Apple Lesson of the Day: Product Depth vs. Breadth

You don't become the largest tech company in the world without turning a few heads. That rise to the top inevitably comes with rivals taking stringent notes in the process, as you show them how it's done.

Apple (NAS: AAPL) is accustomed to competitors mimicking it and plain ripping it off, which is hardly a shocker considering that if Apple were to stack its $97.6 billion money mountain as $1 bills, it would stand 6,160 miles tall. With the Hubble Space Telescope's orbital altitude at 353.5 miles, that means Cupertino's wall of Washingtons would stand over 17 times as high. Now that's a stat that might blow you away.

The second first 100 days
Fun facts aside, one of the most important strategies that Steve Jobs implemented upon his return was to quickly slim down Apple's product offerings by focusing on depth instead of breadth, which could also be viewed as choosing quality over quantity. That focus on putting more innovation into a relatively smaller number of products has proven critical to Apple's success.

Shortly after coming back, Jobs called a meeting and asked employees what was wrong with Apple. After no one was able to answer correctly, he provided it: "It's the products. The products suck!"

One of the gifts that I was fortunate enough to receive over the holidays was this print by Pop Chart Lab of a fairly comprehensive product map throughout much of Apple's history (what else do you get an Apple fan who already has too much iStuff?).

anImage

Source: PopChartLab.com, used with permission from Pop Chart Lab. Dark line represents approximate return of Steve Jobs to Apple, and was added by the author for illustrative purposes only.

The aspect that immediately jumped out at me was that you could clearly recognize Jobs' return based on the visible simplification of Apple's product strategy. Cupertino's jumbled mess of offerings was funneled into the families of lineups we see today.

3 vs. 145
Apple releases one iPhone model each year, with a few configurations, but ultimately one model. Compare that to its Google (NAS: GOOG) Android and Microsoft (NAS: MSFT) Windows Phone OEM competitors, which flood the market in comparison.

Including older models, Apple currently offers three iPhones: 3GS, 4, and 4S. Counting Android and Windows Phone handsets, LG has 27 different models currently listed on its site. Motorola Mobility (NYS: MMI) has 15, while Samsung and HTC churn 'em out like there's no tomorrow with 53 and 50, respectively. That's 145 different models between just those top-four prolific OEMs, and don't even ask me to list them all out like I did with Apple.

With recent figures from Kantar Worldpanel ComTech showing Apple's market share of 44.9% has squeezed ahead of Android's 44.8% by a hair, and Windows Phone still struggling to top 2%, I think it's fair to say that Apple's trio is holding its own admirably against a veritable army of adversaries.

A change of heart
A pair of the aforementioned OEMs has had a recent change of heart. Earlier this month at the Consumer Electronics Show, Motorola CEO Sanjay Jha said the company is shifting gears this year and will be making fewer phones, focusing on better innovation within smaller numbers. The change would also allow Motorola to better concentrate its marketing bucks.

Across the pond, HTC has voiced similar intentions; HTC U.K. exec Phil Roberson said that the vendor will roll out fewer devices of higher quality this year. Roberson said, "We need to make sure we do not go so far down the line that we segment our products by launching lots of different [models]." He conceded that HTC tried to do too much in 2011.

Dollars and sense
Innovation costs money, and Apple makes its R&D dollars go a lot further because it's so focused on deeply developing its gadgets. Just compare its most recent quarter's figures to those of some of its rivals mentioned so far, in terms of absolute dollars and as a percentage of sales.

Company

R&D (% of Revenue)

R&D ($)

Apple 1.6% $758 million
Google 12.2% $1.3 billion
Microsoft 11.3% $2.4 billion
Motorola 11.1% $384 million

Source: SEC filings, figures as of most recent quarter.

Microsoft in particular has a problem developing ideas that may never see the light of day, or at the very least, not anytime soon. One example would be its work in its applied sciences lab on a Star Trek holodeck-esque magic wall (Microsoft must have read this article by fellow Fool Jim Mueller). Another would be Microsoft Surface, an enormous table-sized interactive touchscreen.

I'm not saying these technologies aren't cool; on the contrary, I want them in my living room. But ultimately, they're not the most productive use of shareholders' R&D spending since they're not commercially viable.

"Here's a dopey idea"
There's no doubt that Apple also comes up with goofy ideas. Just glancing at some of its patent applications is evidence of that. At Apple's Steve Jobs memorial, design head Jony Ive said, "Steve used to say to me -- and he used to say this a lot - 'Hey Jony, here's a dopey idea.' And sometimes they were. Really dopey. Sometimes they were truly dreadful."

The difference is that thinking up wild ideas, putting them on paper, and filing for a patent is far cheaper than dropping a couple billion per quarter.

Focus and depth have always been strengths for Apple, and it looks like some rivals are starting to recognize the value in that. If quality and quantity met in a dark alley and had a knife fight to the death, I'd wager on quality in this match any day of the week.

The mobile revolution is also set to become the next trillion-dollar revolution, with Apple leading the way. There are lots of companies that are set to cash in on it, but one in particular has excellent prospects. The company is one of a few players that will help power the mobile devices of the future, and it also has exposure to the explosive growth in China. I'm so bullish on the stock that I've given it an outperform CAPScallGet access to this 100% free report to find out what company I'm talking about.

At the time this article was published Neither Fool contributor Evan Niu nor The Motley Fool receives a referral fee or any type of consideration if readers choose to follow the above link to purchase a print of the poster shown above, although it does look nice framed in Evan's home office. He owns shares of Apple, but he holds no other position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Microsoft, Google, and Apple. Motley Fool newsletter services have recommended buying shares of Microsoft, Apple, and Google, as well as creating bull call spread positions in Microsoft and Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Learn about investing from the comfort of your own home.

Portfolio Basics

Take the first steps to building your portfolio.

View Course »

Investment Strategies

Learn the strategies you need to build a winning portfolio

View Course »

Add a Comment

*0 / 3000 Character Maximum