Chris Dixon

  • June 25, 2012
Why the integrated approach to mobile devices is winning

Until last week’s announcement of the new Surface tablet, Microsoft had taken the same approach to mobile devices that they had with PCs: build the software themselves and let partners build the hardware. Google took a similar strategy with Android but then reversed course when they acquired Motorola. Apple’s integrated strategy was once widely ridiculed as a repeat of their losing 1990′s desktop computer strategy, but is now being copied throughout the industry.

There is a trade off between integrated and non-integrated approaches to building devices. The non-integrated approach lowers costs, but adds friction between components that compromises performance. Consider this anecdote from Microsoft’s previous attempts to build tablets with hardware partners:

The H.P. tablet was thick, the Intel processor it used made the device hot, and the software and screen hardware did not work well together, causing delays whenever a user tried to perform a touch action on its screen. “It would be like driving a car, and the car not turning when you turn the wheel,” the former H.P. executive said.

- ”With Tablet, Microsoft Takes Aim at Hardware Missteps,” New York Times

What is the difference between mobile devices today where the integrated approach is winning and desktops PCs in, say, 1995, when the non-integrated approach dominated? The best way to understand the difference is through the lens of Clay Christensen’s disruptive technology theory*. When a new category of device first launches, it is usually not “good enough” for most customers. Chistensen illustrates this with a famous graph:

According to Christensen, technology gets better at a faster rate than customers’ demands on technology do (in the graph, the black line goes up faster than the other lines). Eventually, new device categories become “good enough” (the black line crosses the purple/blue lines), and customers become unwilling to pay significantly higher prices for improved versions of the device. At this point it doesn’t make sense for manufacturers to invest in greater performance if customers won’t reward that investment. Instead, manufacturers should spend the “performance surplus” on making devices less expensive. The best way to do this is to let different companies produce the core software and hardware components, i.e. to switch from an integrated to non-integrated approach.

If you believe Christensen’s theory (and most senior people at large technology companies do), the interesting question now is: when will smartphones and tablets be “good enough” (respectively) for non-integrated to beat integrated approaches? My guess is it will be at least 5-10 years before customers are no longer willing to pay significantly more for faster bandwidth, more features, longer battery life, increased storage, faster processors, etc. But no one really knows.

It isn’t hard to see how Google, Microsoft and pretty much everyone but Apple missed the key difference between PCs and the new generation of mobile devices. Christensen himself missed it:

Christensen’s most embarassing prediction was that the iPhone would not succeed. Being a low-end guy, Christensen saw it as a fancy cellphone; it was only later that he saw it also being disruptive to laptops.

- When Giants Fail: What Business has learned from Clayton Christensen, The New Yorker. [paywall]

Seen as high-end smartphones, iPhones were “sustaining” innovations (above the blue line) that would only appeal to the highest end of the market. Seen as low-end laptops, iPhones were disruptive innovations that would eventually subsume the PC business. With support from the iPad, they seem to be doing exactly that.

* If you aren’t familiar with Clay Christensen, this talk is a great way to learn about his theories.

  • Anonymous

    But today’s windows pc isn’t good enough. windows PC won in the 90s because the decision to purchase one wasn’t made by consumers. it was made by corporate IT managers. iPhones and iPads don’t’ have that problem, consumers vote with their own wallets.

    • http://www.cdixon.org/ chris dixon

      I think most consumer would say today’s consumer PCs are good enough for the basic tasks they perform. The only areas people pay for more performance are niches like gaming and video editing.

      • Anonymous

        i don’t think so. “once you get a Mac, you’re never go back to Window” shows windows pc isn’t good enough.

  • http://kidmercury.posterous.com/ kidmercury

    i think integrated vs non-integrated is a false dichtomy, and that the winning approach will be integrated solutions built atop open source — open often being closely associated with non-integrated stuff in this discussion — hardware and software. that is why i’m so bullish on amazon and such a fanboy of them, because that’s the approach they’re using.

    i also think that hardware/software integration is not the true basis of competition; rather i think it is who can offer the complete ecosystem of apps, media, devices, and, soon enough, social network (which facebook could conceivably use as its key to break into this game). who is the best at managing a diverse ecosystem that suits the needs of the customer segment the platform operator is targeting? msft could win the business crowd. apple could win naive children who focus on toys and are easily deceived. amazon wins the value shoppers, google…..i don’t know, they could go meta and be the ecosystem enabler.

    • http://twitter.com/blakewatters Blake Watters

      I disagree. I think that both integrated vs. non-integrated and the larger ecosystem dynamics all point to the same thing — at the end of the day, most users just don’t care about these things. Apple is succeeding first and foremost because they deliver a experience that consumer can relate to and a technology vision they understand and aspire to integrate into their lives. So often in non-integrated devices you have device integrators competing fiercely and their marketing messages include heavy references to the components they have selected. This is what makes my girlfriend and my parents feel intimidated by trying to buy a laptop or even try to muddle through the process of selecting an Android phone. They really just don’t really care or want to know what type of processor, screen resolution, version of the OS, etc. is in there. It causes anxiety and ultimately decision paralysis. They worry about making the wrong decision at a time when they are trying to get excited about putting several hundred dollars on the table.

      Apple does a fantastic job of sidestepping all of these fears. It feels safe and promises a great deal of joy with minimal chance of feeling screwed. Open Source doesn’t mean anything to them and never will.

      Amazon is doing well because they are providing a low cost, integrated device that downplays the decisions and provides an integrated experience on top of platform in which all the device consumers are already passionate users. If you were to take Amazon’s play with the Fire and throw it into another firm’s lineup I don’t foresee similar traction, even with an open source core and integrated ecosystem. It takes a number of ingredients to make a tasty cocktail.

      • http://kidmercury.posterous.com/ kidmercury

        i am not sure what you disagree with me about, as i think we are saying the same thing, aside from my insults towards apple. amazon is not going to have the fragmentation issues the hardware manufacturers building off android have — amzn are building integrated devices — but they will have the cost benefits of using open stuff, which is how they moved so quickly into this space (kindle smartphone slated for Q4 this year). i agree the end user wont care about the technical stuff and just wants something that is simple and works (which amazon will give them), but end users will care about price and what media/apps/social networking they can do with the given device. this is subjective as different ecosystems will cater to different people, but i think amazon has an incredibly robust offering here. they can basically curate the android ecosystem as well as leverage all their data.

        • Timothy Meade

          I would argue that building off of AOSP only works because Amazon hides the details from the user, I don’t know how it will work in a phone unless Amazon can offer navigation, voice control, and all the other features that being a licensed Android device get you. Also, Kindle is fundamentally fragmented, the only requirement for Fire is it can play Amazon videos but it’s not the fastest cpu out there.

      • http://www.cdixon.org/ chris dixon

        Agree cunsumers don’t directly care about integrated vs non-integrated. But they care about how it works and how much it costs, and those are functions of integrated vs disintegrated.

    • http://twitter.com/PXLated PXLated

      “apple could win naive children who focus on toys and are easily deceived”
      Oh Please, Spare Us This BS

      • http://kidmercury.posterous.com/ kidmercury

        i should’ve noted they will face stiff competition from chuck e cheese and toys r us

        • Sayter

          It’s odd that you would attempt to use “toy” as an insult on a blog post by Chris Dixon when he’s talking about Clay Christensen’s disruptive innovation. There’s another article about Clay’s work that Chris wrote on this blog in 2010, titled: “The next big thing will start out looking like a toy.” As Chris notes of the title’s theme, “this is one of the main insights of Clay Christensen’s ‘disruptive technology’ theory.” He ends the article with the observation that “startups with sustaining technologies are very unlikely to be the new ones we see on top lists in 2020. Those will be disruptive technologies – the ones that sneak by because people dismiss them as toys.”

          • http://kidmercury.posterous.com/ kidmercury

            apple is an incumbent now, and their iOS products operate from the perspective of an incumbent. yet in spite of their incumbency, from my perspective they have not graduated from being a toy yet — which leads me to believe they were in the toy industry all along. i do concede their disruption of the toy industry was very impressive, toys r us never saw it coming.

            i do concede siri as being an example of something that currently looks like a toy but actually has immense disruptive potential.

    • http://www.ivpcapital.com/blog Michael Elling

      Agreed with KM. Vertically complete as opposed to vertically integrated is the answer. PC vendors didn’t understand processing vs content consumption of mobile devices vs desktops/laptops. Contexts, users, etc… all changed. Same holds for feature phone vendors (NOK, RIMM) who didn’t understand content and data apps world, whilst beholden to monopoly carriers (very dangerous strategy!).

      Apple learned a lot from iPod and built a better content accessibility solution in the process and got the phone/communicator and camera just right. Danger for Apple now is that it forgets why it beat the competition and remains silo’d.

      Further the big arbitrage to be had now is no longer on the device side, rather the service side. 2 years of service should be equal to or cheaper than device cost. Why? The latter benefits from moore’s law, while the service provider model is impacted by moore and metcalfe when it comes to scale. Bandwidth pricing (wired and wireless) disconnected from those laws about 10 years ago and are 20-150x higher than they should be.

      So will Apple, Google or MSFT/NOK be first to disrupt carriers? Apple may well be at a disadvantage because it is inexorably linked to carriers. MSFT should be THE natural disruptor as they have very little to lose. I could go on and on about pros and cons. Suffice to say FCC killed equal access in 2004 and we have Steve Jobs to thank for resurrecting it in 2007.

  • Anonymous

    “According to Christensen, technology gets better at a faster rate than customers’ demands on technology do (in the graph, the black line goes up faster than the other lines). Eventually, new device categories become “good enough” (the black line crosses the purple/blue lines), and customers become unwilling to pay significantly higher prices for improved versions of the device. At this point it doesn’t make sense for manufacturers to invest in greater performance if customers won’t reward that investment.”

    the only problem with this theory is that it assumes customers know what they want and will demand it. customers never asked for iPhones, they never asked for iPads, they did ask for a better track ball from the blackberry maker!

    • http://www.mindchemy.com/ Marcos Polanco

      Beidaren,

      Of course, customers did not know to ask for the product manifestation…that is the job of the designer. Yet customers are experts at the jobs they are “hiring” technology to perform. When iPhone became technologically possible and Apple supplied it, customer indeed demanded it…not because they were experts at the solution, but because they are experts in their problems.

      • Anonymous

        not really, if customers are experts in there problems, they’d switched to Mac from PC. By the time smart phones or iPads are “good enough”, Apple would have shown its customer something else they didn’t know they need and want.

      • http://www.cdixon.org/ chris dixon

        Agree Marcos. No one is claiming you ask customers what they want and then build it (see famous Henry Ford quote about faster horses). The question is if you offer them an Ipad 3 vs ipad 2 will they pay more for it.

        • Anonymous

          when the iPod became good enough, Apple showed us the iPhone which we didn’t know we wanted. when iPad 10 is good enough, there will be something i’ve never heard of from cupertino.

          By the way, DIsqus is clearly NOT good enough yet. very buggy and jumpy.

          • Timothy Meade

            I seem to remember two+ years of “speculation” about the iPhone which amounted to begging Apple to make one. Of course, the iPhone that came out of it was nothing like the mockups but some subset of consumers was clearly asking for the product by name.

  • http://twitter.com/fredgrott Fred Grott

    Chris, first paragraph Google did not go to integrated device approach when buying MM as rest of OEM OHA partners are still on the same equal footing with MM. And MS Surface tablet is still vapor ware until the other foot drops..

    Lets try to avoid jumping off cliffs and have somewhat a more factual discussion.

    • Alex Murphy

      And with the new Nexus program, Google is actually working even more closely with OEMs to create “pure Google” devices that will still make manufacturers money (unlike Microsoft’s surface strategy).

    • http://www.cdixon.org/ chris dixon

      We’ll see what Google does with Motorola, but pretty hard for me to believe they won’t try to make a better phone than what their hardware partners are making. Why else would they pay 10b+ for a much lower margin hardware company?

      • http://twitter.com/danvk Dan Von Kohorn

        I think it was, in large part, also a play for the patent portfolio – particularly in relation to their bargaining position with Oracle,

      • Anonymous

        patents.

    • Anonymous

      So what you are saying is he should wait for the official Google Press Release before he says what he wants to say? That is ridiculous.

      Android 3 fails. Android 4 fails. Google buys Motorola. Samsung is the only profitable Android maker left, and they are developing their own OS. Over 75% of phone profits go to Apple, who have one phone per year, and also have the top 5 best-selling smartphones of all time (all 5 iPhones.)

      If you are a Google shareholder and Google doesn’t release its own phone, you would have to consider a lawsuit.

  • JamesHRH

    Bang on.

  • http://www.mindchemy.com/ Marcos Polanco

    I would give great credit to Apple if their strategy were attuned to the competitive affordances as Christensen described; closer to the truth is that Apple has pursued a single integrated approach for decades, and the game finally came to them given the characteristics of smartphones. They are geniuses only in hindsight.

    • http://www.cdixon.org/ chris dixon

      Agree Jobs might have kept it integrated if he had been at Apple the whole time, even if it wasn’t the optimal business (profits) strategy.

      • Anonymous

        It was the optimal business (profits) strategy. He proved that when he returned.

        The only reason Wintel succeeded was it was in a vacuum. Apple was run by chimps at that time. They stood still and let Microsoft catch up.

        In 1985, Jobs wanted the original Mac to be an iMac, and he wanted to develop a Mac Pro, which he did at NeXT, and he wanted to develop the MacBook “within 5 years” (it arrived in 1991 at Apple.) He would have sold the original Mac at the same or lower prices as competing DOS PC’s, in the same way that, today, the Mac undersells other high-end PC’s, iPad undersells other low-end PC’s, iPod undersells other music players, and iPhone undersells other smartphones.
        What you have with Apple/NeXT is the same computing platform, but it got forked in 1985. That is a disastrous event. That is not the way to prepare for the 1990′s PC market. When the 1990′s came, Apple’s tech lacked a high-end and NeXT’s lacked a consumer product. NeXT got killed by Sun (also integrated) and others at the high-end, and Apple got killed by Microsoft at the low-end. In 1995, both Apple and Microsoft were selling low-end PC’s, but Apple was trying to get away with high-end prices. When Jobs returned, he unforked Mac/NeXT and then built on that, went forward to find the next big thing.

        We should have seen the release of Mac OS X in 1988 or so on Apple-branded NeXT hardware, and we should have seen the release of the consumerized version of OS X (now called iOS) in 1993 or so on an all-new line of low-end Macs, completely eclipsing Windows and OS/2 and other systems of the day. That would be easier than killing Wintel from 2001–2010.

        Basically, Windows 3.1 should have gone up against the iPad. The iPad would probably have had a mouse on it, and of course would be much more primitive, but it would be an iPad in the experience. The entire platform would be for “everyone” and it would be so easy you could switch in an afternoon and so much fun that people would be drawn to it, and so much better than Windows 3.1 that people would bring it into work and demand that they are allowed to use it, because it will enable them to do that much more work.

        • Arthur LeCuyer

          Correct assessment, John Doey. I’d heard the project name for that project was BigMac. I’m not sure if this is correct, but many of the people who left Apple to join SJ were on the original design team, including the software developers who wound up creating NeXTstep and Openstep, as well as Web Objects which today still powers the iTunes music store.

    • Sullivan McIntyre

      And yet that strategy worked very well with both computers and MP3 players too, no? Seems to be working with tablets, too…

      • http://www.mindchemy.com/ Marcos Polanco

        That’s a good point. The article focuses on integrated vs. non-integrated and why it is winning; note that it most definitely did not win back when Windows was in ascendancy. In my view, the victory of iPod has much to do with an exquisite product design, including simplified content discovery through the iTunes Store, that served as the axis of a business model for the both Apple and the music industry. So perhaps it is correct to say that Apple is now choosing product markets where integration is likely to be a disruptive advantage, leaving competitors in a tizzy.

    • Anonymous

      No, you have it backwards. It is Wintel that looks ignorant in retrospect. And Android. They are the exception, not the rule.

      All of the world’s products are made the Apple way. Your car was made the Apple way. The first IBM PC was made the Apple way.

      Nerds like Legos. NOBODY ELSE LIKES LEGOS. The reason Wintel and Android are made out of lego is they are made for nerds. All of the other products in the world are made for everyone.

      Nikon and Canon cameras, Sony TV’s, Nintendo/Sony/Microsoft game consoles (MICROSOFT!) — all made the Apple way.

      Microsoft is the radical. Wintel is the radical solution. Apple is the mainstream. Regular people buy Canon cameras and Apple computers. Unless they are prevented from doing so by, say, an I-T department that enforces 100% HP computers, or by a phone carrier that doesn’t have iPhones (still most of them) and pushes you to Android.

      • http://www.mindchemy.com/ Marcos Polanco

        The innovation theory Chris makes reference to has exemplars in multiple industries. If the Apple way were the universally perfect embodiment of The One Right Way, then they would not have been on the verge of collapse in the 1990s. The optimal integration strategy fluxes over time depending on a number of factors. Notice Chris is not saying that the integrated approach will be a competitive advantage for eternity…he estimates it will be so for a couple years.

        You are almost certainly not using an Apple printer, and Apple telco or an Apple credit card, yet all are essential to the whole solution of iPhone and Mac; you probably have a flat-screen TV with standard HDMI and coax ports, and you almost certainly have an automobile with standardized windshield wiper mounts; these integration points were not pre-ordained but emerge from the location whole-system performance chokepoints or lack thereof. These chokepoints migrate over time, as Nokia and RIM are finding out. Will Apple meet its match a decade hence just as Microsoft met theirs? Open question.

  • http://twitter.com/Eric_WVGG Eric Jacobsen

    I think there are some flaws in this analysis. I’m not sure that it’s accurate to draw a relationship between the iPhone being a disruptive technology and it being an integrated device. It was both, of course, but there’s nothing about Christensen’s theory that rules out the possibility of the iPhone OS being invented by… I dunno… General Magic?… and manufactured by HP. It still would have met the needs of users as “disruptive to laptops” and been revolutionary.

    The question is, *could* someone invent a disruptive technology that is split between multiple partners with competing interests? I’m not enough of an expert on the topic to say, but it doesn’t seem likely.

    So what is the difference between the iPhone of today and the Macintosh of 1995? According to almighty Steve, it’s because Apple “went for the profits when they should have gone for the market share.” I find it hard to imagine that strategy, coupled with the Tim Cook Supply Chain Monopsony™, not squashing Windows 95.
    Microsoft didn’t win in the nineties; Apple lost. Crucial difference. What’s amusing to me is that the seed of the Surface can be found as far back as these emails from 2003 — http://blog.seattlepi.com/microsoft/files/library/PX08636.pdf

    • http://www.cdixon.org/ chris dixon

      For what it’s worth, Christensen talks explicitly and extensively about the integration before “good enough” and disintegration after good enough a lot. Also Steve Jobs said he was a big fan of this theory. (I strongly recommend the New Yorker article among others where they talk about Jobs & Christensen).

    • Timothy Meade

      And sold by whom?

  • Anonymous

    this is not just about the integrated hw/software approach that Apple is taking. It is about the integrated supply chain and economy of scale approach that Apple is taking — they are able to lock in supplies not only of advanced touchscreen panels before anyone else, they are even able to lock in supplies of raw materials like Aluminum. So while in the 1980′s through today they have almost always believed the philosophy of building the hardware in order to make great software, now they have the additional advantage of being able to make devices far cheaper than anyone else, they can “out-Dell”(think 1990′s Dell) anyone out there.

    • http://www.cdixon.org/ chris dixon

      I agree. Christensen talks about that but I wanted to keep this a reasonably short post so left it out.

  • http://twitter.com/felixjamestin Felix Jamestin

    Christensen’s theory holds if you consider that when the iPhone launched, it offered a disruptively different (and arguably better) experience through it’s multi-touch screen and default apps (as opposed to other new smartphones with faster processors, memory, etc.). The iPhone then followed the same trend line of disruption as seen in the graph above with different customer types switching over as more features were added. (Essentially I’m looking at disruption in terms of product features/aspects that matter to customers, as opposed to the entire product category itself.)

  • http://twitter.com/tsurantino Artur Tsurkan

    This was a fantastic article.

    What does this mean for the Apple Macbook? Is Apple on the wrong side of the graph here, and the non-integrated approach is better?

    • http://www.cdixon.org/ chris dixon

      Laptops are tricky. Dell bet that they were good enough so hardware was commoditized but go beaten up bad there. I don’t have a strong thesis on laptops but my instinct is PC makers thought they were good enough until the MacBook (particularly Air) dramatically raised consumer expectations and shifted the basis of competition from CPU etc to form factor.

      • http://www.spotsift.com Peter Chang

        If I were to use the model I would guess that Macbooks moved the lines for high quality and demanding use upward.

        Or that they created a new disruptive technology curve.

        I haven’t used a non-macbook laptop in a while but the trackpad is leaps and bounds better than anything else. The precision, feel and sensitivity are magnitude better than anything else.

        One gets the same sense with Macbook Airs and unibody design.

        Apple isn’t just increasing prices. If they were, then, of course, consumers would stick with cheaper options.

        But their technology is evolving enough that the curves in Christensen’s graph shift right and Apple keep their consumers.

      • http://twitter.com/kaz Adam Kazwell

        Apple seems like they’re constantly attacking the idea of “good enough”. Whenever a space looks commoditized, Apple jumps in with a non-commodity option. See: laptops, MP3 players, cell phones, (and maybe even retail stores?)…Up next: TVs?

  • Pingback: 世上的光 » 为什么整合性策略能在移动设备领域取得成功？'这个世界只有圆滑，没有圆

  • http://twitter.com/forrestblount Forrest Blount

    The promise of integrated devices is that they “just work” – and not just for consumers, but all of the stakeholders involved. The consumer market does not need optical drives, VGA ports, replaceable batteries (to name a few moves Apple has made in laptops in recent years). I think that our hardware and software capabilities, regardless of platform, have now reached the point where, like microwaves, tvs, and automobiles before them, humans can use them with virtually no understanding of their underlying mechanics. The iPod and not the iPhone was the first device of this new era. The remarkable thing about Apple’s last decade isn’t the stunning success of the iPhone or iPad, it’s that, when given a choice and uncrippled by software lock-in, users are choosing the integrated laptops and desktops that they couldn’t in the 80s. The next technological shift in consumer behavior won’t be due to a lack of appetite for bandwidth or storage or any other resources, but desire for a larger network (instagram 2), greater integration with devices (android home), or more intelligent search and assistance (Siri leads the way but still early). Yes, these devices will become easier to piece together as limits on resolution, screen size and network speeds are reached, but the potential for integrated experiences facilitated by these devices

    • http://twitter.com/forrestblount Forrest Blount

      …is endless, much like my post!

  • http://abdallahalhakim.tumblr.com/ Abdallah Al-Hakim

    this is a terrific post – thanks for posting it Chris. I am learning quite a bit about an extremely interesting topic. For me as a consumer the main deciding factor at the moment is the OS and how integrated are my mobile devices with one particular OS. This means that if I stick with Apple then it is almost irrelevant how good of a hardware or a software microsoft produces. I started with Apple originally because they laptops and OS were terrific – I have hesitated from the iPhone but will be getting an iPad soon (which is really driving me towards getting an iPhone 5). Basically, I am getting trapped within the Apple ecosystem but I do like their product so it is not bothering me too much. If in the future, I do switch then there has to be a complete package of hardware and software across mobile devices and computers to make my switch easier.

    • http://www.cdixon.org/ chris dixon

      Yeah, the integration across devices is important. That can mean one company, or it can mean older open standards (e.g. web from 1993-present for hypertext), or some new standards.

      • Timothy Meade

        Or AirPlay vs. DLNA. The latter is a standard but the interoperability has been historically horrible.

  • https://plus.google.com/117204671830298752568/about Vishi Gondi

    Here’s when the following companies make money. Their revenue models are are built around these limits:

    Microsoft, when device cost -> $800-$1000
    Apple, when device cost ->$500-$600
    Google, Amazon, when device cost -> $0-$200

    As devices become good enough, price continues to fall and you can see who will benefit the most from the above.

    Apple realizes this and wants to make even more money when device cost ->$0-$200. They made a similar the jump from iPods to iPhones when music players went kaput.

    Look for all the above players to try making money by locking your data in their cloud and demanding a monthly ransom.

    That won’t last forever either. Most users need less than 20GB-40GB at the current rates.

    The next frontier is to get between users and their purchases, to make money on every transaction.

    Apple’s NFC shoe will drop this winter. It would be interesting to see if FB will partner with Apple on this one or if it will stake out alone. They just might!

    • http://www.cdixon.org/ chris dixon

      Nice analysis. Like the price ranges.

    • Timothy Meade

      Seems they will release the cheaper iPad when necessary, but that time has not yet come.

  • http://petegrif.tumblr.com/ Pete Griffiths

    Great post.

    I have one quibble.

    “My guess is it will be at least 5-10 years…”

    10 years is a hell of a long time.
    The iphone was introduced Jan 2007. ie. 5 years ago
    The ipad was introduced April 2010. ie 2 years ago.

    The rate of change is phenomenal and accelerating. If I had to guess it would be 3-5. But as you astutely observe – no one really knows. :)

  • Pingback: 为什么整合性策略能在移动设备领域取得成功？ | 上泽聚

  • http://www.spotsift.com Peter Chang

    “Eventually, new device categories become “good enough” (the black line crosses the purple/blue lines), and customers become unwilling to pay significantly higher prices for improved versions of the device. …The best way to do this is to let different companies produce the core software and hardware components, i.e. to switch from an integrated to non-integrated approach.
    If you believe Christensen’s theory (and most senior people at large technology companies do), the interesting question now is: when will smartphones and tablets be “good enough” (respectively) for non-integrated to beat integrated approaches?”
    I don’t follow the consumer electronics market that closely but my impression is that anything that is on par technology-wise with the iPhone and iPad are being priced similarly. If that’s the case, the non-integrated approaches of other companies are failing, no? Shouldn’t the cost-saving of the non-integrated approach be reflected in the price and therefore put pricing pressure on Apple products? That doesn’t seem to be the way it’s playing out.
    Is it a matter of other makers wanting to reap large profits or Apple’s control of the supply chain allowing them to keep great margins while keeping prices in line with everyone else?
    Actually, a good comparison may be the Kindle vs the iPad. The original kindle was much cheaper. However the iPad has been overwhelmingly successful. Perhaps this is because the iPad is more than a reader so they changed the rules of the tablet game. Obviously Amazon responded by following Apple’s steps and creating a more fully-featured tablet (again, priced similarly).
    The mobile market seems to still be in a very rapidly changing phase unlike the iPod who’s core technology didn’t seem to change too much after the first couple models. As long as Apple leads that change and build what consumers want, I have no doubt they will keep the lion’s share of the market.
    The tablet market seems slightly less fertile for further disruption. I can see Apple’s losing some market share here as they begin to feel more and more like commodities.

    • http://www.cdixon.org/ chris dixon

      “If that’s the case, the non-integrated approaches of other companies are failing, no?” Yes, that’s what I argued. I think we agree. non-integrated smart phone companies could only put pricing pressure on Apple if their products were more competitive on a cost-adjusted basis.

      • Timothy Meade

        Cost adjusted how? Are you arguing that the non-integrated competitors must be priced lower or that for the same price the reduced utility means less value?

  • Pingback: 为什么整合性策略能在移动设备领域成功？

  • http://veespo.com David Semeria

    I don’t know about 5-10 years, but I’m willing to predict that smartphones will be “good enough” when users can’t tell whether they’re using a native or HTML5 app.

    • Anonymous

      That will never happen.

      That’s like saying that TV’s will be good enough when user’s can’t tell the difference between an iTunes movie or Netflix movie. If Netflix ever got to be higher-quality than iTunes, then Apple would simply improve iTunes. If iTunes is not higher-quality than an $8/month low-end streaming service, then Apple should close it.

      Similarly, if iOS native apps only had the quality of Web apps, there would be no reason to have them. A Web app has to run in a Web sandbox, it has to be standardized across many vendors which takes many years, it has many, many limitations on it that native iOS apps do not have. When Apple wanted location services in iOS apps, Apple added them, and they were there. It’s taken 5 years to not get them added to Web apps. So the whole reason you have native apps is to do the things that Web apps can’t do now and won’t do for a while. Like Final Cut or Instagram. In 10 years, maybe today’s level of Final Cut runs on the Web, but by then, the native Final Cut will be 10 years further advanced.

      The idea that native apps are going away is propagated by vendors who don’t have their own native app platforms, like Google. (Dalvik is not native.) The Web is 20 years old, and native C/C++ apps running on Unix (like what you see on iOS) are 40 years old. They’re not going anywhere. It’s actually the Web that is in doubt. It’s actually cheaper to make an iOS app in many cases than to make a public-facing Web app that has to work across all of the browsers. That is the continuing failure of Web standardization that HTML5 failed to fix because it does not even require ISO standard audio video. Standard markup with non-standard audio video is not standard. And apps with no audio video are 20th century apps. A lot of iOS developers are FORMER Web developers. And they’re not going back because Web development sucks.

    • http://www.cdixon.org/ chris dixon

      Agree.

  • http://twitter.com/tomvdb Tomas Van den Berckt

    I think the “good enough” theory is a post-hoc explanation that confuses correlation and causality.
    Jobs was probably right in understanding the human preference for things that are beautiful (that preference defeats the ‘good enough’ theory already). In the PC era though, Apple’s problem was a manufacturing one. They couldn’t produce computers fast enough to meet booming demand and just as important, they did not have the technical advances to stop people from going for something ‘good enough’ instead. When the iPhone launched, it was a bombshell, and it took years for most competitors to even launch a first attempt at something remotely similar. In that time, Apple supplied millions of phones to the world. By now Apple have integrated the production process to such an extent that they will for some time keep the lead on their competitors (not to mention their R&D). Even when iPhones move down the value chain, Apple will have a cut-throat edge of scale. They own this space for now, as they do for tablets.

    • http://www.cdixon.org/ chris dixon

      For theories to be valuable they just need to have explanatory & predictive value. No one is claiming they are causal. (Although in some sense Christensen’s have become causal, since his theories are so widely accepted e.g. by Steve Jobs himself that people have started using them as roadmaps).

  • http://siliconhillslawyer.com/ José A

    Another interesting trend to follow, at least in my opinion, is the integrated v. fragmented approach to software. I think of iCloud v. Dropbox as a standard for syncing files. Right now I find Dropbox far more useful than iCloud for syncing photos, files, but I love how my iPad, iPhone, AppleTV, etc all communicate with one another.

    Curious to see for how long Apple can take advantage of the network effects of its ecosystem to win against specialized apps/software becoming a sort of glue to create a fragmented, but perhaps more fluid, Android ecosystem.

  • Pingback: Mobile Developer News Roundup for Tuesday, June 26, 2012 — Global Nerdy

  • Anonymous

    I think the reason that people don’t understand what is going on is that all of the theories represented here are wrong.

    1) Will users buy “good enough?”

    Only if there is no other choice, i.e. monopoly on sales channels (IBM PC) or components (Wintel.)

    When Apple entered the high-end PC market in 2006, they took it over right away and now have 90% of it. When Apple entered the low-end PC market in 2010, they took it over right away and now already have over 25% of it, even after this short time.

    There are so many “good enough” PC’s in the $500 PC market. Why are people buying exotic iPads with ARM architecture and you have to figure out if you are one of the 10% who really need an accessory keyboard because you really do type that much? Because iPad is BETTER. It’s the best $500 PC you can buy, bar none.

    2) Are Apple’s devices better because they are made by the same company?

    No. Apple’s devices are NOT MADE BY THE SAME COMPANY. The glass is Corning. The SoC is fabbed by a 3rd party. The assembly is Foxconn. There is BSD in there from the open source community. There is OpenGL and ISO PDF and ISO MPEG-4 and other community standards.

    The difference between Apple and HP is that if Apple is disappointed with next year’s batch of Corning glass, they will move to another glass supplier or make their own glass, because they have decided only to put the *best* glass on their devices; while at HP, if they are disappointed with this year’s Windows, they will ship it to you anyway, because they have decided to put *Windows* on their devices, whether it is the best or not. And it is not, because of the Wintel monopoly. Windows has no muscles. It sat on a throne for 15 years and atrophied so much that a Consumer Electronics company could ship a better PC using iPod hardware.

    So Wintel is not a case study in how things are going to go in other products. All the other products are market products, not monopoly products.

    • http://www.cdixon.org/ chris dixon

      Obviously no company is truly vertically integrated anymore, but Apple is far more than any other mobile device maker.

      Not sure what you mean by “high-end” PC. Wintel dominates in the enterprise and data center. Apple has a few high end niches but that is consistent with Christensen’s theory.

  • Mathieu

    The fact that Windows still dominates the PC market and Android has over 50% market share in the Smartphone market shows how the integrated approach is NOT winning.
    The Microsoft Surface is not even on sale yet and Motorola hasn’t released any Google made device yet so it’s a little bit early to say that these 2 companies will have much success with the integrated approach.

    • http://www.cdixon.org/ chris dixon

      Windows dominating PC market supports my argument.

      Apple is crushing Android etc on every financial metric on mobile.

      • Mathieu

        Apple is making more money than Android devices manufacturers but Google is making as much money from iOS devices as from Android devices.
        Also, Google is making money from any PC (not only Chrome OS) with any browser (not only Chrome).

        Apple strategy is paying in the short term but I’m not sure that in long term, once the buzz period is over, that they will continue to make as much money.

        • http://kidmercury.posterous.com/ kidmercury

          absolutely. apple’s strategy and DNA is good for being the first mover, but they need to keep the hits coming because google/amazon/etc play for scale. android has the potential to be in your car, your fridge, public parks, everywhere. iOS will have great difficulty duplicating that reach in the long run. we’re still in the first inning of mobile.

  • http://jeffreine.typepad.com/ mosjef

    Thanks for this thoughtful post, Chris. It’s an extremely useful framework, and the comments are very thoughtful, as well. What’s so very interesting is to consider how creative companies move the goal posts on “good enough” by rethinking a product. And by doing so, they can create new markets. The iPod/iTunes example springs to mind (and led to the Apple Dynasty as we know it), but I am sure there are plenty of others in different industries… The original Ford Explorer comes to mind. It was disruptive and invented the SUV market, even though it was originally viewed as nothing more than a revamp of the Bronco.

  • Pingback: iPhone revolutionizes computing, not phones | Cogblog

  • http://www.facebook.com/patrick.newbery Patrick Newbery

    Based on my readings on Innovation, this article slightly mixes some Clayton’s theories on innovation and not in a way that accurately depicts the differences. Different innovation types (sustaining, low-end, market) have different conditions that make them feasible, successful, or not. It’s also not clear when you say integrated design, does that mean integrating the supply chain or simply having HW and SW and UX and brand all at the same table.

    The relationship between integrated design approach, versus supply chain integration have an impact on what can be produced and what kind of innovation
    it represents, but they are not necessarily as tightly coupled as one might imagine. For instance, Dell’s use of the supply chain integration to produce a
    lower-cost quality PC is a low-end disruption of an existing market. Apple’s use of supply chain integration to produce the iPhone is an example of a “new”
    sustaining innovation that raised the game in an existing market where sustaining innovation was already in full swing.  (I don’t believe it is a market innovation in the true sense of Christensen’s theory).

    Another example to consider is Vizio, who has done an interesting job in low-end disruption in the TV space through supply chain integration and is now moving
    across product categories.

    The relationship of design-to-product in the 3 examples is different as well.

    The eco-system footprint is what really begins to make a difference: Apple has multiple, compatible hardware, OS, software, and commerce. This allows them to deliver a
    fully integrated Solution, not just an integrated product, and is beyond just supply chain integration since there are multiple value-chains at play, each
    with it’s own “supply-chain”.  

    One of the differences between these examples is the kind of design culture that is valued by a company. This plays into Christensen’s theory about why it is hard for companies to innovate: it requires the resources, processes, and values to shift. Integration of design or supply chain are represented by the first resources and processes, but it doesn’t produce result if the values haven’t shifted.

    • http://www.cdixon.org/ chris dixon

      Agree that supply chain integration is different form design integration. Apple does both so makes it more complicated. here I was talking primarily about hardware+software design integration.

      I think the iPhone is a true market innovation when considered as a PC disrupter. I think Christensen thinks that too fwiw (see second block quote).

  • http://www.iphoneil.net/?author=2583 Ronen Mendezitsky

    While the integrated approach is winning, it seems that companies such as MSFT,GOOG,AMZN have been unwillingly thrown into the ring to fight a 400 pound boxer using silk gloves. Apple stepped into everyone’s field and the competition has no choice but to fight back. The only way to do so seems to be using the same approach as Apple is using, which is integration of great software and hardware in a good enough mesh that’ll make end-users happy.

  • Anonymous

    Somehow I managed to avoid reading the Innovator’s Dilemma, so when I read this I got very excited. It is tempting to apply this powerful analogy to everything. I am at the moment sipping a fine microbrew, and thinking about how microbrews really disrupted the heck out of the beer market in the 90s. But the big guys managed to survive, and in fact now produce some of the more popular “microbrews” under white label contracts… wonder how THAT happened?!

    • http://www.cdixon.org/ chris dixon

      Microbrews might never have actually been disruptive. Sustaining innovations disguised as disruptive.

      • Anonymous

        I guess cheap American rice lager was the disruptive innovation

  • http://twitter.com/lchamberlin Luke Chamberlin

    Where does content fit into the integrated / non-integrated dichotomy? It seems like access to good content is not dependent on either approach but certainly favors the integrated approach.

    Apple and Amazon have great content. Android has so-so content. Blackberry has nothing.

    You can almost map the quality of content to the winners. A driver of platform success or a side-effect (i.e. developers flock to develop for the winners)?

    • http://www.cdixon.org/ chris dixon

      I think the platform / apps battle is an entirely separate (and complicated) vector to the integrated/non-integrated one. There’s a lot going on!

  • Pingback: 为什么苹果的软硬件一体化策略在移动时代受到追捧 | 雷锋网

  • Pingback: 世上的光 » 为什么苹果的软硬件一体化策略在移动时代受到追捧'把自己当傻瓜，不懂就

  • http://twitter.com/mvakulenko Michael V.

    Chris, what is popularized as low-cost disruption is part of larger value-chain evolution theory. Its understanding requires little more than watching a 10 min video and reading Wikipedia page.

    The reality is much more complex than pitching integrated vs. modular approach against each other. It is only good for making headlines. Integrated and modular approaches can coexist and win at the same time when applied to different business models. Apple and Google define success differently. Both win – Apple wins on profits, while Google wins on market share.

    In order to sensible conclusions based on the value chain model, one needs to look at the business model, not on specific product or feature. Looking at Surface and Nexus and concluding that integrated is gross oversimplification.

    My two cents.

  • Pingback: Digital Market Watch

  • Pingback: 为什么整合性策略能在移动设备领域取得成功？ | 中文互联网数据研究资讯中心-199IT

  • Pingback: Boot up: more on Nexus 7, 800m smart devices, Silicon Valley’s lost values and more | auicon.com

  • Pingback: Boot up: more on Nexus 7, 800m smart devices, Silicon Valley’s lost values and more | Technology News

  • Pingback: Linkeando | Comentarios - Blog

  • http://micahtcollins.com micahtc

    Something’s missing here…

    I think its worth mentioning some specifics on why integration is working on mobile devices. It’s a product thing. The argument I’ve resonated with the most is that users have rewarded variety and refinement in apps, riding on attractive, well-executed hardware, in lieu of megapixels, screen size, feeds and speeds.
    So Apple’s race to acquire and nurture a vibrant developer community, coupled with hardware that was optimized for the maturity of the OS platform at every step, created the most compelling platform for user expression, enjoyment, and now with iPad, creativity. Partnering for handset variety is shunned as it would drastically increase validation and support costs for the OS, and yield little incremental satisfaction of customer needs. Not the Apple way to begin with… lucky for them. It would be a business recipe that isn’t focused on giving the customer what is fundamentally desired. I think this may sound elementary, yet it is that simple.
    I think what we’ve seen with Android is generally a lack of sync between OS and hardware, and worse: variety being offered to the market in a way that isn’t meaningful enough to the user experience to warrant the price premiums necessary to turn a profit selling handsets.
    I would take some issue with the implications of the statement “The best way to [make devices less expensive, and trim performance surplus] is to let different companies produce the core software and hardware components, i.e. to switch from an integrated to non-integrated approach.”
    The reason being, everyone partners for lower cost hardware, Apple too. But, the best way to trim performance surplus and improve profits is not just to dis-integrate hardware from software, but to do so strategically (not wholesale), while ALSO exercising restraint on the product *definition*. This actually requires more ownership of product, not less.
    To me, this is what the Nexus program really is. Taking ownership of product definition… and executing hardware with strategic partners. So, Google sees this. They know only a limited number of the handset makers are actually making money selling devices running Android. In some ways, their Nexus program and their future pure first-party plans (on-hold due to channel conflict concerns imo) can be seen as defensive in nature, trying to cover for an unhealthy ecosystem where partners are hemorrhaging profits, largely missing the boat product-wise, and reacting slowly. We can also cut Google some slack, because they came at this market without having a hardware business. That’s changing, quickly. They will also have a leg up as the cloud reveals itself (to users) to be the true “guts” of these post-PC devices.
    It’s fair to say Microsoft has learned a lot about hardware, and done some things really well (Xbox) since they first launched Windows, and so their approach to the mobile space will look evolved as well.

  • http://about.me/jelpern Jordan Elpern-Waxman

    The theory is great for purchases primarily driven by performance, but doesn’t work as well for other factors such as style, quality of ecosystem, etc. These are the areas in which Apple has had unparalled success: making technology a fashion accessory, themselves an aspirational brand, and bending an entire ecosystem around them. People will always buy BMWs even though the car industry is 100, and they pay more for MacBook Airs despite the maturity of the PC industry.

    Apple tried the same thing with the Mac, but the execution fell short; in Jobs’ second act he nailed it. It would interesting to think about why the same strategy worked from the late 90s on but not in the early 80s.

  • Pingback: Where integrated systems lead « discourse and notes

  • http://www.gsmbooster.co.uk/ signal booster

    The integrated mobile phone approach supporting the well features and functionality to their user. That’s why integrated approach is well popular.

  • Pingback: 为什么整合性策略能在移动设备领域取得成功？ | IPOWall科技

  • Pingback: 早您 : 一天之晨 创造之始 zaonin.com » 为什么整合性策略能在移动设备领域取得成功？整合与非

  • Pingback: Samsung’s predicament - Chris Dixon

  • Pingback: 为什么苹果的软硬件一体化策略在移动时代受到追捧 | 科技推