There have been a lot of posts lately arguing back and forth about the strength and future prospects of Apple's iOS market share, profit share, platform share, Windows and Mac historical share and so on. Too many have been filled with MBA gobbledygook, wonk talk and just plain nonsense. And there's been all too little thinking outside the box or consideration of what Don Rumsfeld might call tech's unknown unknowns.
Most typically, the downfall of a dominant market leader comes not from some incremental competition but from a true paradigm shift that turns a strength into a weakness. Here are four current Apple strengths that could turn round and undermine the whole enterprise.
1. Hardware monoculture
Unlike any other smart phone vendor, Apple creates both the hardware and software for the iPhone and iPad. That means everything just works, magic new features arrive regularly and there are no concerns about fragmentation. But that also means that there is little variety and the new product cycle is very long in smart phone terms (it looks like it's going to be 15 to 18 months between models for the iPhone right now). Apple also relies on a few key suppliers for critical parts like Samsung for screens and Qualcomm for communications chips.
I'm thinking here of a company like Kodak, that had technological leadership, economies of scale and end-to-end integration advantages much like Apple has today. But as picture taking quickly went digital, film and printing equipment became nearly irrelevant and low cost electronics manufacturing and design skills (plus deals with mass market retailers) were suddenly critical. Apple's hardware monoculture was one of its weaknesses in the middle of the PC wars, as well, when Intel chips started to outclass the PowerPC and competitors could source cheaper components. Apple itself buried the early smart phone players with its revolutionary touch screen format. Blackberry still doesn't have a decent touch screen model.
Perhaps some new form of mesh networking allows virtually free mobile calling and data plans but Apple can't update its iPhone for a year. Maybe Sony has a battery breakthrough it doesn't want to share. Maybe super-realistic three-dimensional displays become all the rage. Hard to say but Apple has put itself in a position where it might have a hard time capitalizing on breakthroughs invented elsewhere.
2. Business model monoculture
Apple's smart phone success has flourished amidst the dominant business model in the mobile phone world. Carriers pay full price upfront for phones at $600 or more a pop but sell them to customers for much less in return for lengthy service contracts at high monthly rates. That has made it very difficult for competitors to compete on price.
Broadcast television networks and station owners were once at the top of the entertainment ecosystem but the advent of cable and subscription-based pricing changed all that. Dual revenue streams are now the order of the day. Perhaps a new bundling of products or services hits the mobile market at much lower prices or a government spectrum auction empowers true open access wireless carriers. That could shake up consumer preferences. A phone with "free" lifetime mobile service backed by another revenue stream, following the Amazon Kindle business model, could be pretty compelling.
3. Status quo rights and regulations
Apple's iTunes ecosystem is currently a big beneficiary of the rules protecting digital copyrighted materials. Apple has struck deals with all the major record labels, book publishers and movie studios to get their output on iTunes' virtual shelves. And Apple under Jobs has been the most cunning, savviest and sharpest dealmaker around. Apple's hardware and software innovations themselves are also protected by high walls of patents, trademarks and copyrights.
But change happens all the time in the land of intellectual property rights. Biotech drug developers were largely immune from being undercut by generic drugs but all that is supposed to change now that the 2010 healthcare law included a plan for biologic generics. Or, on a smaller scale, look at how Apple's negotiations with book publishers to create so-called agency pricing for ebooks hit Amazon's Kindle ecosystem if not quite with a death blow with a very serious blow indeed. Consider mandatory licensing of digital content, a decision to abandon all forms of digital rights management or a pact among content makers to offer a different economic deal.
4. Brilliant, visionary leader
Without question, Steve Jobs is the greatest CEO working in tech-land today. His return to Apple in 1997 marked the beginning of the company's rise from near-bankruptcy to the overwhelming and dominating colossus we see today. And while it is certainly true that Jobs has surrounded himself with highly talented underlings like Tim Cook and Jonathan Ive, history shows the transition when the masterful CEO departs is fraught with risk. Whether it's Bill Gates or Lou Gerstner or Jack Welch, companies never make a smooth transition when the legend leaves the building.
No leader lasts forever. When Gerstner left IBM, the company's stock price stagnated for five years. Microsoft's stock price has done even worse in the decade since Gates handed over the reins to Steve Balmer. I left this one for last because it's the most predictable and previously discussed. But the impact of Jobs' departure still seems to be under-appreciated on a timescale of 5 or 10 years.
You'll notice at least one common element to all of these scenarios -- they're a ways off in the future. Only the leadership transition seems likely sooner rather than later. But even if Jobs left the company completely tomorrow, his legacy efforts would continue to bear fruit for a while. So it seems extraordinarily unlikely much could happen in the next six to twelve months to really knock Apple off its perch. At least until an unknown unknown arrives.