The phrase, "It's just money" makes less sense when you compare the U.S. dollar and the post-Greek Euro.

Portugal, Italy, Greece, and Spain (also known as PIGS) managed to devalue the Euro through some rather reckless mismanagement (a.k.a. the government). Compared to other paper, the value of the Euro dropped when people weighed the risk of owning one fiat currency as opposed to another. We can hope that George Soros was holding a pocket full of Euros when the slide started.



As the chart shows, devaluation can happen instantly. The same is sure in the technology business. Aside from intellectual property (IP) protections via patents, there is no safety in innovation. Creating something usable invites others to do the same. Today's glory product is tomorrow's techno trifle.

Are you listening Steve Jobs?

With smart phones still a small part of the cell market—but one that is growing fast due to falling prices and increasing demand—watchers wager on the ways of Apple, RIM, and Google (rumor has it that Microsoft has smart phone software, but it remains obscured by vapors). When Nielsen—the company that likes to spy on your television watching habits—reported that Google's Android smart phone operating system was rocketing upwards in sales and was actually outselling iPhones, the technology world gasped in unison. They passed out at RIM's stagnant sales, declining potential, and the poor taste Nielsen had in releasing their study the same week that RIM released a new phone and OS that offered nothing new.

(Before going much further, we must note that the numbers Nielsen proffered were through Q2 of 2010, which preceded Apple offering the iPhone 4. Since the market anticipated i4, and slowed buying of iPhones in expectation of the new device, the numbers are somewhat skewed against Apple in the interim. However, trends are trends and that is where this story is going).



From this jumble of numbers we see (as vividly portrayed on the chart we lifted from The Register) that Android is rising rapidly against everybody. Aside from some added Google goodies, one cannot claim that Android is fantastically better than iOS. Indeed, given the tight integration between iPhones and iEverythingElse, one could deride Android. Yet its rise in popularity is eclipsing iPhones in current sales, and in less than a year, Android has risen from obscurity to having half the market share that Apple enjoys.

iPhones have been devalued.

In all markets, things drift toward commoditization. In high tech, they race to that condition. When differentiation between products is diminished, companies that win tend to have lower price, better overall value, and make their money on more than the core product (why do you think Coke sells merchandise). In technology, software is where devaluation to commodity status occurs most rapidly, and it occurs when other motivations beside core product profit margins exist. Linux developers don't have a profit motive and thus changed the server operating system market forever. Google isn't interested in profiting from mobile phone operating systems either—they have better ways of making money and dislike being eviscerated by commodity products (hardware).

The differentiation between smart phones—in terms of core functionality—will disappear. They all will sync with Outlook and Exchange, they all will have cameras, they all will play music, tether, have GPS navigation, Bluetooth to your dashboard, cook your breakfast, double on keyboards and wax your back ... by next Thursday. Thus price, selection, and availability become key factors for buyers. Techno-lust drops to third place at best.

This is where Apple and RIM are missing the mark. Apple is Soviet in its approach, insisting on top-down control of everything, including hardware, channels, and apps that locate new internal organs for Steve Jobs. RIM rested on its laurels in the corporate email addiction market, and watched this thin differentiator evaporate without creating new business functionality to keep it ahead of competitors.

Google mimicked the Microsoft model.

Microsoft is huge because they purposefully let other people profit from their products. They could have been a hardware company and had the same success Apple did in the desktop market, which was a fraction of Microsoft's. Instead, Microsoft worked with hardware vendors (who Microsoft knew would commoditize themselves) and made Windows ubiquitous, much to the gastric discomfort of IT support teams everywhere. Google is taking the same approach with Android, allowing hardware vendors to make Android ubiquitous. The primary difference is that Microsoft made money on every instance of Windows aside from the 99 out of 100 copies distributed in China. Google is making their profit on the backside. Front, back ... irrelevant. The issue is that Google is encouraging every hardware maker—HTC, Motorola, Samsung, Sony Ericsson, LG—and every cellular carrier to make Android available to everyone, driving prices down to commodity levels.

Which erases top-line revenues for Apple, RIM, and Microsoft. Several marketing strategy lessons can be found herein.

Force devaluation: Competing toe-to-toe with established players is a rough game. Finding an alternate way to make money and accelerating commoditization changes the rules of the game and leaves competitors gasping.

Everything is a commodity: Maybe not today, but eventually. It is great to be in a market before commoditization occurs, but once it does, you need to either play on price or avoid the market entirely.

Catching up is bad: RIM's answer to their declining smart phone fortunes is at best parity (or parody if you find similar sadness with the now missing Palm). When the market is running far ahead of you, being equal means falling behind at a slower pace. You have to bring something new to the market, which RIM didn't. People buy value, not features. When your features only equal those in competing products, you failed to create value worth buying.


Guy Smith is the chief consultant for Silicon Strategies Marketing. Guy brings a combination of technical, managerial and marketing experience to Silicon Strategies projects. Directly and as a consultant, Guy has worked with a variety of technology-producing organizations. A partial list of these technology firms include ORBiT Group (high-availability backup software), Telamon (wireless middleware), Wink Communications (interactive television), LogMeIn (remote desktop), FundNET (SaaS), Open-Xchange (groupware), VA Software (enterprise software), Virtual Iron (server virtualization), SUSE (Linux distributions and applications), BrainWave (application prototyping) and Novell.