Color me something of a product marketing traditionalist. New products only succeed in a well defined and mature marketplace if they bring a compelling reason for competitor’s customers to switch.
Here’s how that works and how it would apply to Apple Car.
Products that challenge market leaders must improve on the overall user experience in a substantial way, and be priced competitively. Apple learned that with iPhone a decade ago and cut the price to spur demand, despite having a product with no equal in the nascent smartphone market.
Likewise, a challenger to market leaders can provide the same features and functions as a competitor but at a lower price point. Otherwise, what’s the incentive to switch? Brand is important but the basic laws of product marketing physics will apply, even in the automotive market, which is ripe for disruption.
What’s Apple’s specialty? Market disruption.
Vitaliy N. Katsenelson writing for MarketWatch:
Whenever Apple comes out with the Apple Car, it will grab a disproportionately large market share from General Motors and other automakers precisely because of that deep well of goodwill.
Apple has more than 1-billion well satisfied customers who lap up iPhones, iPads, Macs, Watch, and other goodies by the hundreds of millions each year. Will that goodwill transfer to a $50,000 electric car?
A good example of a new product coming into an existing and mature market is Tesla and the somewhat successful Tesla Model S.
I had this “Aha!” moment recently when I visited a Tesla store and saw its cars’ power train. It looks just like a skateboard — basically a flat slab of metal (which houses the battery), four wheels, and an electric engine the size of a large watermelon. That’s it — the Tesla has only 18 moving parts.
In other words, Tesla built a luxury car full of inspirational amenities on top of a simple platform that requires little maintenance; substantially different than traditional automakers.
Compare that to Apple’s original iPhone. It was a large screen on top of a very big battery, and a small chipset that ran the company’s highly acclaimed software. Not much has changed.
What is also amazing about electric cars is that they aren’t that much different from smartphones. Smartphone prices have declined significantly because their components became ubiquitous and commoditized. The simplicity of electric cars and the declining ambition of Tesla, Apple, and whoever else enters that space to be known as a “car” company will likely lead to commoditization of components and thus lower prices. Tesla today is more a software and battery company than a car company.
The similarities are notable. Apple’s iPhone was disruptive because the hardware was simple and elegant and came with software that was easy to use. That design disrupted an entire industry. What do smartphones look like today? The original and current iPhone.
Think back to the day when Apple introduced the iPhone. No one suspected that it (and the smartphones that followed) would enable a service like Uber, which is putting cabdrivers worldwide out of business.
Since then, disruption has occurred throughout various markets, thanks to the iPhone’s impact and how it leads the post-PC era. PCs are passé. Mobile devices have won.
What of the near term future?
When Apple makes its entrance into the auto industry, it will likely be successful and highly disruptive. After all, Apple has the much-needed software know-how to design a car. (Apple is already working with car companies on CarPlay, the iPhone-centered car infotainment system.) Apple boasts a global network of stores, possesses unlimited resources ($150 billion of net cash and $50 billion of free cash flows annually), and its imagination has not been damaged by decades of producing cars with internal combustion engines.
The only problem with that scenario is the obvious. Tesla has already done what Apple should have done.
Is it too late for Apple to have an impact on the market? Apple was late to retail, late to the portable music player, late to online music sales, late to the smartphone revolution, late to tablets, late to smartwatches, late to augmented reality, late to cloud services, but somehow the company seems to find a way to redefine new markets.