Number of Companies — the Idiocy That Never Dies

2010.08.27   prev     next

EVER since about 2004, there’s been this thread of punditry that keeps popping back up every year or two, saying that Apple is making the same mistake it made in the 1980s against Windows, and will soon (or eventually) suffer the same niche-ization that the original Mac did then. This argument is flawed for a number of reasons that have been gone over plenty of times before, so here I want to address a new one that I think hasn’t been as noticed.

Soldiers On the Battlefield

Imagine that you’re a soldier with a sword, out on a perpetual battlefield. Many other soldiers are wandering around the battlefield too. There’s nothing much to do on this battlefield except try and kill other soldiers, but you can always team up with some of them for safety; for strength in numbers.

If you team up with a large number of other soldiers, what will happen? You will easily trounce your enemies due to overwhelming force. If you refuse to team up with most other soldiers, and mostly go it alone, or with just a few, tenuous partnerships, what will happen? You soon will be killed by a mob of allied soldiers against which you don’t have a chance.

This analogy, or something very much like it, apparently is what most Apple-is-soon-doomed pundits have in mind when they suggest that the number of companies lining up behind system XYZ is a strong indicator of how successful XYZ will be, and how hard it will be to compete against XYZ. And it’s apparently what they’re thinking when they describe Steve Jobs as “sitting alone” in a “walled garden” (App Store) while everyone else is gathering and interacting in the open park (Android).

Of course, we know something must be wrong with this analogy, because PlaysForSure and Windows Mobile both tanked, and both of them should have handily beaten away all competition if the analogy was correct. And the iPhone and its App Store are both going like gangbusters. So what’s wrong with the soldier analogy?

The Flaw

Although some soldiers are bigger and stronger than others, and some are more skilled fighters than others, the difference isn’t particularly extreme, so even an unusually large, strong, and skilled soldier can be easily overpowered by a group of several soldiers bent on his destruction. But with companies, that is not true. A single company can be thousands of times as successful as another, so even a band of twenty companies acting in cooperation to take down a single company may be unsuccessful if that single company is much more successful than the twenty of them combined. Further, a company can play on multiple, separate battlefields (markets). A company that is relatively unsuccessful on one battlefield may be hugely successful on another.

This is why the many participants in PlaysForSure, some of them big, successful companies in their own right, didn’t make a dent in iPod: The combined lot of them, on the portable digital music player battlefield, were still tiny compared to Apple’s huge presence there.

Adding more companies to the PlaysForSure mix did not make it harder for Apple to compete against PlaysForSure, because none of those companies was bringing anything particularly special to the game. Each PlaysForSure partner was doing about the same thing as every other PlaysForSure partner: just making another model of PlaysForSure music player or another PlaysForSure online store. None of them was better than what Apple was already dominating the market with, so the consumer had no reason to switch to PlaysForSure. Throw together ten companies each with a ho-hum product, and what do you get — an excellent product? No, you get ten ho-hum products.

Competing With? Huh?

This lunacy — that Apple will have a harder time the more individual companies it competes with — recently has been taken to a new level in a Business Insider article in which Fabrice Grinda suggests that since Apple is now making its own processor (the A4 chip), “it now has to compete with the likes of ARM!” Which, according to Grinda, can only make Apple’s task of thriving that much harder.

Let’s stop for a second and take note of a few poignant facts:

  1. Apple hasn’t entered the processor market. Apple isn’t selling the A4 chip. The A4 is made strictly for use in Apple’s own mobile products.
  2. ARM hasn’t entered the mobile phone or tablet markets. ARM is simply selling ARM processors to whomever will buy.
  3. If, a few years from now, Apple were to find that the latest chips from ARM are significantly better than its own latest A4 (or whatever), then Apple could simply buy chips from ARM — which ARM would be only too happy to sell.

So Apple’s creation and use of its own A4 chip doesn’t put Apple under any new competitive pressure at all. It helps Apple to succeed against those it already competes against, by allowing it to custom-design its processor to best meet the needs of its not-yet-released products — instead of having to choose from whatever chips are being offered by ARM and the other chip sellers. And since the A4 is owned by Apple, whatever competitive advantages it offers are available only to Apple.

It’s a bit flabbergasting that Grinda, a summa cum laude Princeton grad, doesn’t seem to see this. Does Princeton, perhaps, award egregia cum laude to those who can perceive the difference between making chips to sell, versus making them for use only in your own products?

 

Update 2010.10.09 — More of the same baffling bullshit, this time from Charles Arthur in the Guardian:

Given the number of companies that are announcing tablets, one of two things will happen; the market will absolutely explode, and everyone and their dog will have a tablet in a couple of years [...] or it will be another brief flurry, rather like netbooks are turning into, which will in turn mean swathes of red ink.

I suspect that for Apple to do well [with] iPads, it actually needs those competitors to do well too. There’s nothing worse for a company than to try to create a market, only to find yourself the only one in it. [...] With tablets, if everyone decides that all the competition is rubbish, Apple will be left alone, standing in the middle of a blasted heath, master of all it surveys ... which won’t be much.

Nothing worse than being the only, lonely company selling a couple million tablets a month, huh? Somebody, please notify Princeton that they need to award this man an honorary summa cum laude.

 

Update 2010.10.14 — The Mac Observer? ’Fraid so; here’s John Martellaro:

Apple is great at creating great products that we love. To keep doing that, Apple has to maintain control. That’s in conflict with the business forces that always apply. Products, like Android, that allow companies to jump in, rather than toil over their own innovation, will always be in demand. ... There will always be industry forces that want Apple to fail, lest they look bad and get squeezed out of the game. ... Android lets companies look cool, make products that look like the Apple iPhone, and lets everyone take a shot at a cut of the smartphone pie. It’s exactly what the industry craved, and it’s everything Apple isn’t.

So if a big bunch of Apple competitors just jump in, wanting, demanding, and craving Apple’s failure — Apple will fail! Room for one more, Princeton?

 

Update 2011.01.15 — Dan “Fake Steve” Lyons in Newsweek:

[Android] has become an unstoppable juggernaut. ... Android still has one huge advantage over the iPhone — diversity.

...

No matter how many carriers sign on to carry the iPhone, in the long run, Apple has again set itself up to be a niche player in smartphones, just as it is in PCs.

No matter how many carriers? What? Apple just signed up a single carrier. A huge one. And the only other two US carriers it conceivably could sign up now are Sprint and T-Mobile, which as far as I know wouldn’t matter as much as Verizon if you put the two of them together.

Which is better, Dan — a dozen quarters, or a single $50 bill? You figure it out.

 

Update 2011.02.04 — One I missed from last month, Katherine Noyes in PCWorld:

[U]nless Apple starts licensing the iPhone to other handset makers, the platform could get lost amid the many Android competitors.

Because what consumers really crave in a mobile software platform is a hundred different manufacturers, each trying to put their own spin on how it should work. Consumers just love that. And when they want to buy a smartphone, they typically write down the names of all the different models of smartphones on little slips of paper, shake them all up in a hat, reach in and pull one out! And then Apple gets, like, 1% of purchases. Bye-bye, Apple.

 

Update 2011.03.19 — And how could I pass up this one from last June, Dennis Kneale on The Daily Beast:

In less than a year, Android has lured over two dozen makers to join its loosey-goosey confederacy, and now they make 50 rival handsets. Apple goes it alone and makes, basically, one model. Android’s inexorable advance is only a matter of time.

Because two dozen companies always beat one company. Got it.

Google, its founders, and its CEO, Eric Schmidt, stand for the cause of open design. Thousands of developers from hundreds of shops and dozens of device makers are free to tinker with Android all they want.

Wait — did you say thousands of developers are “free to tinker with Android all they want?” Or thousands of developers are writing great apps that run on most, if not all, Android phones? Not sure I heard you. Clarification needed.

 

Update 2012.02.14 — Here’s another perfect example of this absurd illogic, from Neil Trevett of Nvidia:

Apple is fabulously successful and I’m sure will continue to be so, but I do think Android will, over time, really dominate the mobile market. It’s nothing to do with who’s better, it’s just you have thousands of companies producing these devices... I think it’s going to be a repeat of the PC/Mac market, with 80% Android and 20% iOS.

Of course it is. How could it be otherwise.

 

Update 2012.03.22Nicholas Kolakowski on eWEEK last November:

“Microsoft’s Windows 8 Tablets Not Too Late”

“Is it truly too late for Windows 8 tablets? The question seems asinine, considering how said tablets won’t hit the market for several quarters.”

“But does that necessarily mean that Windows 8 tablets will arrive on store shelves too late for consumers? No. In the tablet wars, Microsoft has one very powerful tool at its disposal: its wide variety of manufacturing partners. ... OEMs in the tablet and PC arena will have little choice but to embrace Windows 8 as the route forward a­gainst Apple’s iPad.”

It’s not too late — to make a bunch of tablets that don’t sell.

 

Update 2014.06.05John Fontana in ZDNet:

“Apple’s fingerprint reader missing one special touch”

“Apple is still without one important piece that would position its iPhone as a strong authentication device for secure access to both consumer and enterprise Web applications. ... That piece? The inclusion of FIDO Alliance protocols, which provide a standard infrastructure for multi-factor authentication and align with an emerging federated identity architecture for the Web. FIDO adoption would allow Apple to come out and play — and authenticate — with the rest of the world’s services, apps and wearables that live beyond the App Store.”

“[FIDO] should sound a bit like the Touch ID plans Apple announced this week, only Apple’s version is walled off in its locked Apple garden.”

“‘The guys who built the (AuthenTec) sensors [now owned by Apple] were thinking along these lines,’ said Michael Barrett, president of the FIDO Alliance. And that connection gives Barrett confidence that he will one day see Apple in the FIDO fold.”

“‘Obviously Apple has a nice market penetration, but it doesn’t own the handset market and it doesn’t own the mobile market,’ said Barrett.”

“Samsung users are already there. As are FIDO board-level members including Bank of America, Discover, Google, Microsoft, MasterCard, and Nok Nok Labs along with another 100 engaged members.”

A hundred companies that don’t make the iPhone. Or the iPad. Or the iPod touch. Or the iOS App Store. Or the Apple Watch. Or Apple TV. Or iCloud. Or the Mac. Or iTunes. Or Apple Retail. Or Apple Pay. But a hundred companies always beat one company — everybody knows that.

 

Update 2014.04.09 — Apple appears to be forming a team to create its own baseband chips, presumably for its own, future products. Maybe Grinda could grace us with a new article, saying that Apple’s job just got even harder because now they have to compete with the likes of Qualcomm.

 

Update 2014.10.28Matthew Mombrea in IT World, making the same mistake all over again:

“Why CurrentC will beat out Apple Pay in the end

Apple pay was released to the public just over a week ago and it’s stumbling out of the gate. ... retailer participation is low. ... Unfortunately the payment system may be doomed to fail.”

“The strength of the merchants designing or backing CurrentC is enormous. It reads like a greatest hits list of retail outfits ...”

“The retailers have joined together to create a platform that is independent of the credit card companies and their profit-robbing transaction fees. ... This is huge for the merchants who are losing a significant amount of money on every credit card transaction.”

Which is destined to be successful: Several companies offering something that consumers really don’t want? Or one company offering something they do?

 

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