Two or three years ago, people might have said that Apple was on the rise and Google was in decline. Today, people say Google is on the rise and Apple is in decline.
Pundits and press are generally confused about why this is true. They say it’s because Apple used to make better stuff, but now Google does. But that’s wrong.
The best way to understand the main difference between these two Silicon Valley giants is to divide the consumer electronics world into products and services.
Apple and Google both make products and services. Products include hardware and software, and services include things like, say, iTunes or Gmail. But that’s where the similarity ends.
Apple is a product company. Their services exist to support their products.
Google is a services company. Their products exist to support their services.
The shifting fortunes of these two companies is less about which company is succeeding and failing and more about which model is succeeding or failing.
Right now, the product model is on the ropes, and the services model is on the rise. Here’s why.
Two years ago, Apple was the company that could do (almost) no wrong. Having transformed and re-energized the smartphone industry by shipping the iPhone in 2007, Apple shipped the iPad in 2010. In the year 2011, Apple seemed to be an unstoppable freight train of innovation.
The only thing that mattered back then were multi-touch user interfaces, smartphones, tablets, app stores, ultra-elegant hardware design and engineering—in other words, products.
Apple somehow did all these things far better than any other company could even hope to. In the tablet space, especially, Apple was perfectly untouchable. It was an incredible moment for Apple. But such moments never last.
Technology innovation always follows a predictable pattern. New innovations and new ideas enable the most successful companies to be fundamentally different from their competitors. And when they’re both different and better, as Apple was two years ago, they rule.
But what’s innovative and differentiating today becomes a commodity tomorrow. A commodity is a non-differentiated product, one where the quality of the product is a given.
In the past two years, all Apple’s innovative product differentiators have slouched toward commoditization.
The iPhone 5 is a design and engineering marvel, but it landed with a thud. People buy it, but the lack of excitement over the device is palpable.
It used to be that Apple had the only best phone. Now there are many best phones, depending on user preference. In other words, excellence in handset design and engineering is no longer a strong differentiator for Apple.
The same goes for Apple’s other differentiators. Apple’s multi-touch user interface is still more elegant. But that elegance is counterbalanced by an entire industry full of alternative multi-touch user interfaces, not just Google's Android, but also versions of Android tweaked by rival handset makers and a new generation of non-Android upstarts all coming online this year.
The number and quality of apps in Apple’s App Store started as a differentiator at first. The Apple app store is still probably better than Google’s Play store, but not by much anymore. Apps are no longer a differentiator.
The product aspects of mobile technology—hardware and software—have been largely commoditized.
Services, on the other hand, not so much.