There is no doubt that software power is one of the key factors driving the success of the iPhone and Apple.
Editor’s note: This article is from WeChat public account “outside the stack” by Ben Thompson , authorized to reprint. Original title “Ben Thompson: Is Apple a technology company? 》
If the hardware strength of the iPhone alone, Apple may not be able to stand out from the competition of traditional mobile phone manufacturers. But in the face of many Android rivals, the iPhone can still dominate. There is no doubt that software power is one of the key factors driving the success of the iPhone and Apple.
If Apple simply sells equipment, it can only be considered a consumer electronics company. Apple’s software, services and ecosystems, combined with a strong hardware foundation, make it a true technology company.
Simple hardware companies will experience low margin risk and enter a low-profit negative feedback loop. It can only increase revenue by continuously expanding its scale. At the same time, costs are increasing, but the goal of high profit margins is turned into a bubble.
The way to effectively change the status quo of hardware companies is to differentiate themselves through software services and distinguish them from their peers. At the same time, the network effect of software services is utilized to expand the scale, reduce costs, and increase profits.
The original text from Stratechery, author Ben Thompson, this article has been officially authorized to translate
Technology companies and hardware companies
Like most authors, I have always been unsatisfied with what I wrote, but this feeling is especially prominent today. Originally, I wrote to myself yesterday What is a technology company?” I fell asleep with satisfaction and gratitude, but woke up in disappointment at three in the morning and then spent a whole day in a sullen mood.
The reason I am frustrated is that I always ignore hardware companies, and ironically, the case of Internet fitness company Peloton turned out to be one of the motivations for me to write this article. But my negligence has a certain reflective meaning: For many years, even if there is such a dominant product as the iPhone, why has Apple not been optimistic? The answer to this question is echoed by the reason I ignore the hardware company: At least from the business model, the hardware company does not fully comply with the business model of modern technology companies.
There is necessarily a question of marginal cost: it costs hundreds of dollars to make an iPhone, and it takes more than a thousand dollars to become a Peloton member, which means that it is still far away to achieve zero marginal cost. In this, we are far underestimating the value of software.
Recalling that when I started publishing articles at Stratechery, I often complained about such negligence. I wrote in the opening of “Reviewing Two Bear Markets”:
In the modern PC industry, there is a very annoying phenomenon – the review site said that “Mac series computers are only PCs from any angle.”
Let’s take a look at CNET’s evaluation of the MacBook Pro in 2007:
Advantages: CPU performance and image processing capabilities are improved, but the price remains the same; LED backlight display can extend battery life; support 802.11n transmission technology.
Disadvantages:There are very few configuration options; only 90 days of free technical support; there is still no card reader.
Look again at the PC Mag 2006 evaluation of the Macbook that year:
Benefits: Configure the Core 2 Duo processor to complete the notebook line; thickness is only 1 inch (about 2.54 cm); excellent performance;