Dave Brakoniecki’s post on Nokia, Apple, and the Commodity Trap takes issue with Henry Chesbrough’s argument that Nokia had fallen into a commodity trap – essentially that it was not thinking about its business as a service business.

But Dave argues that actually, the problem is that Nokia’s market has been commoditized at the low end by contract manufacturers around the world, and at the high end, by Apple and Android, which commoditized the app business:

While it was asleep, contract manufacturers made the fabrication of complex and high-quality products a commodity business.  As Chesbrough correctly notes this trend has eroded Nokia’s competitive advantage and their position in the market.  [...]

Ironically, at the other end of the market, Apple and Android have also commoditized the market, just a different market.

Yes, they are selling premium hardware but the handset market has always been heavily subsidized by telecom providers in exchange for long-term contracts.  [...]  First, Apple and then Android essentially commoditized application development in a way Nokia never managed.  Apple and Android have made the mobile data services market explode.

By including a usable browser and making app installation plug-and-play, suddenly anyone could build a data service.  There really isn’t that much the iPhone does that you couldn’t achieve on the Nokia N95 but the amount of effort and development pain involved simply made it pointless.  The pain outweighed the utility until Apple made it easier.

Put another way – Apple has commoditized its complements – application development, for example – more effectively than Nokia has.  And if you can commoditize your complements, then commoditizing is a good thing.

Apple’s net profit from iPhone’s exceeded Nokia’s by approximately 50% ($1.6B in net for Apple, $1.1B in net for Nokia). Its the first time Apple’s net profit in phones exceeded Nokia’s, and it is a dramatic reversal. Just 7.4 million phones generated this profit for Apple. Nokia sold 108 million phones to generate its $1.1B.

The way things are headed, Nokia and others may have more volume, but Apple and RIM will have substantially all the profit.  This is similar to what’s happening in the PC world, where Apple has a stunning 90% share of computers that cost over $1000, according to NPD reports.  Meanwhile the profit is getting sucked out of the rest of the PC business by netbooks and lower cost laptops.

Meanwhile, the AppleInsider has a really interesting comparison of the business models of Apple’s iPhone and Google’s Android phone.  It points out that while Google’s model has some advantages, there are also some disadvantages – no control over the Android brand, for one, and lack of clear accountability to fix customer issues once they have an Android phone.  AppleInsider points out that one bad Android phone can tarnish the brand – which is true of the iPhone as well, but the difference is that Apple has control over what gets released with the iPhone brand, but Google can’t exercise the same kind of control over Android derivatives.  I can’t help but think that the fragmented market of Android phones will only be an advantage if collectively the phones can evolve faster and take advantage of new technology faster than Apple’s iPhones… but so far technology adoption hasn’t been the problem – user experience has been the problem.  And it seems like Apple still has the edge there.