In his HBR article ‘Amazon’s Kindle Fire Is a Disruptive Innovation’ Rob Wheeler argues that the Kindle Fire could disrupt Apple’s iPad.
- it has less features, and is cheaper
- it supplies low end customers, potentially cannibalising the high end tablet market
- Apple may think an inferior product could never slay them, hence not act appropriately
- Apple may continue to play the iPad game for years to come and focus on incremental innovation, i.e making better iPads
I’m of the opinion that the Kindle Fire is not a disruptive innovation, and I’m of the opinion that Apple does not run a great risk of being over taken by Amazon in that market segment.
Let me tell you why.
By definition the Kindle Fire is not a disruption
A disruptive technology is one that, when introduced, either radically transforms markets, creates wholly new markets, or destroys existing markets for other technologies.
Although the Kindle Fire undoubtedly has a market, it’s not radically transforming a market, this has already happened, nor does it destroy markets for other technologies, it’s simply capitalising on technologies already available.
A cheap product is not automatically a disruption
Competitors have always developed cheaper versions of an original innovation; think portable printers, DVD players, and digital cameras. This does not mean they are disrupting an industry and/or an organisation; they are simply competing through a different strategy. Call it a ‘me too’ strategy, or a ‘lower price’ strategy, or as I suspect is the case with Amazon, a ‘Gillette’ strategy, where the hardware is sold at a loss as the revenue is recuperated from another source, e-books.
Being expensive works if it’s a strategic choice
Disruptive theory describes a concept called ‘what goes up can’t come down’. What that means is that as an organisation grows, so does their cost structure forcing them to increase the price of their products and solutions. At this point they can no longer serve the lower end of the market, even if they would like to, and run the risk of being disrupted by a different solution answering the same need.
However, this is not the case with Apple. They are expensive because they are in the game of being the market leader in terms of innovation and distribution – this will always be reflected in the products you develop, markets you target and the price you charge. I don’t believe for a second that Apple is interested in competing on the lower end of the market. Not doing so is a strategic choice, and not a decision driven by the fact that their cost structure prevents them from offering cheaper solutions.
Corporate arrogance can be good
Rob Wheeler makes a valid point about how dangerous it is to think that an inferior product could never slay a giant. This indeed can lead to arrogance, organisational complacency and finally extinction think gaslights, Singer, and Kodak.
The risk of becoming obsolete through complacency happens when the incumbent is unaware of what is about to happen, example Nokia with the iPhone launch. I don’t believe for a second that Apple did not expect cheaper versions, or copies, of their product to be released. It’s basic business that when you innovate someone will launch a cheaper version, think DVD’s, digital cameras and printers.
Disruptors don’t just incrementally innovate
The important question is therefore not how Apple will react to the Kindle Fire; the important question is what they will develop next! And let’s face it, Apple has shown in the past that it is a true innovator or we would not have the tablet. And Apple has shown in the past that cannibalising its own products in the name of innovation is not a problem to them, or the iPhone would not exist, clearly making the iPods irrelevant in the long run.
So I suspect Apple will be more concerned about what they are going to do next, than by how much market share is gained by the Kindle Fire.
Rob Wheeler ends the piece by asking what would the market gurus and Wall Street analysts think of Apple launching a cheap product to compete with Amazon.
I don’t know what they would say, but I do know what I would say, I would say the same thing to Apple as I say to all our clients at this fluid world, continue to ignore competition and do your own thing, continue to innovate, shape and disrupt markets, continue to develop shiny objects of desire as Jonathan MacDonald calls them, don’t be distracted by other market leaders pursuing their own strategy, which by the way is exactly what I think Amazon is doing.
But then I’m not a guru, nor do I work on Wall Street