How the power of the Apple brand is reshaping entire industries

2011 will surely go down as the year Apple changed the face of the communications industry.

Wall Street Journal, April 1, 2011

In the space of just a few weeks, industry giants Nokia and T-Mobile have both crumpled under the Apple tsunami. Now Acer, the world’s No. 2 PC maker by shipments, is the latest to feel the pain.

Yesterday it was reported that Gianfranco Lanci, Acer’s CEO, resigned as part of the company’s efforts to reorganize its operations to tackle the rising challenge from Apple’s iPad.

The management change comes after Acer revised its first-quarter earnings forecast downward last week amid increasing concerns about sluggish demand for notebook PCs globally. The iPad is beginning to eat into the notebook and netbook markets, in which Acer has strong positions.

Three weeks ago AT&T announced its plan to acquire T-Mobile, the 4th largest wireless carrier in the United States. Most of the news focus was on AT&T and it’s need for spectrum and network quality to stem the dropped calls for which it has become notorious.

What had made T-Mobile so amenable to the merger was the advent of the iPhone.

The Game Changer

Customers weren’t having any problems with the T-Mobile network. The problem they had was that they wanted the iPhone and T-Mobile couldn’t offer it to them. So they left in droves.

T-Mobile’s reported a net loss of 318,000 customers in the last three months of 2010, which is more than twice as bad as the 117,000 customers lost during the same time period in 2009. It followed the 60,000 customers lost in Q3 2010.

T-Mobile failed to convince subscribers that it had a phone worthy of consideration over the iPhone and paid dearly for it. When Verizon started carrying the iPhone on February 11 the game was evidently over.

Coincidentally, on that same day, the CEO of cell phone giant Nokia announced a deal with Microsoft to use its Windows 7 software in an attempt to get back into a game it once dominated.

In a now famous “burning platform” memo to employees CEO Stephen Elop identified the cause of Nokia’s problem: Apple.

“The first iPhone shipped in 2007, and we still don’t have a product that is close to their experience. Android came on the scene just over 2 years ago, and this week they took our leadership position in smartphone volumes. Unbelievable.”

Nokia’s share price has fallen by two-thirds since then as it tried, unsuccessfully, to produce an iPhone killer. In the meantime, low-cost Chinese manufacturers, using Google’s Android software, have eaten into Nokia’s sales of basic handsets in emerging markets and are moving up the value chain quickly, commoditizing the entire industry in the process.

Where Nokia and Acer (and Motorola) see devices, Apple sees creative connections.

Apple has blurred the distinction between phones and computers, integrating them both into a mobile computing platform which is wrapped and delivered in the Apple brand experience.

The iPhone is a full-blown computer with touchscreen technology that turns the mobile Internet into a user-friendly experience. The apps that began appearing in 2008 enabled people to customize their iPhones to suit their lives.

It was the precursor of the iPad, which in itself has moved the game forward (as Acer would affirm). Both are natural expressions of the Apple brand ecosystem – form and function are seamlessly linked and forged into objects of desire. Expect to see news about Apple TV soon.

The power of the Apple brand is in its ability to create desire, to generate demand and to open new markets. Others can only follow, chasing market share with me-too products sold through low grade, third-party retail experiences.

Apple has already revolutionized the music industry with the iPod and iTunes store. One year ago the store served its 10 billionth song download; a milestone was reached in just under seven years of being online, making Apple the largest music retailer in the world.

This communications revolution is just beginning.

This video of Steve Jobs is always worth a view, if only as a reminder of the foundational philosophy behind the Apple brand.

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Two Motorolas, one huge branding mistake

Motorola Inc., the maker of mobile phones and two-way radios, is targeting January for the spinoff of its handset unit, splitting the company in two.

The new company will be known as Motorola Mobility.

The remaining business, Motorola Solutions, will make bar-code scanners, walkie-talkies and other emergency-communication equipment.

Mobility, or Solutions?

Thus, there will be two Motorolas and two Motorola brands in the market next year.

In all the spinoff announcements there has been no mention of how the shared brand will be managed, which should be a concern to investors. How will each of the two Motorola brands move forward and evolve, as they will need to in order to stay relevant and competitive in their specific market categories, without undermining each other?

Motorola is treating the separation as though they it were naming two new divisions, each with vacuous appellations, in the apparent belief that the Motorola brand will magically float above the two, managing itself in the ether as it has done always. As both businesses are inherently about ‘mobility’ and ‘solutions’, how is the market supposed to understand the difference between Motorola Solutions and Motorola Mobility?

The truth is that Motorola has never understood branding and the role of the Motorola brand. Brands have always been about product.

Prediction: Only one of these businesses will survive as Motorola. The other will languish, not understanding how a commoditized industry has moved to differentiation by brand, until it is too late to save it from being acquired by a competitor. If and when this happens, what will happen to the Motorola name then?

Name origin: Motorola founder Paul Galvin came up with this name when his company (at the time, Galvin Manufacturing Company) started manufacturing radios for cars. Many audio equipment makers of the era used the “ola” ending for their products, most famously the “Victrola” phonograph made by the Victor Talking Machine Company (later JVC).  The name was meant to convey the idea of “sound” and “motion”. It became so widely recognized that the company later adopted it as the company name.