In the book ‘Steve Jobs’ by William Isaacson, there is a reference to Mike Markkula and his 3-point manifesto for Apple. Markkula is an American entrepreneur who was an angel investor and second CEO of Apple, providing early critical funding and managerial support. His 3-point manifesto was:
Point No. 1: Empathy
Apple should strive for an “intimate” connection with customers’ feelings. “We will truly understand their needs better than any other company,” Markkula wrote.
Point No. 2: Focus
To be successful, Apple should center its efforts on accomplishing its main goals, and eliminate all the “unimportant opportunities.”
Point No. 3: Impute
Apple should be constantly aware that companies and their products will be judged by the signals they convey. “People DO judge a book by its cover,” Markkula wrote. “We may have the best product, the highest quality, the most useful software etc.; if we present them in a slipshod manner, they will be perceived as slipshod; if we present them in a creative, professional manner, we will impute the desired qualities.”
I thought it was refreshingly different from the typical ‘mission & vision’ policies one across from companies. Aside from that, I think the policy on ‘focus’ is still alive in almost all the things Apple does. Witness the recent investments in China and the complete disregard for India. The iPhone 4S pricing is also testimony to that: the rupee’s performance against the USD (current exchange rate is 1$ = Rs.51) is a reason for the high pricing. But if the Apple honchos believed in India, they could have worked out a subsidy scheme with operators. But they are happy selling whatever few numbers India will add in.
India vs. China
Focusing on what you believe is right comes at a price. It calls for relentlessly carrying on with what you think is right, irrespective of what the world says. The flip side is that you come across as arrogant and unmindful of what people (even consumers) demand of you. That to me is the thinking behind Apple totally ignoring one of the world’s leading telecom markets: India. According to a recent study by FICCI and Ernst and Young: India is the world’s second-largest telecom market after China, with the total wireless subscriber base crossing 850 million at the end of June, 2011. By 2020, the handset demand is projected to reach 350 million a year. Drool-worthy numbers alright. But the same study also said: ‘the average selling price (ASP) of handsets in the country is estimated to increase to Rs 2,950 by 2020 as compared to Rs 2,300 in 2010‘. So the average handset price is Rs.3000 and a majority of the handsets are in what is called the ‘medium’ segment.
Smart phones are gaining popularity alright, but India is still a market where we want ‘everything at a great price’. When it comes to technology, we seek products that have a laundry list of features within a not-too-elastic price band. With mobile phones the magic price point seems to be Rs.10,000 for an ‘idea’l handset, stretchable maybe up to 15k. But that has to do everything (at least on paper) everything a high-end smartphone does. Anything beyond that is luxury in India – the volumes on this segment is likely to be low.
There could be a lot of similarities between India and China. According to this (rather vague) Wikipedia entry: China’s cell phone market is dominated by products with price under 2000 RMB yuan (about US $290). Products at this price have accounted for 60% of the whole cell phone market, competing with China’s local brands, informal cell phones and international brands. It doesn’t say what the ASP in China is but going by reports it looks like there are a lot more Apple fans over there in China, than in India. Apart from news reports of 1000s lining up for the iPhone 4S launch in Hong Kong, here are the hard numbers:
For the fourth quarter of 2011, China contributed $4.5 billion, or 16 percent of the $28.7 billion in total revenue the company reported. It’s even more astounding when you compared that to Europe, which contributed $7.4 billion to Apple’s bottom line — that means China and its surrounding areas are accounting for a little over half of what Europe is.
No wonder Tim Cook says:
In my lifetime I’ve never seen a country with as many people rising into the middle class aspiring to buy products that Apple makes. It’s an area of enormous opportunity. It has quickly become No. 2 on our lists of top revenue countries very, very quickly.
Apart from the phone market, China behaves differently in the PC market too. The brand halo is much brighter there compared to India. Apple overtook Lenovo in China recently and is considered the most desirable PC brand over there.
Given all this and the fundamental mindset of the Indian consumer, it is not surprising that India is not in Apple’s radar.
Coming in Part 2: Mac vs PC to iOS vs Android