exist before.

The third option is that Apple says our real advantage is in application and industrial design. In my view, Apple has three critical advantages over anybody else in the markets they serve. One is they have an incredibly strong brand; two, they have been the best at industrial design, far better than their closest competitor, Sony; and third, they have been very good at delivering applications in the digital home space.

The third strategy is very different from the second, which is to (concede) we lost the operating system war, and instead leverage our brand, our industrial design skills, and our application base. This strategy would suggest that Apple give up on the Mac OS, become a Microsoft customer, and go after the consumer PC in a very big way.

Tags: Management

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