

What Clayton Christensen Got Wrong (2013) - gklitt
http://stratechery.com/2013/clayton-christensen-got-wrong/

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mathattack
I get a little bothered when people expect pundits like CC to be right 100% of
the time. If they get nit-picked too much, then people stop making
predictions. And CC may indeed be correct on the iPod - it had a great run,
but sales are falling through the floor. Similarly, Apple is looking great in
the iPhone, but it is still under attack on the low end.

~~~
andyidsinga
I see my kid's teen friends running around with android phones. Also, there's
something to be said for competitors catching up in terms of design. Several
are catching up and forcing apple to complete on their terms - see phablets
starting with samsung galaxy note.

~~~
sogen
Oddly I saw the opposite: my nephew and his friends using iOS only.

Yesterday he bought an iPad mini with his savings, I suggested him to get an
Android tablet "hey, an android will cost you 1/3", but he declined, because
all his friends had invested a LOT of time on their (iOS) games.

~~~
gruntled
That's exactly what you would expect if a "low end disruption" is just getting
started. The low-cost disruptor picks off some but not all of the market, and
doesn't immediately compete for the most attractive customers (because that
fight's too hard for them at the moment).

That's what puts the incumbent in an "innovator's dilemma": do you chase the
high end and high margins, and if so which high-end niches do you chase
(gamers who want graphics performance, design-lovers who want a precision
machined marvel of industrial design) or do you go lower cost and high volume?
The latter is a race to the bottom, so the incumbents tend to pick the former
and retreat up-market. It's not unusual for the incumbent's profits to
increase temporarily when this happens because of their focus on the most
profitable customers.

The problem is it doesn't last: the low-cost producers who are already good
enough for the low end of the market continue to improve, until they become
good enough for the middle of the market too, and grab more and more market
share and more and more profit share. And then, looking for even more growth,
they head for the top end of the market (or get disrupted themselves).

Ironically, if there wasn't an up-market to retreat to, there would be no
dilemma. Android and iOS would have to compete head to head for the same
customers with the same requirements (rather than one taking all the budget
consumers and the other taking the gamers and others with higher
requirements).

As it is, we could be seeing a low-end disruption, and the high-end consumers
will be the last to notice.

~~~
thramp
The thing you’ve gotten wrong with wrong the “design lovers” you mentioned is
that Apple’s customer base are entirely those quote-unquote design lovers who
happen to be just normal consumers.

The entire point of the article is that competing on user experience pretty
much side-steps the whole theory of low-end disruption.

~~~
gruntled
I understood the article, thanks. I'm just not convinced.

The debate hinges on this: is UX a special basis of competition that can't be
disrupted? Will consumers pay a premium for better UX forever? Will the
cheaper alternative never be "good enough"? Won't people put up with a few
minor annoyances? What if it saves them money?

I think UX is a hygiene factor: when it's bad it annoys you to the point where
you do something about it, but when UX is good enough, most people start
worrying about other things.

That's different from design: I think some people will continue to pay a
premium because they love Jony Ive designs and they can afford it. And some
will pay for a status symbol. And some will need the performance. But none of
that is the mass market.

------
fauigerzigerk
I doubt very much that businesses are as rational as he makes them out to be.
Many businesses buy extremely expensive software for completely irrational
reasons or pay business consultants for obviously meaningless fluff.

The difference between consumers and businesses is that businesses that act
too irrationally for too long are more likely to fail and get replaced by more
rational businesses. I suspect that the statistics on rational businesses
often suffer from survivor bias.

------
lemmingsleft
Ben Thompson is mostly wrong: Customers don't 'buy' iPhones, Carriers do i.e.
iPhones are protected from low end disruption by carriers subsidizing and
obscuring the price with plans/contracts. In markets where carrier subsidy
isn't as popular (e.g. Europe) iPhone market share is very low. Likewise, iPad
market share is dropping quickly becausr there are few subsidies for that
product.

NB Apple was always careful to sell low end iPods like the nano and shuffle so
they continuously disrupted themselves in that product market and kept other
companies from doing so.

~~~
encoderer
I disagree. I think people shop for a phone the way many people
(unfortunately) shop for a new car: On the monthly payment, not the sticker
price. All that matters is that the carriers finance the phone, subsidies are
dying. Every major US carrier now has installment options.

> Likewise, iPad market share is dropping quickly becausr there are few
> subsidies for that product.

You don't think it's because they essentially invented the market, starting
out at 90% market share?

~~~
lemmingsleft
> You don't think it's because they essentially invented the market, starting
> out at 90% market share?

Apple essentially invented the harddrive digital music player with iPod+iTunes
and maintained a +80% marketshare for the lifespan of that product

> I disagree. I think people shop for a phone the way many people
> (unfortunately) shop for a new car: On the monthly payment, not the sticker
> price. All that matters is that the carriers finance the phone, subsidies
> are dying. Every major US carrier now has installment options.

The monthly payments for cars vary widely with the differences measuring in
hundreds of dollars per month. The monthly payments for contract cellphones in
USA are mostly the same for a $0 low end phone or a $0 iPhone. Indeed for many
years AT&T/Verizon/Sprint wouldn't give a discount on the monthly plan even if
the consumer brought their own phone which made it slightly irrational to not
sign a contract. It's impossible for the low end to disrupt when the high end
is the practically the same price.

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screature2
I guess this is a 2013 article, but I'm surprised that what hasn't been
mentioned in the comments yet are the platform/network effects of iOS apps and
the App store.

I think it's interesting to identify a consumer focus on
status/UX/psychological benefits, but I actually think it's wrong to say that
the consumer isn't paying for more functionality because I think the iOS app
ecosystem actually provides pretty compelling additional functionality in
addition to the incremental, but still relatively meaty, upgrades between
phone models and nominally nicer UX.

I mean, the App Store is still much better curated than its open Android
counterpart. The iOS development seems to have more robust developer tools,
offer better return, have a more or less standard device structure for
testing, etc etc. ([http://thinkapps.com/blog/development/platform-build-
first-i...](http://thinkapps.com/blog/development/platform-build-first-ios-vs-
android/))

The iOS ecosystem isn't just the handsets. It's the App store, the developer
tools, etc. This allows developers to better create functionality on top of
all these Apple devices and enables Apple to surface those quality
apps/functionality better and faster. That's a significant benefit.

~~~
crazychrome
which comes first, a good consumer product or a healthy ecosystem around it?
it's a positive feedback loop thing in later stage but product always comes
first. it's not a big secret but only few nailed it occasionally in a decade.

~~~
screature2
that's a good point, but Apple's bet on this ecosystem continues to pay off
with each of their new consumer product reaping pretty sizeable dividends from
that ecosystem.

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ams6110
I don't relate to this at all, but accept that I'm an outlier in the
marketplace. I have a cheap android phone on a cheap month-to-month plan.
Other than the apps it came with, I have installed very little from Google
Play. I use the phone for texting, phone calls, mobile email, maps,
occasionally mobile browsing, and that's about it. I don't play games with it,
I don't listen to music with it, I don't take pictures with it. Even this
cheap phone does way more than I need. I would never consider an iPhone.

------
minthd
That's a very interesting theory, but it's supported by very few examples, and
the examples are pretty weak.

In the example of clothing and fashion - the consumer really buys buys
psychological value(status, attention, etc), not user experience with his
extra money, and i'm not sure those goods can be "good enough", because some
have arms-race logic build internally(for example status).

In a sense, the same applies for the BMW - you could probably get as great car
as the BMW , for much less , but the BMW holds important psychological
advantages.

And as for consoles - i'm not sure we've reached "good enough" level of
graphics for true gamers. When we'll reach that - it would be interesting too
look at that market.

So yes, consumers aren't rational and for some thing you can never satisfy
them, but i'm not certain user experience is one of those things.

~~~
blowski
> the consumer really buys buys psychological value

I think that's what the author is saying - businesses don't buy printers
thinking about how the printer will make their staff feel, whereas when people
buy iPhones, how they feel is a big part of the decision. The idea that I can
afford to buy an excellent user experience for myself is very much part of
that status value. Apple has exploited those feelings so that its design value
outweighs the economies of scale that can be achieved by modularisation.

~~~
snom320
I think the important point is not that it just outweighs what can be achieved
by modularisation, but that it is fundamentally more difficult to achieve
using modularisation. Had that not been the case, you would expect companies
that emulated the psychological value _and_ used the modularisation path to
make more money than Apple would.

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gz5
iPhone and iPod are very interesting and unique case studies in that they
combine high-end differentiation (the devices, or at least the brilliant
marketing-fueled perception of the devices) with low-end disruption, and with
network-effect ecosystems (music, apps).

The low-end disruption is cheaper music (iPod) and cheaper computer (iPhone).
Computer in that many consumers initially saw iPhone as a way to do email, web
and apps without paying for separate computer and Internet.

------
sschwartz
[http://www.newyorker.com/magazine/2014/06/23/the-
disruption-...](http://www.newyorker.com/magazine/2014/06/23/the-disruption-
machine)

~~~
_pius
This article is pretty bad.

The OP, however, is quite good. In a nutshell, it argues that (1) disruption
theory assumes rational actors and (2) consumers are much less rational than
businesses.

~~~
throw7
ISTM that the author is not so much saying or arguing people are not rational,
but that the economic definition of "rational" is missing the modeling of
consumer behavior in this area. (i am not an economist.)

~~~
barrkel
My GF is an economist, and she takes great exception at any phraseology that
describes people as irrational. As far as she's concerned, everybody is
rational. See this for more details: [http://mises.org/library/what-do-
austrians-mean-rational](http://mises.org/library/what-do-austrians-mean-
rational)

~~~
chongli
Praxeology is a fringe theory espoused by radical libertarians. I'd even go so
far as to call it a just-so story.

------
crazychrome
Were Steve Jobs, John Ive, Tim Cook and other Apple guys crystal clear about
the theory when they started iPod/iPhone? I don't think so. Apple has a unique
weapon called design and is willing to pay whatever it costs to enhance it.
Its business is to use the weapon wherever there is a chance: mp3 player,
tivo, mobile phone, watch and more to come. The rest is upon professors in
business schools to figure out.

~~~
DigitalJack
I think their secret weapon is design expertise, not design itself. I have a
2014 moto X, and I like it. I switched from IOS due to bugs I was experiencing
with IOS 8, and I liked the idea of a more open environment.

I can say with a high degree of confidence (but not 100%) that I'll switch
back to iphone next year.

The reason centers on two things: Google's baffling lack of design sense
(google's own apps look bad), and google's inability to filter out sham
reviews on their app store.

The google app store and the apps are just awful. There are some diamonds in
the rough, but they are few and far between and hard to find because nearly
all the apps (good or bad) have 4+ stars.

There are tons of crap apps on the apple store too, but the good ones are
easier to find because the _ratings_ still have meaning on the apple store.

There is something seriously wrong with google's store. The AT&T app, which is
a marginal semi web app, has 25,000 5 star reviews on google's store. It
averages somewhere above 4, I can't remember the exact number. I'm sorry,
there is just no way 25,000 honest people gave that app 5/5 stars. It's
ridiculous to even consider.

It's barely a 3 star app on apple's store and that sounds about right. I'd
give it 3 just because it is functional.

I think the real problem behind it is the concept of freemium apps. Apple has
it too, but I think because of scale android/google are head of the game in
terms of the damage caused by fremium apps.

I think the best way for either company to fix it would be to not allow in-app
purchases on free apps. The reason I think it would fix it is that both app
stores require you to have the app to vote on it, but with free apps it's no
big deal to download-vote-delete an app. This opens you up to mechanical-turk
type exploitation.

If it costs a buck to download, you've raised the cost of buying a vote,
you've raised expectations of buyers. It has a side benefit of destroying the
freemium market which in my opinion can only be a good thing.

My gut tells me that google could filter out sham reviews if they wanted to.
I'm sure they can detect the download-vote-delete pattern easily, and if 25000
come in over the course of week or something, well, it just seems like it'd be
obvious if the spent time mining the data.

