The cellphone SKU wars: Why Apple isn’t like Nokia
Mon, Apr 20, 09
There’s a strange blindness that obscures U.S. blog and news coverage of iPhone. If the measure was mindshare, iPhone would be the world’s most important handset. But based on market share, iPhone is a tiny fish in a pond of larger, wiser fish. Nokia is biggest of them all. Marketshare matters — and it will matter more as Nokia launches its Ovi Store rival to Apple’s App Store…Nokia shipped more than five times as many handsets in a single quarter than Apple expected to ship for all of 2009. Perhaps iPhone is more water bug than tiny fish in that big pond.
Nokia is the poster child of those whose incurable fetishism is market share. It recently announced shipments of 92.3 million handsets in a single quarter, for a 38% global share. Apple, on the other hand, has sold only a total of 17 million iPhones (and 13 million iPod touches) in nearly two years for less than 2% global market share.
What if Apple operated like Nokia?
There are many differences between Nokia and Apple, of course, but none more telling than these two pictures:
Those are just a tiny fraction of more than 220 different models of Nokia phones in circulation. Apple, on the other hand, sells a single cellphone model:
That’s it. One model (with more or less memory, black or white) for all demographics and markets, here and abroad.
What never shipped
Steve Jobs has famously said that he is proud not only of the products Apple has shipped, but also the products Apple has decided not to ship. Indeed, had Apple listened to its competitors, analysts and pundits, it would have shipped a plethora of devices two years ago, including:
It’s the SKU, stupid!
With so many products, Apple would have had to research, design, manufacture, quality check, ship, stock, market, track, analyze and upgrade at a level of expenditure an order of magnitude higher than what it currently has for a single product.
SKU promiscuity is a sucker’s bet, as is the opportunity cost of behaving like Nokia. By spreading itself far too thin over 220 SKUs, Nokia inevitably fell short of a vision and ability to innovate, getting blindsided by the birth of the truly usable handheld computer, also known as the iPhone.
Indeed, Nokia’s greatest asset — its market share — has all of a sudden become an albatross around its innovation neck. The vast majority of its devices in the market are dumb phones running an aging OS, incapable of competing with web-surfing, multi-touch, multi-media and multi-purpose devices of the burgeoning ‘smartphone’ genre. Reliant on volume and distribution for over a decade, Nokia has finally become the Microsoft of cellphone industry: ubiquitous, lethargic and beholden to its user base and SKU outlays.
In contrast, Apple uniquely leverages what’s essentially a single OS across desktop, server, mobile and set-top devices. Each innovation and improvement can not only quickly propagate across platforms through shared frameworks, but can also closely integrate them further to create the ‘halo effect’ that sells more Apple products. If Nokia’s strategy is ‘segment and conquer’ Apple’s is ‘integrate and cross-sell.’
And one more thing…
Nokia reported a 91% drop in Q1 earnings per share.