That’s the phrase I kept thinking of over and over again as I watched Apple’s keynote yesterday: commoditize everyone else’s business. Apple makes its money on hardware. To make hardware more valuable, Apple needs a series of products and services around it that are cheap or free. This includes content, apps, accessories and services.
Watch Apple in action. Apps are moving toward free (or at least freemium). Apple has repeatedly fought to keep music and book prices lower than the publishers of said content want, going so far as to be sued by the US Government over its position. iCloud, Apple’s services offering, is free. Now OS X Maverick, iWork and iLife apps all join iOS 7 as free software. This is some amazingly powerful and capable products, all at no charge for customers… except you have to buy the hardware.
Apple isn’t alone. Microsoft mastered this approach for years, making software valuable while commoditizing the hardware business. This is why no Windows computer manufacturers are making any money on the hardware. And of course Google has been playing its own commoditization game, making operating systems and apps free while maximizing the value of ads.
It’s important to note that each of these three are staring at each other’s businesses, each trying to outdo the others. When it comes to building a successful business (meaning revenues and profits, not market share) the question is which will win. Microsoft clearly is losing out right now in the mobile space while Google and Apple take charge. It is no coincidence that the two companies who are winning in the mobile market are primarily aiming to commoditize Microsoft’s software business.
But Google really hasn’t aimed at Apple yet and Apple really hasn’t aimed at Google yet. Do one of them win? Or does it open the door for a third-party — say Amazon — to step in and make content king while commoditizing everything else?