Integrated versus

Scott Francis
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Chris Dixon’s thought-provoking post, “Why the integrated approach to mobile devices is winning” does one thing really well:  it explains why everyone thought the non-integrated approach was going to win in mobile devices.  But I don’t think it explains sufficiently why integrated is working this time:

[…] Microsoft had taken the same approach to mobile devices that they had with PCs: build the software themselves and let partners build the hardware. Google took a similar strategy with Android but then reversed course when they acquired Motorola. Apple’s integrated strategy was once widely ridiculed as a repeat of their losing 1990′s desktop computer strategy, but is now being copied throughout the industry.

He isn’t joking, using the word “ridiculed”.  So why did they think that Apple was doomed to the same fate it suffered in the PC era?

As Chris Dixon points out, largely because of Clay Christensen’s model for disruptive technology.  Many assumed that the iPhone would occupy the “excess performance” part of the demand curve, above the “Most demanding use” line:

But, it turns out that it wasn’t just the most specialized uses that the iPhone appealed to.

Chris Dixon chalks all of this up to the disruption curve – that the real issue is that these mobile devices are disrupting laptops and PCs, not just mobile phones.

I think that’s oversimplifying on why Apple’s approach is working – for which there are several reasons:

  1. Consumers are picking their own devices – even at work – which puts a greater emphasis on design and experience.  This is different from the 90’s, when technology purchases were corporate IT decisions.  Most of the 2000’s saw corporations buying cell phones (or Blackberrys) for employees.
  2. The horizontally divided OEMs lacked the profits to invest in R&D as Apple began to disrupt their business.  Last time around the OEMS were taking in more share of profits (early 90’s).
  3. Mobile Devices with iOS uncovered *new* needs that neither PCs nor older mobile phones could satisfy.  Examples:  location, GPS, mapping, restaurant recommendations, etc.
  4. Mobile devices re-introduced constraints into product builds.  Constrained build environments favor integrated OEMs in industries because they can work through all the issues as a system, rather than independently.
  5. Even Apple isn’t completely integrated. But, their philosophy leads them to a more integrated approach than most.  They strive to influence, control, or innovate on key areas of each product- rather than just depend on others’ “good enough”. (And yet, not afraid to use standard parts when necessary)

It might be the case that the non-integrated model is the more exceptional one in high tech.  Time will tell.

There are lessons here we try to take heart at BP3 – these are really interesting guideposts – even for a consulting business.

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