Apple’s Success Using a Simple Model
In his article, The Story Behind Apple’s Success, Andrew Beattie describes Apple’s rise since its founding and gives insights into what strategies have proven successful. Over the years, Apple has differentiated itself from other technology companies in a number of ways. For one, its products include both hardware and software. This is distinct from most of its other competitors which offer either hardware or software almost exclusively. For example, Microsoft is most well known for its operating system Windows, and while it has begun to dabble in the hardware market with products like the Surface, it has a lot of catching up to do in the market. In contrast, companies like Lenovo are known for their computers while its software products go almost completely under the radar. As Beattie highlights, Apple’s business model has always been Apple hardware running Apple software. This gives Apple products an internal compatibility that is hard to find in other companies’ offerings.
We can use the threshold model of diffusion that we learned about in class to analyze what exactly about Apple’s business model and marketing strategies make it so successful. This situation may not exactly coincide with the model where a single technology completely dominates a network, we can simplify our thinking by imagining a small group of people, none of which use a Mac. Say one person in that network decides to switch to a Mac. Maybe the beautiful design or the simplicity of the user experience that Beattie talks about was enough to convince that person even though none of their friends currently use a Mac. Now we need to think about what factors may convince a friend to switch as well. Of course, there are the factors that convince the first person are still true. So, the payoff for having a Mac is higher than their current computer if their friend’s computers are not considered. However, because that other technology is somewhat compatible with itself and offers users some benefits only if both people use it, this will increase the payoff. This means that we must also consider the internal compatibility of the Mac. With its “tight ecosystem of hardware, software and content”, Apple has given two users who use their products much greater benefit, so we can imagine a payoff matrix that looks something like this (using arbitrary values):
| Apple (Person 2) | Other (Person 2) | |
| Apple (Person 1) | 10,10 | 3,1 |
| Other (Person 1) | 1,3 | 4,4 |
With payoff values like these, as well as using simple intuition, you can see that the threshold for switching to a Mac would be fairly low. This means that a person in a network we need only a small percentage of their friends to use a Mac before they decide it is worth it for them to switch too. This makes it much easier for Apple to penetrate markets where it does not already have a strong presence, and begins to explain its success. This simple model allows us to translate how Apple’s business and marketing strategies have translated to success in the market.
http://www.investopedia.com/articles/personal-finance/042815/story-behind-apples-success.asp