Apple and the Giant that came from the North

A few days ago analysts published a report on worldwide market share for smart phones and Apple is firmly in third position.

Here is a link for your convenience.

What is relevant here is a couple of things. First the trend, the "Giant" (AKA Nokia) is losing market share to RIM (the silver medalist in the race) and to Apple. While it is somewhat surprising that RIM is still growing at first glance, this can be explained by market differences and specifically by different business models. In Europe for example the modus operandi of mobile phones is that the end user purchases the device out right. That places the iPhone in the EU599 shelf, considerably higher than most RIM devices. If you are reading this from the US, do not bother to convert that to dollars, you may faint. This obviously limits the market penetration of this device and places it at the same level as the most exclusive and ugly mobile phones from Erickson and Nokia I have ever seen. Hey, I am being honest, they look like bricks and they cost an arm and a leg because the are feature jammed and they can rotate your tires. But I digress. The other point here is the trend. Over time Apple keeps grabbing market share and the critical but often overlooked detail is that it is doing so with....one device. Have you jumped on your chair yet? No? Well, let's work on that shall we.

My point?

Considering the fact that the iPhone is heavily subsidized by AT&T in the US, a 17% worldwide market share is something that Nokia and RIM should fear and understand so that they can fight it. Yes, I do want competition for the iPhone, that benefits everybody.

De facto Apple has a 17% worldwide market share with *one* device, as above mentioned. Nokia has 39% with a ton a different models and RIM is at 20% with a somewhat more organized mess of distinct devices but still a far cry from *one*. Getting the picture yet?

Two things are happening

Number one, Apple's rivals are plagued by product line up fragmentation and the burden of multiple platforms. Big problem, why? Because it costs more than a pretty penny to maintain and develop multiple hardware and software product lines. More importantly, it takes some serious guts for the executives and senior management at Nokia and RIM to push a top down company wide mentality change needed to move to one platform so they can compete. Not to mention you need to reorg like there is no tomorrow and possibly lay off people including some of the managers whose help you need to push the policy forward.

Good luck with that.

Number two, the mobile industry is all about software now. Sure one can foresee a future where consumers can purchase a more rugged iPhone for the outdoorsy audience Vs. a super-thin one for the trendy bunch. But the hardware inside will be the same and so will the software. What has happened is a paradigm shift in customization and personalization. Consumers can now project their identity onto their devices in a richer way than ever before. We went from expressing one's individuality via the physical features of the device (who can forget the Motorola Razor Vs. LG Chocolate battle?) to the customization of both exterior and interior. this is thanks to more iPhone cases than you can count and...software. An iPhone is an iPhone but if you grab mine and my wife's, for example, you will be looking at two completely different user experiences. That is the future. In fact I would expect to see many more ways to customize via software like desktop themes and so on and more ways to personalize the exterior via choices of colors, even more cases and, why not, custom paint schemes.

Wait a minute said the Android's crowd

I know, I am overlooking the Android platform. But for a good reason. I really wish Android well but until someone finally realizes that the only product design that will work is a de facto clone of the iPhone or better, we are not going anywhere fast. Read more here, if you like. Moreover chances are that Android will become a success story in an adjacent market: web enable devices other than mobile phones! Have you noticed how many such devices are running Android? We will cover that another time...

What does that means for the players in the industry?

I would start selling Nokia and RIM stocks sooner rather than later. Sure they have a long way to fall but I have yet to see signs that they are serious about reshaping their business to align with the new paradigm of mobile phones consumption. And if you think a corporate mentality shift is not that big a deal, you probably never lived through one with your company: if you do not execute it right or at all....this is how great companies die.

The good news is that it can be done. Ask IBM or indeed Apple, they know a few things about that ;-)