Tag Archives for technology

2 Reasons for Apple’s Distortion on Tech Sector Profitability

I received the below chart from Business Insider Monday, which highlights that without Apple the technology sector profits would be down 3% this year vs. with them profits are up 7%.  Why is Apple out performing and at such a degree against the back drop of all other technology sector companies?

Source: Chart of the Day from Business Insider
Without Apple, the tech sector's profits would have been off by 3% in 2011, according to this chart from Barclays Capital. With Apple, profits are up 7%.

There are many possible explanations and many have come before me trying to explain either the “Steve Jobs effect” or that the Apple  brand is the main component. Two points I think are at play are 1) differentiation and 2) marketing capabilities (the Big “M” marketing not marketing communications). And yes, brand is at play and I will show you that too.

First consider this statistic on differentiation, 80% of managers say their company is strongly differentiated but only 10% of customers agree (C. Zook and J.Allen, “The Great Repeatable Business Model”, Harvard Business Review, November 2011).  I think this is more true than most technology executives would allow themselves to admit. Unfortunately for those companies, this is within any organizations full control to find relevant differentiate in their respective markets.

Source: Chris Zook and James Allen, “The Great Repeatable Business Model”, Harvard Business Review, November 2011

The second is marketing capabilities, Keen’s body of academic research we know that a 1% increase in market orientation and marketing capabilities yields a 6% increase in return on assets. This coupled with a brand impact for Technology firms where 1% increase in brand equity drives over $650 million in additional cash flow the next year or over $1.3 billion in market capitalization.

Source: Keen Strategy Research

The bottom line is Apple is excelling at creating meaningful differentiation and has built the right market orientation and capabilities to manage the business and as a result the brand. Apple is also taking advantage of arbitrage (whether they realize it or not) because in the technology sector companies just are not as good on these dimensions and hence there is more upside for a firm that can get this formula right.

iPhone iMessages don’t count towards your text usage

Business Insider Chart of the Day

I like to think I am ahead of the curve on understanding technology and especially wireless, but some how this iOS feature for iPhone to iPhone messaging did not get through. iMessages do not count towards your text usage. 

This is doubly painful since I recently upgraded my plan to include unlimited text on our family plan because my lovely wife has all but left email behind and replaced with texting. Maybe I should reconsider?

Anyway, I would love to know why I haven’t heard about this until now? Was it downplayed by Apple because it wasn’t inclusive of Android and other phones? Or was it an attempt by the carrier to push cost back to Apple (their user are notorious for high data usage vs. compressed data from Blackberry devices), which has now backfired (lowering the need for text plans)?

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Mac vs. PC: truth in advertising hurts

I could not help sharing the new Mac ad called “elimination” from Apple:

Disclaimer: I switch back to a Mac a little over two years ago and I believe I made the right decision for me.

Bottomline:

Why this ad works is it because it is based on truth or at least perceived truths and I would argue that in a consumers mind these are the same. What is Microsoft‘s next play? Who knows, but I would encourage them to focus on the core product to increase stability and work with partners like Dell, HP, Acer and Lenovo to clean up the messaging for the “PC” solution.

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Differentiate or be commoditized

This is the second in a series of short posts related to The CMO Agenda research. Informed by recent CMO conversations and CMG Partners‘ collective experience helping top marketers develop marketing strategy, we have compiled a list of seven ideas or jump starters for further conversation. These are meant to spark discussion, ideas, and action as we all enter a difficult 2009.

True differentiation is increasingly hard with faster moving markets and better-educated shoppers. This means the task of constantly exploring whether your products and services stand out in the mind of the consumer is critical.

How will you differentiate for the long-term?

Forecasting the “death of the American Brand” as one CMO said, forces you to think about the private label explosion and house brand strength by the likes of Target and big chains. These house brands are successful because very little separates them from the old standards.

This trend is happening in everything from CPG to Computers to Insurance. Dell rode the wave as it commoditized the PC market, which now tries to find a sure footing again. Even service markets like insurance are seeing this trend as GEICO and Progressive lead the charge to commoditize auto insurance and drive down prices — even large cost-ridden competitors are following them in this practice.

In this tough economic market, for many the first reaction is to discount or attempt to push value and rationale messaging, but marketers need to understand the long-term impact. It is time to reassess the market and understand current strategic impacts to make decisions and trade-offs on how your company can differentiate in a unique way.

Mirror post at cmgpartners.com/blog

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TiVo on the slide; is this a death spiral?

In TiVo Swings to a Profit posted by The New York Times, it is clear the TiVo continues to shrink. It is a sad day for the small technology brand that could. Subscribers are now at 3.5 million from a peak of 4.4 million. Net subscriber additions are down and have been shrinking all year long.

Net Adds for TiVo Service as reported by tvbythenumbers.com

Net Adds for TiVo Service as reported by tvbythenumbers.com

The cable companies are the major immediate threat and have been, but in the larger context Apple (iTunes), Hulu, YouTube and other similar services are changing the consumption behavior for video content.

See my last post Netflix & TiVo join forces, it does not seem TiVo is positioned well even in the strategies they are employing to get out of this tough spot. It is time to rethink the business model.

The Bottom Line:

TiVo needs to pull themselves out of this death spiral, but it will take grand action not incrementalism. They could become a software and information services provider for the competition (cable and satellite TV providers). Cable companies love to outsource this type of thing and they have been on a whirlwind of deals to work together in wireless communications, advertising networks, and interactive TV initiatives.

Strike one for Google, death to Yahoo!

Google the #1 search engine

Google the #1 search engine

In yesterday’s article “Google Won’t Pursue Yahoo Ad Deal” from The New York Times, it was reported that the Justice Department did not approve of the deal thus Google stepped away from the deal. This was strike one for the world dominating search powerhouse. Don’t read this the wrong way, I love Google. I probably love them more from stepping away from this deal and tarnishing their image as a force for good vs. corporate moguls. They know the rules and are agreeing to play by them… more companies should do the same.

More importantly, now Yahoo! is in a jam. Their options are limited – reconsider Microsoft or potentially AOL merger or the slow progression of turning the business around. I think most likely they will find a suitor since they are a product of the early internet revolution and deal making is in the psyche.

Netflix & TiVo join forces

The Wall Street Journal just ran a story on the collaboration between Netflix and TiVo (http://online.wsj.com/article/SB122533284014583011.html).

This is a brillant play by both companies….

For Netflix:

  • Increased distribution to an avid fan base of TiVo users, who are by definition lead technology users (assuming they are not one in the same)
  • Providing a home entertainment device option for streaming content (Apple is looming with their Apple TV solution coupled with iTunes software)
  • Provides a proof point for the satellite and cable companies to deliver their content library

For TiVo:

  • Provides relevance again… the cable companies are really eating their lunch
  • Provides value by association (to something that is cool now) to an avid fan base
  • Differentiation in a commodity consumer electronic space

The bottom line: I think Netflix gets more out of this partnership strategically and could position them as a content supplier “middle man” between the movie studios and those companies that own the living room (e.g. Cable and satellite companies). If Netflix does not capitalize on this though, the TiVo outlet will probably not perform to the level that makes this a breakeven deal.