Fortune Magazine interviewed Jeff Bezos recently in Seattle. He drew a difference between Kindle and the iPad – “I think there are going to be a bunch of tablet-like devices, its really a different product category. The Kindle is for readers”
“Amazon accounted for about 80% of all electronic book sales last year” Amazon reported a profit of $299 million last quarter, and electronic book sales are a huge component of that. Amazon has about 600,000 books available, and sells, on average, about 24 eBooks per year, per Kindle. I understand the Kindle. (I may understand it better than investors, who have lowered Amazon’s stock since the recent Kindle price cut.) Amazon’s profit from the Kindle works like Gillette’s profit from selling its latest razors. The razors don’t matter. Sure, Gillette makes money from the latest, but the blades are the real source of profit. That article suggests it, but it is easier to understand when you realize the math behind 24 ebooks per Kindle, per year. Apple hasn’t released numbers for their iPad, but the iPad isn’t limited to books. It can download apps, music, books, and every other “blade” that Apple can make available to it.
So – back to the Ipad. From a technology perspective, from a capabilities perspective and from every other perspective, it is crystal clear that there is nothing unique, revolutionary or special about the iPad. I didn’t understand why Apple would build it or why users would buy it. It made no sense to me. The market slice is between Kindle, Nook, Droid, iPhone, Netbooks and PCs is razor thin. Why build and position a device between them?
Yet, for some reason, iPads sell, amazingly. Why? I’ve tried to make sense of the iPad. I’ve tried to figure out why and failed repeatedly. Is it the existing user base? Certainly that has a lot to do with it, but if you already have an iPod touch, an iPhone, an iPod, and an Apple Mac, do you really need an iPad? Conversely, if you have an app, or a song and it is already in the iStore, do you need to sell to the same user-base that’s already bought it? When you’ve seen Microsoft’s Origami succeed at nothing and it was essentially the iPad minus Apple’s marketing, when you’ve seen Dell and HP fail to sell touchpad computers in any real volume, and when you already have iPod, iPod touch, and iPhone – why put the money into development of an upsized iPod touch-like “me-too” device.
I’ve found the answer in a most unlikely place. I was amazed when it finally clicked. I was reading Eddie Alterman’s editorial in the July 2010 Car and Driver magazine. I thought it was such an odd place for digital and technology enlightenment. Shoot, it was in the PRINT version, and I couldn’t find a link anywhere to a web-version. The interesting thing were his thoughts about the iPad. He sees the iPad as the cutting edge slicing the distinctions between print and digital media. The iPad is a “convergence of print and digital values (that) will give writers, editors and art directors all kinds of opportunities to deliver more engaging, more entertaining and more useful stuff.”
The iPad is an animal that eats brand new kibble. Media wants to feed it. Media wants it to succeed. For every small-town or mid-market newspaper that has canned its entire local news group. iPad might be an answer for all the people who want media in the 21st century to find a way to be profitable. Eddie suggested how this one device acts as a shining star lighting up a dark sky – beating back the gloomy futures that writers feared. Creators of content and consumers of content can converge at the iPad. In that place it makes enormous $ense. For media that wants to feed the iPad in a quasi-desperate sort of staving off extinction gasp, iPads, Nooks and Kindle’s are magical. Still – does the iPad make sense for Apple?
Of course, and it goes way beyond Amazon’s philosophy for the Kindle. Look at it this way: If you could sell 3 million razors in the first 80 days - you might not need to sell any blades at all. At this point, I could buy a fair netbook for $300, a kindle for $169, and have two devices instead of an iPad. Those two devices would enable me to read anything, go wireless, Skype, run a bunch of programs, and generally do a dozen times what the iPad does. So, in those terms, the iPad makes no sense. Somehow, Apple sells millions of “that which makes no sense.” That makes enormous financial sense for Apple. iPad = $$$$$.
Do they truly have no competition able to compete with their marketing prowess and consumer evangelism?? Why not? What do you think the next Apple media-consumption device will be?
Mark Richtel has a great article in The New York Times today about “Your Brain On Computers.” In Mark’s article, and in another by Christine Lagorio on Inc Magazine, the following scenario is described:
Someone wanted to buy Kord Campbell’s startup for $1.3 million dollars. They sent him an email. He didn’t see the email for 12 days, and only saw it when he was sifting through old messages.
Most of both articles describe the kind of constant attention deficit disorder inducing characteristics of technology. They describe email, chats, web browsing and an “electronic flood.” Kord’s electronic flood is pictured here. My personal own electronic flood that looks like this:
The thing is – EVERYONE has an electronic flood. In view of that fact, losing a million dollar email… is silly.
To clarify – It is NOT silly to lose an email. I get hundreds of emails daily; I have filters that delete many of them before I ever see them and I assume MOST people have filters and volume attached to their own personal floods. What I want to more clearly say is that it is silly to begin a million dollar deal with just an email. Email has lots of great characteristics, but it doesn’t generally have any verifiable receipt. I’m not talking about doing the return receipt requested. When you fire off an email and send a message, there is really not an adequate way to know that the person you sent it to has actually gotten it. If they do get it, you really have no way to know when they got it.
Given the electronic flood that everyone now lives with: Anyone who wants to do a million dollar deal should send a paper copy, a fax, make a phone call, send a text AND follow up with a phone call and/or a face-to-face meeting. (via Skype or whatever, if there are geographical considerations) This would be a great idea for deals done via fax, mail, phone, text message, instant messenging, tweet, Facebook, or any other type of other new or old media.
Newer electronic forms of communication are tremendously convenient, but as the saying goes, there’s no substitute for being there. If the offer is that valuable, then it merits sending in multiple communication formats – and at least one of the types of communication used really ought to be a bit traditional.
When you reach out and touch someone with a valuable message, even if it is not a million dollar offer, you have a responsibility to be certain they get the offer that you sent. If a message is valuable, spend the time to make sure it gets to the intended recipient with the intended information. Put time, effort and yourself into your communication. When a message is likely to be valuable, use a shotgun approach. Send multiple formats to ensure that your million dollar offer survives the electronic flood and then like the multiple pellets in a shotgun shell, you will have a greater chance of hitting your target.
Nobody wants to miss or lose a million dollar offer.
Mark Cuban is a billionaire, and is also a big fan of Reed Hastings. I am a very big fan too,
– because Reed has a strategy for competitive advantage that cannot be duplicated or beaten by any inauthentic company. Reed’s strategy is here, and also on SlideShare.
Mark points out one key element of Netflix success is that ”almost no customers leave cable for Netflix” That is important because it means that subscribers value Netflix in addition to cable. But why not? The most important competitive advantage that gets to the heart of “why.” The complete question – to be articulate – is WHY do customers value Netflix, and why will they continue to value Netflix?
Reed reveals that on slide 21 with a simple yet effective philosophy. His philosophy is to provide the best customer service. He stakes Netflix’ success on the ability to be a service of choice, to perform with and deliver to Netflix’ customers, to lead customer satisfaction across all of his current and potential competitors. He understands the amazing depth of competition coming at him from all directions. He understands where his business is going. He thinks that having the best customer service will be his singular competitive advantage.
Even if other companies never get the value of superior customer service, it would be to everyone’s advantage if they would try. It worked for Zappos, it is working for Netflix. I guess the real question is why WON’T other companies try harder?
In this presentation, Reed gives a great overview Netflix’ history of customer service leadership, and their go-forward strategy for “running fast” as he puts it. For Netflix, running fast is a race to provide the best customer service. They win when their customers win.
I like that and admire pretty much every business that uses innovation and superior customer service as a competitive advantage. Unfortunately, I suspect the effectiveness of superior customer service as a competitive advantage is only valuable because it is so rare.
How could that be changed?