AAPL - Apple Inc.

[no_free_lunch]

With the commoditization of their existing product line, don't they need a repeat of the iphone just to maintain where they are at?  That is the problem with Apple, and most tech companies, once they get to scale they have to fight just to stay there.  Same issue with pharmaceuticals and expiring patents as well.

[Viking]

Val, I would perhaps be a little more concerned if the ipod, iphone, ipad, mac (and I will add their ecosystem as a 5th pillar) were all independent businesses offering no synergies. But they all overlap and are synergistic making the whole stronger. First time buyers of one product are VERY likely to purchase another.

 

People see Apple as the iphone company as it currently does drive the vast majority of their profits. Interestingly, 95% if iphone users plan on purchasing another iphone as their next smartphone. Why is this? Is it because of the phone or is it becasue of the ecosystem?

 

I think using Jordan is a good analogy. But perhaps Jordan as it relates to Apple, and their long term competitive advantage, is the ecosystem. Perhaps Apple is only just now entering its prime and the best is yet to come. I will be watching the June developers conference to see how they are improving their software. Looking forward to it!   

[VAL9000]

I think using Jordan is a good analogy. But perhaps Jordan as it relates to Apple, and their long term competitive advantage, is the ecosystem. Perhaps Apple is only just now entering its prime and the best is yet to come. I will be watching the June developers conference to see how they are improving their software. Looking forward to it! 

 

Yeah I am pretty excited about this, too.  I think they will do a good job with the software.  I hope it's more than just beautification.

 

[Guest valueInv]

Txlaw conveniently left the thread at the most opportune moment  ;), so I'll answer the questions:

 

 

1, What is the difference between commoditization and disruption?

Commoditization and disruption are two completely different things, don't be fooled. The word "commoditization" occurs only once in all of "The Innovator's Dilemma"

 

Commoditization takes place when products are relatively static, so they can be fungible. In the tech industry, it is rarely the case, since companies are constantly innovating. Products are constantly changing and hence, not that fungible.Thats why Christensen talks about disruptive and sustaining innovations.

 

Not every market commoditizes or is disrupted. For example, TVs have been around for decades but yet a new Samsung 4K TV is $55K. The old TVs get cheaper and cheaper, but companies keep introducing newer technologies that command a premium. As a whole, the market has not commoditized.

 

Segmentation is another way companies counter disruption. The automobile industry has been around for a century and they have used segmentation effectively to counter disruption.

 

There are tens of thousands of markets which have not been disrupted. You have just open your eyes and see.

 

 

2, What condition is necessary for disruption to occur?

 

Disruption occurs only when one condition becomes true. Vendors compete along dimensions or bases of competition (For example, for cpus - performance, power consumption, size). When a technology is introduced, the market demands more than what companies can deliver (Eg, Our computers were slow and frustrating because cpus weren't enough). Over time, innovations allow companies to catch up to market demands and then deliver more than what the market demands. It is only then that disruption occurs. Conversely, when market demands are higher than the capabilities of current products, sustaining innovations win.

 

So the question becomes - are mobile devices delivering more than what the market demands?

 

A little thinking will tell you clearly - no. There are hundreds of unsolved problems with mobile devices. Here a few:

      - The content creation problem - It is still not easy to create content on mobile devices even though people are already use them for creation

      - Siri & Google Now are in their infancy - For example, you cannot tell either to arrange a 5 day vacation to Hawaii (picking flights, hotels, cars, restraints,etc)

      - Your phone can talk to few other devices - Your car, your ATM, etc. For example, you cannot read and post on this forum through voice while commuting to work

      - Battery life

 

Not only that, there are many technologies in the works that are going to revolutionize various aspects on the smartphone. I know because my company is working on one. And I just learned that a neighbor is working on another technology that is going to completely change another aspect. There are thousands of companies doing this sort of thing. And that doesn't even include Apple - if you follow Apple closely and connect the dots, you'll see that they have a lot of innovations in the works.

 

Now, I talked about basis of competition. Most products have a handful bases/dimensions (For disk drives - capacity, size, power consumption). When one dimension over delivers, vendors compete on another, then another. CPUs used to compete on performance, until they surpassed market need. Then Transmeta introduced power consumption as the dimension and that became important. The reason why Intel is failing in mobile is that while they are good are building performance, ARM is better at power consumption. When vendors over-deliver on all dimensions, disruption occurs,

 

A smartphone is a multi-function device. Unlike other products, smartphones have hundreds of dimensions (performance, form factor, network, software, ecosystem, user experience, camera, services, security, batter life, content, compatibility and on and on.) It will take decades for vendors to over-deliver on all those dimensions i.e. for disruption to occur.

 

3, What are the two kinds of disruption? Does Apple have anything to do with the second kind?

 

The two kinds are : low end and new market disruption. People typically are referring to low end disruption. But Apple is probably has pulled off more new market disruptions than any other company. Macs ( & PCs) disrupted mini-computers; iPods disrupted Walkmans; iPhones disrupted iPods; iPads disrupted laptops.

Apple is the ultimate disruptor. And they understand it very well. That is why Cook says they are not afraid of cannibalization.

[Guest valueInv]

On the whole segmentation question:

 

http://allthingsd.com/20130503/maybe-the-low-end-iphone-is-really-a-mid-end-iphone/

 

Like I said before, I don't expect Apple to go after the low end. If anything, they will enter the mid-range.

 

Also, note the volume on the top tier in the graph. There is only one phone priced that high - the iPhone. It tells you how the other "high end" phones are doing in comparison with the iPhone. And it also tells you why Apple's marketshare is (and will be) low when you consider the total market.

[Guest wellmont]

On the whole segmentation question:

 

http://allthingsd.com/20130503/maybe-the-low-end-iphone-is-really-a-mid-end-iphone/

 

Like I said before, I don't expect Apple to go after the low end. If anything, they will enter the mid-range.

 

Also, note the volume on the top tier in the graph. There is only one phone priced that high - the iPhone. It tells you how the other "high end" phones are doing in comparison with the iPhone. And it also tells you why Apple's marketshare is (and will be) low when you consider the total market.

 

can't find any data that fresher than 6mo old? is the data global or us? you are making assumptions about the high end that's not expressly clear from the data. I could accept you making those assumption if  the data provider labled which phones were in which tier. what the article doesn't suggest is that Apple's own mid range phone could take lots of share from apple's high priced phones. :)

[Guest valueInv]

On the whole segmentation question:

 

http://allthingsd.com/20130503/maybe-the-low-end-iphone-is-really-a-mid-end-iphone/

 

Like I said before, I don't expect Apple to go after the low end. If anything, they will enter the mid-range.

 

Also, note the volume on the top tier in the graph. There is only one phone priced that high - the iPhone. It tells you how the other "high end" phones are doing in comparison with the iPhone. And it also tells you why Apple's marketshare is (and will be) low when you consider the total market.

 

can't find any data that fresher than 6mo old? is the data global or us? you are making assumptions about the high end that's not expressly clear from the data. I could accept you making those assumption if  the data provider labled which phones were in which tier. what the article doesn't suggest is that Apple's own mid range phone could take lots of share from apple's high priced phones. :)

 

Look at iPhone ASPs and the prices of the various models. Who sells the highest priced phones in the market today? Who then, is in the top tier?

 

Article doesn't say US or global. If it is global, the data speaks for itself. If it is US, then expect global to have a much higher bottom end. Either way, the conclusions stand.

[Guest wellmont]

 

Look at iPhone ASPs and the prices of the various models. Who sells the highest priced phones in the market today? Who then, is in the top tier?

 

Article doesn't say US or global. If it is global, the data speaks for itself. If it is US, then expect global to have a much higher bottom end. Either way, the conclusions stand.

 

There are numerous ways that article and graph are deficient: It's a look back in time about 6 mo (markets look ahead) and we have no idea whether it's global or US. We also don't know what phones fall into which categories. That kind of imprecision is typical of tech blog posts I realize; but usually allthingsd is better than that. even if they are extremely apple biased.

[Guest valueInv]

 

Look at iPhone ASPs and the prices of the various models. Who sells the highest priced phones in the market today? Who then, is in the top tier?

 

Article doesn't say US or global. If it is global, the data speaks for itself. If it is US, then expect global to have a much higher bottom end. Either way, the conclusions stand.

 

There are numerous ways that article and graph are deficient: It's a look back in time about 6 mo (markets look ahead) and we have no idea whether it's global or US. We also don't know what phones fall into which categories. That kind of imprecision is typical of tech blog posts I realize; but usually allthingsd is better than that. even if they are extremely apple biased.

 

The information is all there. You just need to be willing to think ;) Look at the numbers. Do you think the US market is that big?

[texual]

Lol apple and innovation are not synonyms any longer...

[Palantir]

I think you guys are overlooking the possibility that Apple's competition is going to start fragmenting. With Samsung so successful, they're going to want control, and release their own OS, which will hurt Android's market share. Windows is gaining traction slowly in this space. Apple on the other hand will have a strong and very profitable niche.

 

Furthermore, cannibalizing iPhone sales with iPhone Mini is not a concern, Apple has been willing to do just that. I would welcome the addition of a cheaper iPhone even at the expense of iPhone sales and lower margins. High margins are a consequence of Apple's dominance, but they are not a goal in itself.

[Guest wellmont]

 

Look at iPhone ASPs and the prices of the various models. Who sells the highest priced phones in the market today? Who then, is in the top tier?

 

Article doesn't say US or global. If it is global, the data speaks for itself. If it is US, then expect global to have a much higher bottom end. Either way, the conclusions stand.

 

There are numerous ways that article and graph are deficient: It's a look back in time about 6 mo (markets look ahead) and we have no idea whether it's global or US. We also don't know what phones fall into which categories. That kind of imprecision is typical of tech blog posts I realize; but usually allthingsd is better than that. even if they are extremely apple biased.

 

The information is all there. You just need to be willing to think ;) Look at the numbers. Do you think the US market is that big?

 

it's very incomplete, vague, and stale. :) other than that it's a good resource. big picture: htc one, samsung galaxy s4, note II and note III, Google X phones, and new high end lumias will be formidable challengers to apple. the mid range is ultra competitive. android and windows will continue to make inroads with tablets that are cheaper, but good enough. equity investors have pretty much sussed out the markets for smartphones and tablets for the next few years. it sees slower growth, increasing competition, and looming commoditization. apple will need something new and exciting to propel it out of 12-14 p/e range. I know. Stay tuned. :)

[txlaw]

Txlaw conveniently left the thread at the most opportune moment  ;), so I'll answer the questions:

 

Yeah, I didn't want to get pulled into a pointless debate again.  You're so in denial about Clayton Christensen and his most recent work, it's not even funny.  (Actually, it is kind of funny ;D).

 

But I can see I'm going to have to drop some science from the man himself for the board's benefit and for my own benefit -- not yours, ValueInv, as you will only see what you want to see.

 

The following posts quote heavily from "The Innovator's Solution," the follow up to "The Innovator's Dilemma" that ValueInv clearly hasn't read (and probably never will because it doesn't comport with his thoughts about Apple).  I think this exchange is educational enough that quoting a good amount from that book is fair use.

 

----------

 

From Chapter 2: How Can We Beat Our Most Powerful Competitors?

 

We call disruptions that take root at the low end of the original or mainstream value network low-end disruptions.  Disruptions such as steel minimills, discount retailing, and Korean automakers’ entry into the North American market have been pure low-end disruptions in that they did not create new markets—they were simply low-cost business models that grew by picking off the least attractive of the established firms’ customers. 

 

. . .

 

Many disruptions are hybrids, combining new-market and low-end approaches . . . Southwest Airlines is actually a hybrid disruptor, for example.  It initially targeted customers who weren’t flying—people who previously had used cars and buses.  But Southwest pulled customers out of the low end of the major airlines’ value network as well.” 

 

--------

 

This reminds me a lot of Android, which is a low cost OS that is highly functional and that initially targeted folks who couldn't afford "high end" smart phones like the iPhone.  But now it's pulling customers out of the low end of Apple's market share, especially since there is a blurring of functionality across the market segments we have discussed before.

 

More to follow . . .

 

[txlaw]

From Chapter 6: How to Avoid Commoditization

 

(Note: this is a whole chapter on commoditization in "The Innovator's Solution."  ValueInv, do yourself a favor by buying this book and reading it. ;))

 

The process that transforms a profitable, differentiated product into a commodity is the process of overshooting and modularization. . . . When [the] circumstance changes—when the dominant, profitable companies overshoot what their mainstream customers can use—then this game can no longer be played, and the tables begin to turn.  Customers will not pay still-higher prices for products they already deem too good.  Before long, modularity rules, and commoditization sets in.  When the relevant dimensions of your product’s performance are determined not by you but by the subsystems that you procure from your suppliers, it becomes difficult to earn anything more than subsistence returns in a product category that used to make a lot of money.  When your world becomes modular, you’ll need to look elsewhere in the value chain to make any serious money.

 

The natural and inescapable process of commoditization occurs in six steps:

 

1. As a new market coalesces, a company develops a proprietary product that, while not good enough, comes closer to satisfying customers’ needs than any of its competitors.  It does this through a proprietary architecture, and earns attractive profit margins.

2. As the company strives to keep ahead of its direct competitors, it eventually overshoots the functionality and reliability that customers in lower tiers of the market can utilize.

3. This precipitates a change in the basis of competition in those tiers, which . . .

4. . . . precipitates an evolution toward modular architectures, which . . .

5. . . . facilitates the dis-integration of the industry, which in turn . . .

6. . . . makes it very difficult to differentiate the performance or costs of the product versus those of competitors, who have access to the same components and assemble according to the same standards.  This condition begins at the bottom of the market, where functional overshoot occurs first, and then moves up inexorably to affect the higher tiers.

 

Note that it is overshooting—the more-than-good-enough circumstance—that connects disruption and the phenomenon of commoditization.  Disruption and commoditization can be seen as two sides of the same coin.  A company that finds itself in a more-than-good-enough circumstance simply can’t win:  Either disruption will steal its markets, or commoditization will steal its profits.

 

. . .

 

There can still be prosperity around the corner, however.  The attractive profits of the future are often to be earned elsewhere in the value chain, in different stages or layers of added value.  That’s because the process of commoditization initiates a reciprocal process of de-commoditization.  Ironically, this de-commoditization—with the attendant ability to earn lots of money—occurs in places in the value chain where attractive profits were hard to attain in the past:  in the formerly modular and undifferentiable processes, components, or subsystems.

 

--------

 

The mobile device industry is becoming modular in nature.  Google provides the OS for close to free.  Samsung and others manufacturer components and handsets.  Google and third party app developers provide the layers of added value on top of the OS.  New standards like HTML5 make it almost inevitable that modularization will win.

 

Thus, the additional functionality/problem solvers that we are waiting for comes in the form of better components, peripherals, apps and services that are attached to the OS in a modular fashion.  It is there where the money will be made, not in the OS.  For example, I look at Google Now or Siri as something that is separate from the OS – it’s an app/service.  Same thing with buying books from Amazon – the Kindle bookstore is available everywhere.  iTunes is a good example of a useful service that could be decoupled from iOS and OSX.

 

The point is that the OS is being commoditized, and it is the de-commoditized layers where we should look for profits.  Eric Schmidt said as much in his interview at AllThingsD, which I posted in the GOOG thread.

 

This poses problems for Apple’s current business model – hopefully, they will change with the times. 

 

More to follow . . .

 

[txlaw]

From Chapter 10: The Role of Senior Executives in Leading New Growth:

 

We noted in chapter 2 that most of the companies whose stock we wish we had owned in the past fifty years took root with a disruptive strategy.  A few—but not many—of these companies subsequently caught or created other waves of disruption that kept the parent corporation growing at a robust pace for a time.

 

One of our most sobering realizations is that within the population of companies that successfully caught a subsequent wave of disruption and stayed atop their industries, the vast majority were still being run by the company’s founder at the time they tackled the disruption.  Only a few companies that were run by professional (non-founder) managers have succeeded in creating new disruptive growth businesses.”

 

From Chapter 3: What Products Will Customers Want to Buy?:

 

Sony’s founder, Akio Morita, was a master at watching what consumers were trying to get done and at marrying those insights with solutions that helped them do the job better.  Between 1950 and 1982, Sony successfully built twelve different new-market disruptive growth businesses. . . . Every new product launch decision during his era was made personally by Morita and a trusted group of five associates. . . Interestingly, 1981 signaled the end of Sony’s disruptive odyssey, and for the next eighteen years the company did not launch a single new disruptive growth business. . . . What caused this abrupt shift in Sony’s innovation strategy?  In the early 1980s Morita began to withdraw from active management of the company in order to involve himself in Japanese politics.

 

--------

 

The takeaway here is that it is entirely possible that Steve Jobs was a unique individual who was primarily responsible for the new-market innovation that we all expect from Apple.  For example, if Apple’s TV venture is a success, that will be part of the Jobs pipeline -- but there’s no guarantee that there will be anything after that.

 

Therefore, if Apple sticks with its current business model, investors better hope and pray that the commoditization story is not true because that will mean that the circumstances for sustaining innovation in the OS layer do not exist.

 

This is not to say that Apple cannot do well going forward, but they will need to be more like GE, JNJ, PG, IBM, and GOOG to do so.  But they’ll have to stay on their toes because the cycle of commoditization and de-commoditization will happen again and again.

 

More to follow . . .

 

[txlaw]

Finally, let’s quote once again from Clayton Christensen’s interview at Startup Grind 2013:

 

So as a general rule, when a new industry takes root, and the first products emerge in a wave, almost always the architecture of the product will be proprietary and interdependent in character.  The reason why that those are most successful have proprietary architectures is the product isn’t good enough in the beginning for what people need.  If you try to start out with an open architecture, the modularization of the architecture takes so many degrees of freedom from the engineers that they have to make a product that’s not as good as the best, and when the best is not good enough, you can’t win that game.  That’s why we lost Palm.  They went open too early.  So you see RIM is the most dependent proprietary architecture and the iPhone is not as closed, but still very proprietary.  And then what always happens is the product becomes more than good enough for what mainstream people need.  Then coming from below, it becomes more open and modular in character.  And when that happens, then the people who have the proprietary architecture are just kind of pushed to the ceiling and the volume goes to the open players.  So in smartphones, the Android operating system and the consummate modularity now allows hundreds of companies in China and Vietnam to now assemble these things.  So it pulls in global competitiveness that isn’t nearly as intense when proprietary architectures are the norm.  Just one other thing about it:  Just like I pray for Harvard Business School. I pray for Apple.

 

http://techcrunch.com/2013/04/06/clayton-christensen-talks-venture-capital-crowd-funding-and-how-to-measure-your-life/

 

------

 

As the man suggests, let us pray for AAPL . . .

 

[SwedishValue]

Very good posts Txlaw. You are one of the reasons I signed up for this forum.

 

I guess it is possible that Apple has a permanent competitive advantage on innovation and/or attracting people. I would personally deem it extremely unlikely, but each to his own.

[Guest valueInv]

Txlaw conveniently left the thread at the most opportune moment  ;), so I'll answer the questions:

 

Yeah, I didn't want to get pulled into a pointless debate again.  You're so in denial about Clayton Christensen and his most recent work, it's not even funny.  (Actually, it is kind of funny ;D).

 

But I can see I'm going to have to drop some science from the man himself for the board's benefit and for my own benefit -- not yours, ValueInv, as you will only see what you want to see.

 

The following posts quote heavily from "The Innovator's Solution," the follow up to "The Innovator's Dilemma" that ValueInv clearly hasn't read (and probably never will because it doesn't comport with his thoughts about Apple).  I think this exchange is educational enough that quoting a good amount from that book is fair use.

 

----------

 

From Chapter 2: How Can We Beat Our Most Powerful Competitors?

 

We call disruptions that take root at the low end of the original or mainstream value network low-end disruptions.  Disruptions such as steel minimills, discount retailing, and Korean automakers’ entry into the North American market have been pure low-end disruptions in that they did not create new markets—they were simply low-cost business models that grew by picking off the least attractive of the established firms’ customers. 

 

. . .

 

Many disruptions are hybrids, combining new-market and low-end approaches . . . Southwest Airlines is actually a hybrid disruptor, for example.  It initially targeted customers who weren’t flying—people who previously had used cars and buses.  But Southwest pulled customers out of the low end of the major airlines’ value network as well.” 

 

--------

 

This reminds me a lot of Android, which is a low cost OS that is highly functional and that initially targeted folks who couldn't afford "high end" smart phones like the iPhone.  But now it's pulling customers out of the low end of Apple's market share, especially since there is a blurring of functionality across the market segments we have discussed before.

 

More to follow . . .

 

 

I have it and I have read it. But since you seem to have access to the electronic copy, could you post the last paragraph of page 55?

[Guest valueInv]

He has some interesting ideas on segmentation - page 75. Could you post that and tie it to comparing features of smartphones that you and Val9000 like to post about.

[Guest valueInv]

Could you also post the section on page 135? It stays interesting thru page 140

[Guest valueInv]

From Chapter 6: How to Avoid Commoditization

 

(Note: this is a whole chapter on commoditization in "The Innovator's Solution."  ValueInv, do yourself a favor by buying this book and reading it. ;))

 

The process that transforms a profitable, differentiated product into a commodity is the process of overshooting and modularization. . . . When [the] circumstance changes—when the dominant, profitable companies overshoot what their mainstream customers can use—then this game can no longer be played, and the tables begin to turn.  Customers will not pay still-higher prices for products they already deem too good.  Before long, modularity rules, and commoditization sets in.  When the relevant dimensions of your product’s performance are determined not by you but by the subsystems that you procure from your suppliers, it becomes difficult to earn anything more than subsistence returns in a product category that used to make a lot of money.  When your world becomes modular, you’ll need to look elsewhere in the value chain to make any serious money.

 

The natural and inescapable process of commoditization occurs in six steps:

 

1. As a new market coalesces, a company develops a proprietary product that, while not good enough, comes closer to satisfying customers’ needs than any of its competitors.  It does this through a proprietary architecture, and earns attractive profit margins.

2. As the company strives to keep ahead of its direct competitors, it eventually overshoots the functionality and reliability that customers in lower tiers of the market can utilize.

3. This precipitates a change in the basis of competition in those tiers, which . . .

4. . . . precipitates an evolution toward modular architectures, which . . .

5. . . . facilitates the dis-integration of the industry, which in turn . . .

6. . . . makes it very difficult to differentiate the performance or costs of the product versus those of competitors, who have access to the same components and assemble according to the same standards.  This condition begins at the bottom of the market, where functional overshoot occurs first, and then moves up inexorably to affect the higher tiers.

 

Note that it is overshooting—the more-than-good-enough circumstance—that connects disruption and the phenomenon of commoditization.  Disruption and commoditization can be seen as two sides of the same coin.  A company that finds itself in a more-than-good-enough circumstance simply can’t win:  Either disruption will steal its markets, or commoditization will steal its profits.

 

. . .

 

There can still be prosperity around the corner, however.  The attractive profits of the future are often to be earned elsewhere in the value chain, in different stages or layers of added value.  That’s because the process of commoditization initiates a reciprocal process of de-commoditization.  Ironically, this de-commoditization—with the attendant ability to earn lots of money—occurs in places in the value chain where attractive profits were hard to attain in the past:  in the formerly modular and undifferentiable processes, components, or subsystems.

 

--------

 

The mobile device industry is becoming modular in nature.  Google provides the OS for close to free.  Samsung and others manufacturer components and handsets.  Google and third party app developers provide the layers of added value on top of the OS.  New standards like HTML5 make it almost inevitable that modularization will win.

 

Thus, the additional functionality/problem solvers that we are waiting for comes in the form of better components, peripherals, apps and services that are attached to the OS in a modular fashion.  It is there where the money will be made, not in the OS.  For example, I look at Google Now or Siri as something that is separate from the OS – it’s an app/service.  Same thing with buying books from Amazon – the Kindle bookstore is available everywhere.  iTunes is a good example of a useful service that could be decoupled from iOS and OSX.

 

The point is that the OS is being commoditized, and it is the de-commoditized layers where we should look for profits.  Eric Schmidt said as much in his interview at AllThingsD, which I posted in the GOOG thread.

 

This poses problems for Apple’s current business model – hopefully, they will change with the times. 

 

More to follow . . .

 

Could you post the 5 steps on page 153 of de-commoditization? Did you forget that part?

 

You talk about Samsung and others as manufacturing components as examples of modularization. Problem with that is they have been doing that since the day iPhone was introduced. Apple has not manfactured components yet, but they are going to play a bigger part in it.

 

OS commoditization is a problem for RIM and MSFT, not Apple. Apple does not sell an OS, the sell a device with end-to-end integration including the services and the content delivery.

 

People are moving away from HTML5 to native apps. Ask Facebook, LinkedIn and hundreds of others who had HTML5 apps but switched back to native.  They will tell you.

 

But you are again distracting and diverting away from the core issue: Disruption happens only when vendors overshoot. Yet, you have produced little evidence of overshooting.

[Guest valueInv]

By the way, what is this "law of conservation of attractive profits?" How does that effect an vertically integrated player like Apple?

[Guest valueInv]

Btw, here is an article from the coauthor of Christensen's latest book:

 

http://blogs.hbr.org/cs/2011/10/steve_jobs_solved_the_innovato.html

 

One thing I can say is that he understands Apple's motivations very well.

[Guest valueInv]

And here is Christensen himself, on Apple:

 

http://blogs.reuters.com/great-debate/2011/08/29/jobs-made-apple-great-by-ignoring-profit/

[Guest valueInv]

And his views on Apple:

 

http://www.bizjournals.com/seattle/blog/techflash/2013/02/disruption-guru-christensen-why.html?page=all

 

Funny he should mention that the value is in manufacturing - Apple invested $10 Billion capex n "manufacturing and process engineering" last year.

 

Incidentally, one of the thing I got wrong in my 2007 analysis of the iPhone was the proprietary nature of the iPhone. I believed that competitors wouldn't catch up because of the proprietary tech inside the device. Turned out, that it was based on off the shelf, modular components which competitors had access to also.

 

The proprietary components and only now starting to be built. You shall start to seem them appear starting the next release or so.

 

Interesting, his comments on Tesla - so far they are going the opposite way he is predicting and they are extremely successful.