Let’s take a look at the “conversation”, piece by piece.
“Ken: “Apple really needs to do a Netbook.”
Me: “Yes, now. It’s the biggest growth category in laptops. They’re missing out on a big opportunity to take Windows’ share away.”
Mistake number one: A focus on market share. Even in 2009, it was obvious this wasn’t Apple’s focus . In its lean years, the company had learned that you could survive happily on market share of a single digit, and that what was important was simply profit. If you were profitable, you lived. If you weren’t, it didn’t matter how much share you had.
Ken: “Apple keeps saying it doesn’t want to go near the low-end and make crappy notebooks with low margins. Would tarnish the brand, hurt the bottom line.”
Me: “They’re lying. They know they have to go there.”
Mistake number two: Thinking Apple will make crappy products to grab share. Apple’s made its fair share of duffers over the years, but since the end of the Amelio era they’ve tended to be few and far between – and I can’t think of a single example where the product has been crap because Apple has tried to create something cheap with a low margin. Apple just doesn’t do that anymore. Instead, the company focuses on building the best things it can, and if it can’t make something “good enough” at a specific price point, it just doesn’t enter that part of the market.
The best example of this is the way Apple introduced new variants of the iPod. The original iPod was expensive, by the MP3 player standards of the day, but was also significantly better than anything else on the market. When the company extended the range and hit lower price points, it didn’t do so with something crap: the iPod mini was a better iPod, and cheaper. The iPod nano was much higher quality than its competitors. None of the iPods ever felt like “me too” products. None of them ever felt cheap. And none of them were crappy products with low margins.
Me: “So they slap a little design flair on the thing, put one model out for $599 and another for $699. Sure, the Windows version would cost you $350-$450, but I’d have no problem paying the Apple premium on one of these.”
Mistake Number Three: Thinking design is something you “slap on”. There’s a phrase for this view of design: “putting lipstick on a pig”. It’s not what Apple does – or at least, it’s not what the Apple of 2014 does. It used to be what it did, back in the early 1990’s, and it’s one of the things which almost killed it. The likelihood of Apple starting to just put lipstick on pigs again is about the same as pigs growing wings and flying.
Ken: “A lot of people would pay $599 for an Apple Netbook.”
Me: “No one’s buying the Macbook Air at $1,800.”
Ken: “I wouldn’t say no one.”
Me: “OK, but it’s sort of the Apple TV of laptops. It’s just not that relevant. Most people would prefer buying a more powerful notebook that weighs a little more for a grand.”
Ken: “I agree. I almost bought an Air when it first came out, but I’m glad I didn’t pull the trigger.” [Note: Ken uses a MacBook Pro but he wants a Netbook for nonbusiness travel].
Mistake Number Four: Failing to understand how Apple pioneers product categories. Sometimes, Apple will produce something which is a little expensive, but which effectively reshapes or creates an entire product category. In the case of the MacBook Air, that category was what we now call ultrabooks: something expensive, high-margin, but thin and light.
Me: “Apple always talks about design–and they do have great designers–but what people want now is cheap. As I said, this thing doesn’t have to be a masterpiece. I’d rather see them keep things simple and elegant and keep the cost down to $599.””
Mistake Number Five: Believing mature markets are solely price-sensitive. Where to go with this one? It’s so obviously false that it almost beggars belief. No matter how tough the market, there’s always someone buying a £50,000 Mercedes rather than a functionally-equivalent £20,000 family car. And there’s always someone who will pay $2000 more to get exactly the model they want, even though it’s functionally the same as the cheaper alternative.
The thing which makes Carnoy’s post brilliant is how it manages to encapsulate every way of misunderstanding what Apple is about, while also misinterpreting the signs of the overall market. It’s not that Carnoy was an idiot – I’m sure he wasn’t, and isn’t – it’s simply that everything in his post illustrates how easy it is to get tech punditry wrong when talking about Apple. This is a company which has grown because it defied expectations, bucked trends, and followed its own path. If you want to write about Apple, this is the first thing you should always bear in mind.