How Android won 90% of the smartphone market with tactics Microsoft used to win 90% of the PC market
In 1991, Harvard Business Review article Computerless Computer Company by Andy Rappaport and Shmuel Halevi explained how Microsoft’s PCs overwhelmed Apple’s Macs. Most of the article’s wisdom would hold true today if applied to Google and Android’s domination of the iPhone.
Since Steve Jobs orchestrated Apple’s turnaround in the late 1990s, Apple has recovered from the near-death experience when Jobs returned and Microsoft loaned Apple $150 million. Apple is now one of the world’s richest companies in the world and is no longer in what the authors called a battle for long-term survival when they asked the question:
“Apple beat Microsoft by six years, a lifetime in computers, in developing a graphics-oriented operating environment. So why is Microsoft the most powerful company in the computer industry while Apple wages a battle for long-term survival?”
But the question could be restated in today’s terms:
Apple beat Google by 15 months, a lifetime in mobile phones, in developing a touchscreen smartphone. So why is Google the most powerful company in the mobile industry while Apple wages a battle for new products to restart its stalled growth?
Since its introduction, Android—like the PC has reached 90 percent market share. And, though smartphone shipments have dropped to single digits, last year iPhone shipments declined.
The Mac’s advantage, like the iPhone’s, was a superior operating system that measures ease of use, graphics power, and software and network integration. A couple of years ago, Android 4.4 KitKat reached parity with iOS. Today, it could be argued that iOS 10 is better than Android 7 Nougat, but any difference is too marginal to matter.
Like Windows, Android product improvements were driven by an intensely competitive clone hardware market because silicon component manufacturers could innovate and sell to many Android phone maker, while building for Apple meant selling to one phone maker with comparatively smaller market share.
Google’s advantage over Apple
While Apple shovels its own cash reserves into R&D, Google has the advantage of leveraging worldwide spending on mobile hardware components and by hundreds of Android smartphone makers—the list beginning with giant Samsung and ending with tiny unknown Asian manufacturers. Apple designs and contracts the fabrication of its A10 Fusion processor, like Sun did with its Sparc processor before giving up and turning to Intel to supply its chips. Android phone makers can choose from a variety of processors from Qualcomm, Nvidia, MediaTek, Hi Silicon, Samsung and Intel that makes the AMD/Intel X86 competition look tame.
Silicon integration or the packing of more functions onto a single chip makes it hard to determine where a semiconductor company ends and a smartphone company begins. The Qualcomm Snapdragon 430 processor includes much more than a CPU: GPU, LTE category 4 modem, Wi-Fi 802.11ac, Bluetooth 4.1, GPS, NFC, USB, camera support, HD display support and fast charging—to name a few.
Silicon integration reduces the design and development investment for the Android phone maker, and competition produces a wide variety of capabilities that lets the phone maker curate the best single processor to meet the retail price that will win customers. Phones are really the chip makers’ phones with the phone makers’ plastic or metal wrapped around it—like Windows notebooks are Intel computers.
iOS 10 availability less than Android availability
iOS 10 is available on only a narrow range of Apple proprietary iPhones and iPads. Android is available on a diverse spectrum of phones and tablets in terms of size, features and price points. Like PCs, there is an Android product for every niche and a niche for every Android product.
The opening paragraph of Rappaport and Halevi’s article seems to predict mobile ecosystem companies Google and Facebook:
“By the year 2000, the most successful computer companies will be those that buy computers rather than build them. The leaders will leverage fabulously cheap and powerful hardware to create and deliver new applications, pioneer and control new computing paradigms, and assemble distribution and integration expertise that creates enduring influence with customers.”
Google and Facebook and many smaller companies that build the mobile ecosystems are not software companies, but mobile companies. And like Microsoft defines and dictates how X86 devices are designed and built, Google defines how Android devices are built. Google also defines how billions of smartphone users expect to interact with mobile apps and how tens of thousands of Android developers write new applications.
Google owns mobile search, own mobile navigation and has a billion Gmail users. Facebook owns social and a large share of the messaging market. Uber owns transportation. Apple ignored those ecosystem opportunities to make money on proprietary hardware, and it wastes money investing in its own mapping and mobile navigation product to stop its users from using the superior alternative from competitor Google. When one of Apple’s street view vans appears, it brings with it the question: Is this not too little too late?
It would seem Apple would be better off combining cheap powerful computers in data centers with apps on its phones and perhaps even Android phones to deliver pioneering new applications and control large new ecosystems, emancipating it from its struggle to grow hardware-dependant iPhone revenues.
Perhaps Apple should find a new flywheel for growth to replace the iPhone that draws new customers to its other products. A compelling virally growing ecosystem app that captures many of the more than 2 billion smartphone users would make a better flywheel.
