Analysis of the idea of the applicability of the phenomenon described in the popular book by Clayton Christensen to the current situation in the smartphone market.
There are two unrelated trends in the smartphone world right now. There is Apple, which is increasing its share in smartphones in many regions, increasing the average cost and luring users Android to its 'camp'. And there is Samsung with a very different situation. Samsung's mobile division is experiencing virtually all of the hardships of competition in mature markets. Unsurprisingly, the company got it wrong. Here's a key argument:
The increased marketing budget, including the cost of the discount program, did not translate into the sale of premium devices that generate more revenue. Samsung is investing in computer processor factories while trying to 'revitalize' Galaxy lineup sales with a new payment service and is releasing flagship devices at least a month before the new iPhone is released to 'steal' from Apple a slice of market share.
The text also talks about a good level of sales of smartphones in the price range of about $ 150 and the failure of sales of flagships. The aggregate average cost of a Samsung unit, based on 105 million units shipped (of which 84 million were smartphones), was $ 180. Samsung suffers from an 'innovator's dilemma'. And no amount of innovation will fix the situation, because in the 'camp' Android the understanding of a 'quite good' device has already been strengthened.
This concept is understood as the following trend: as the market 'matures', competitors begin to crowd out the first innovators with cheaper products with similar significant characteristics and eat off the market share from the pioneers in their category. Once 'quite good' devices enter the market, it becomes very difficult for pioneers to push innovation at a premium level, as their value is lost due to the transition to 'quite good' products. For the mass consumer, these are Android – devices in the $ 200-400 range, which leaves Samsung products priced at $ 600 or more in a disappointing position.
One of the most interesting observations is the fact that the described problem should have affected Apple. This principle was perceived by those who are short as fundamental. Why buy iPhone when the smartphone market is filled with good enough and inexpensive devices? Still, the problem affected Samsung, not Apple. The most important lesson here will be the applicability of the 'innovator's dilemma' directly to Android, since all hardware manufacturers use the same OS. As I like to say: when you release a device on the same OS as your competitor, you are good until a cheaper option appears. This is the curse of the modular business model. This is why Samsung was hoping for Tizen. They foresaw it. I learned about this from our conversation with company representatives in 2013, during which I was convinced that this is their fate if they continue to bend under Android. Unfortunately, their only option is the fast-growing one Android. Let's try to predict: Samsung will exit the smartphone business within the next five years.
A new pricing line for the premium category Android – smartphones hover between $ 300 and $ 400, and for the general public, the price cap is less than $ 300. These prices will negate progressive innovations, which will lead to a widening gap between iPhone and Android – smartphones. This is one of the elements of the analysis of potential growth points for Apple.
The role of Android is to attract everyone to the Internet with a computer in their hands, and this is an important task for the benefit of humanity. With Android, millions of people will experience the benefits of the online economy and increased access to financial services. Android – Devices will become incredibly 'capable' and endowed with great technology in the 'premium' price range of $ 300-400. But the 'innovator's dilemma' will make it much more difficult to turn true top innovations Android into a source of profit. A similar trend is already evident in a part of the market, where most component manufacturers, in search of profit from advanced innovations, are working hard to defeat Apple, knowing that the only winning solution for them can only be a design that will give a chance to return on investment in flagship solutions.
The case of the 'innovator's dilemma' needs to be studied separately, it is a rare phenomenon that is not typical for all players in the category, but only for those who have chosen a modular philosophy. Apple is not amenable to outside forays precisely because of the philosophy of interdependence. If the devices Apple worked on Android or Apple would sell an OS license to their partners, then all the dynamics mentioned could be applicable to them, which would not allow sell iPhone in large quantities at a price above a certain threshold. In the case of the 'innovator's dilemma' and Android, adequate business theory is needed, but the wisdom is to know and understand when this trend applies.
Original material by Ben Bazharin.
An interesting attempt to substantiate a kind of stagnation in the segment of flagship devices, which, however, does not negate the fact that more and more people are beginning to understand that devices of the mid-price range that seemed before this are quite capable of performing almost all the same tasks as the flagships. Fed up, and maybe become less demanding of the device, but the tendency is taking place. The forecast for Samsung to stop working on smartphones is somewhat puzzling, it seems to me that the company still has something to surprise us with.
Strong middlings who are 'quite suitable' for users can squeeze out competitors from the big players, especially given the growing popularity of the gray market for such devices. And one cannot cope with differentiation here, it is necessary to make users believe in the advantages of flagship solutions over “quite good” ones. Otherwise, the described trend will not keep itself waiting long and the current leaders will begin to lose their shares in total sales.