When unveiled in 2010, Apple didn’t know why iPad would be a major hit.* After spending most of the keynote explaining some of iPad’s basic features, such as email, reading books, and surfing the web, Apple left the fundamental question of why iPad would become popular to the marketplace to answer.
One year, and 19.5 million iPads, later, the marketplace has spoken. While users have a variety of reasons for liking iPad, I attribute its success primarily to its ability to transfer innovation to the user. Apple’s curated iOS ecosystem allows iPad to bring app innovation, and functionality, into users’ lives, all the while sustaining a satisfaction level that is unmatched in Silicon Valley. When selling technology to consumers, initial satisfaction is good, but being able to deliver continued satisfaction and enjoyment is even better.
When putting iPad in this context, it’s easier to see the uphill battle facing competitors. The competition is having a hard time beating iPad because they don’t understand why people are actually buying iPad. To beat iPad, you can’t look at it as some piece of hardware that runs apps; you can’t look at it as “an iPad”, but instead as “iPad”. You have to understand the emotional connection between iPad and its user, which a psychologist could analyze at a steep price. A cheaper option to see the connection between iPad and its user is to walk into an Apple store and hover around the iPad table. After a minute or two, you will see the connection when looking at people’s faces.
Competitors need to aim for users’ hearts and minds and not assume that consumers are buying iPads just because they have $499 lying around the house. I have little confidence that competitors can successfully appeal to consumers in the same way that Apple does. Instead, competitors have two options for fighting iPad: low price commoditization with little emotional appeal, or reliance on innovation to beat Apple at its own game.
1) From a financial perspective, removing the emotion out of a product does not bode well as competition will lead to hardware commoditization and the ensuing margin collapse. Profits and brand power will quickly evaporate. Nevertheless, competitors need to convince users that some level of satisfaction can be received from a tablet form factor at a much lower cost than iPad. Apple understands this alternative strategy (some say due to its PC war history) and is relying on its massive $66 billion cash position to secure device components at prices that help lower iPad’s cost to a price point that is very difficult for the competition to slide under, while at the same time maintaining attractive margins. If you are curious what the tablet market would look like if iPad competitors choose the route of hardware commoditization and low cost, instead of appealing to consumer’s emotion, look no further than the MP3 player market, where Apple’s iPod and iTunes ecosystem maintains 70% market and emotion share.
2) You can only rely on apps and services to such a extent before poor financials, low product margins, and a lack of cash become too much to bear and competitors exit the market. If low-priced commoditization sounds unappealing, a better strategy for competing against iPad is to innovate and come up with something completely different. Once this new product is developed, control the emotional connection to your consumer and strive for increasing functionality and user satisfaction. Let iPad have its user base, while your product entice others with unique features and attributes. Try to beat Apple at its own game.
One year, and 19.5 million iPads, later, the marketplace has spoken, but competitors have spent more time talking instead of listening and watching.
*I didn’t write “if iPad would be a major hit”, but instead, “why iPad would be a major hit”. Apple has a history of releasing major products only after it knows it is worthy of becoming a hit.