Kindle Fire vs. Apple iPad: A Story in Innovation Strategy


First, after a year away I am back to blogging. More to come on what I have been up to for the last year, but until then, please read on…

After reading tons of stories on the recent Fire launch and why we should “thank Amazon”, I found myself asking a different question: What is the innovation rationale for each product and will the Fire win or lose?

Wikipedia

Well it is hard to say for certain, but I will take some leaps to explain one view. It would seem that Apple had been eyeing the tablet space for some time and watched as other companies from HP to Toshiba had tried. In 2005, I was party to meetings where Intel and Asus were shopping 7-9″ screen devices to all manufacturers trying to drum up support for the form factor and their respective piece parts. What makes Apple’s story seemingly unique is that the consumer and the experience seemed to be at the heart of innovation as oppose to the previous attempts that were PCs made to look like a tablet (See picture of early HP design).

Why is this important? Well knowing the rationale for the innovation may give us all a window into how successful each will be. If Apple was starting with consumers and trying to build a better experience that was neither satisfied by the line of computers or new iPhone, what was Amazon’s rationale?

Amazon’s rationale seems to be more focused on a retail-dominate strategy, trying to increase the points of purchase (or store fronts). This is to say that Amazon as a e-commerce retailer has dominated its channel as the Best Buys and Circuit City’s of yesteryear did in physical stores. With increasing consumption and purchase occuring in mobile platforms versus on a computer, Amazon’s business model is under attack, especially in digital consumption. The primary competition in mobile purchase is Apples iTunes and App Store and with well over 100 million iPhones on the global market and 25 million iPads, Amazon has a lot of ground to make up.

To be fair, Amazon may feel that price conscious consumers will flock to the device. This is probably true for a mass market approach that make great holiday gifts, but will they still be happy with the device 6 months from now? As their recent earnings announcement and great analysis points to lower margins for some time to come and the company alludes to a “razor-razor blade” approach to making money, the strategy will only work if consumers continue to use the device and purchase at or above those that purchase the iPad and other devices. Is Kindle Fire really going to attract the most valuable consumers of digital content?

As a final rap up, the innovation rationale has delivered two different approaches to business that will make a great case study over the next year. Keep watching as consumers cast their votes (purchases). My bet is Apple wins and the Fire may turn out to be the next Zune.

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2 thoughts on “Kindle Fire vs. Apple iPad: A Story in Innovation Strategy

  1. As Alan points out, Apple and Amazon represent an interesting intersection of different strategies. Apple’s roots go back to the beginning of personal computing and Amazon’s to the initial widespread use of the internet. Apple has continuously put useful technology into the hands of computer users, with an emphasis on simplicity and enabling creativity. This powerful combination has revolutionized many other industries, particularly film and photography. Their ability to understand, deliver, and exploit each wave of technology has consistently left other giant, capable industry titans gasping for air. IBM, Gateway, Dell, Compaq and Hewlett-Packard were not able to keep up. The relatively recent expansion from computers to ipods, tablets, iphones and nano devices has extended their hardware/software combination deep into many homes worldwide.

    Meanwhile, Amazon has focused on selling products over the internet. Their strength is more in utilizing the technology than providing it for the use of consumers. Their competitive aim has been very focused on the print world, particularly selling books. Their competitors have been Barnes and Noble, Books-A-Million, Borders, and other physical print booksellers. Amazon has been brilliantly positioned to make a seamless transition from physical print to the virtual ebook. As this transition has finally started to get legs after many tablet-like ebook products failed, the reason for the recent ebook success has been the iPad. Previous ebook incarnations have been high in expense, low in function, and lacked versatility. The iPad is not inexpensive, but it is high in function, versatile and, probably most important as we anticipate the demise of the printed word, ubiquitous. Unfortunately for Amazon, the Kindle is not in the same league as the iPad and their company does not have the capability to effectively compete in the fast changing hardware/software market.

    The next battle, already underway, is based upon who gets paid for delivering content. Amazon’s Kindle is a successful strategic move against the physical print world, but only a poor tactical move against Apple’s iPad. If the choice is based upon the physical product, Amazon has lost and Apple has won already. The true battle lies, as Alan alludes to, in the “razor blades” – which in this case is the ebook content. Within that world, Amazon does have a powerful, if little touted, strategic advantage. CreateSpace is an Amazon.com company that allows authors to self-publish. Without going through all of the steps in this quickly moving world, authors – large and small – are cutting out agents and publishers in favor of self-publishing. This squeeze play on the former gatekeepers will open up a wealth of new creative content.

    Apple and Amazon are intersecting, but may be headed into different, non-competitive spaces. NetFlix supplanted BlockBuster with a greater breadth of offerings for a much more reasonable price. Amazon is supplanting the bricks-and-mortar stores, but will Apple supplant Amazon as an ebook provider? While Apple has done this with iTunes, it remains to be seen whether they will be interested or able to take over the virtual print world.

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