A profound and dramatic thing happened in the computer industry last week. And it wasn’t the introduction of the new iPad Air. But it was, not surprisingly, from Apple, which has proved that most important (and brave) of lessons to the rest of the world: cannibalise yourself before someone else does. Though, in this instance, Apple is cannibalising Microsoft.
Announcing a raft of upgrades to its existing computer line-up, CEO Tim Cook revealed that Apple’s new Mac OS X operating system, called Mavericks, would be given away. Free of charge.
Despite its dominance in tablets and premium smartphones, Apple remains a minnow in computer sales, with somewhere around 5% of the global market. But the free update is a noteworthy development and the standout feature of a raft of announcements that included the thinner, lighter, more powerful iPad Air (it is wonderful and likely to dominate sales, but the new naming convention is a bit trite).
Apple may make software, but its real business is hardware. The iPod is credited with changing the way we consume digital media, but it also set the tone for Apple’s business model, which was already in place with its computers, for mobile devices, which would include the iPhone, the iPad, the iPad mini, the iPod touch, and more.
It’s been called the razor-blade principle in reverse. You can pick up a razor pretty cheaply, but will pay through your nose for the blades (the consumables) themselves. It’s the same principle that has underpinned Hewlett-Packard’s vast printing empire for the past two decades. (No amount of explaining the research and development and other work involved takes the sting out of the high cost of print cartridges for consumers, who use the product but loathe the company for it.)
Apple originally sold songs for a dollar but charged top dollar for its iPod. The success of this business model is replicated in the iDevices. Previous iterations of OS X may cost only US$20/customer, but the total amount Apple is sacrificing is not small change, and it sets a marker for this cloud-linking, mobile computing world, where Google’s (mostly) free Android predominates. It’s further bad news for Microsoft which, despite turning in healthy results last week, is under enormous pressure from the smartphone and tablet explosion as consumers buy fewer PCs.
There must be enormous relief and happiness at Microsoft that the latest devices from soon-to-be-acquired Nokia got such a glowing reception after being launched last week at the annual Nokia World event. Nokia showed off its long-awaited entry into the tablet and phablet markets with the Lumia 2520 and 1520. I played with both in Nairobi last week and felt immense relief on both Microsoft’s and Nokia’s behalf.
Microsoft has always been a corporate-focused company, and its recently updated Surface tablets clearly indicate that it still has no clue about the consumer market, where Apple has tapped such a rich vein. Nokia, on the other hand, makes the best-designed handsets and still has an unbelievable brand cachet, especially in Africa.
In this world of me-too imitations of the iPhone (sorry Samsung, Huawei, LG) — and apart from Sony’s steel-rimmed, super-skinny Xperia Z range — the devices that look (and feel) the sexiest come from Finland.
Nokia has wonderfully reinvented itself. With a range of Lumia devices at a range of price points, Nokia has a healthy smartphone portfolio to match its brilliant midrange Asha phones and its funky cheap handsets that still dominate the low-end market. Good for Nokia.
- Toby Shapshak is publishing editor of Stuff magazine. Follow him on Twitter
- This column was first published in the Financial Mail