Apple’s Strength: It Isn’t Scared of Apple

Someday you might find yourself sitting around and wondering why Microsoft doesn't rule the tablet market the way it rules the OS market. It is a good question but one that if you regularly consider means you're a little too invested in the tech world.

The reason the question indicates that you're too into tech is because it means you are obsessed over what could have happened rather than focusing on the here and now. Time to get outside and talk to actual people. Face to face, even. The reason the question is good is because Microsoft (and Palm) had a huge lead in this area and they blew it. How Microsoft managed to miss the tablet market despite being already there reveals a key difference between Apple and Microsoft.

Microsoft's stab at this market occurred years ago and Microsoft called it Tablet PC. It was a lot like whatever the current incarnation of Windows was except you used a stylus instead of a mouse. This notion leaves most people stupefied. Why would you build tablet computer that was the same in almost every respect as a laptop except for the mouse? Didn't Microsoft get that it was a brand new form factor and that form factor could and should unleash a new way to do things? Then you'll conclude that Microsoft is full of unimaginative idiots who can't see the ten minutes into the future with a crystal ball and a weather report.

You'd be wrong. The guys working on the tablet PC did see that the Tablet PC needed to be new and different. The guys working on Office and Windows didn't see things the same way. For the Office guys to remain relevant they had to make sure that Office version on the Tablet PC worked like the version on the desktop. For the Windows guys to maintain power they had to make sure that the tablet PC didn't outpace the desktop version.

Those seem like boneheaded decisions in 2011, but when they were made they seemed smart. Office generated a big chunk of revenue (it still does) why shouldn't the tablet folks bow down to the wishes of the Office folks. The same thing with the OS. Why would anyone with half a brain expect Windows to make allowances for a tablet computer, Windows was everywhere and everything.

While it seems easy to think that Microsoft should have seen it coming when you are faced with the market ten years ago you can understand how obvious the decisions were.

Here's where Apple took a different path. Apple, against all conventional wisdom, stopped worrying (or never bothered to worry) about what the latest product would do to the companies current product.

There are many examples of this. When Apple went to Intel chips people howled; when Snow Leopard came out they howled louder. The counter argument will be that Apple had no real presence in the computer market at that time so who cares. Apple knows it has a certain number of consumers that will stick around no matter what. Sure, they'll whine and bitch but they'll do it while buying the next Mac. Hence, if switching to Intel will bring in more consumers (and it did) no problem.

Now consider the iPod mini. You'll recall it came in colors, sported a tiny hard drive that could hold four to six gigabytes of data. It was perfect. How perfect? It was Apple's biggest selling product. What do you do when you have a product everyone wants? If you're any company but Apple you update it and milk the cash cow until it finally dies.

If you're Apple you kill it and replace it with the nano. A pretty bold move, killing off your most profitable product to replace it with something the company could not be sure the market would embrace. Bold but forward thinking. The nano added a color screen and flash memory but took a step back in drive size. The gamble paid off and the nano was a huge hit.

Which brings us to the iPad. Where Microsoft worried about the Tablet PC cannibalizing sales of Windows, Apple didn't bother worrying about the iPad cannibalizing sales of anything running OS X. Since the iPad has been a hit it is easy to call the move a no-brainer, but the truth is far different. If you were CEO and presented with two options: selling a computer that generates $1200 in revenue or a lite Mac that generates only five-hundred bucks you would likely think about the bottom line and realize that if people buy this iPad thing instead of a laptop you're losing out on six hundred bucks of revenue. You'd likely reject the idea or cripple the thing as to maximize income.

That is the genius of Apple. Instead of asking: "How much money will this cost us?" And "How can this hurt us if it is not a hit?" Apple said: "Screw it. This is better, if it eats away at Mac sales, it's worth it!"

One supposes that some day this attitude will come back to haunt Apple: Apple will release some product that actually kills a higher margin product and the CPAs who work at Apple will go apoplectic with "I told you so's." But Apple won't be making one of the biggest mistakes of the competition, Apple will not be afraid of its own innovations.