What Tesla does better than Apple

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While I was watching the pitch of Elon Musk for the new Model 3 by Tesla, I saw a similarity with the latest iPhone SE presentation. What I realized was that both companies seem to have a similar strategy, even now with the launch of their latest products.

Both companies followed a similar strategy in their lifecycle: they both started niche with very expensive products to fuel their innovation activities, while they put their bet on a strong brand name, on high-end design, even on an influential, eccentric CEO.Then they developed an ecosystem of important technologies (e.g. supercharge vs touchscreen) and solutions that supported their main offering (e.g. Tesla battery vs iPhone).They even faced similar financial crises, getting close to bankruptcy. On the other hand, Tesla did not the mistakes of Apple and was more open to partnerships and stakeholders early on, with open patents and SDK on their cars (almost), as they needed the community on their side to convince their customers to do a more risky and greater transition from gas to electric energy.

What Tesla did faster than Apple was the democratization of its technology.

In 2016, both companies have a huge step forward for their strategies; Tesla does with Model 3 only 13 years after its foundation what took Apple 40 years to do: They choose to make technology affordable to masses:

  • Tesla launched Model 3, a high-tech supercar that you can purchase with $35K, a bit more expensive than the boring hybrid Prius but still cooler and faster; Model 3 a car much more affordable and less equipped than existing Tesla models, but still a brilliant car.
  • Apple launched iPhone SE, a smaller phone with better battery than iPhone 6s, better specs than iPhone 5s, and a lower price of 400$; if someone wants to buy a high-quality smartphone, now he has to choose among an iPhone SE, a Nexus phone and maybe some other flagships phones (e.g. OneNote) which are equally or even more expensive.

In 2016, two high-end, luxurious technological products became more affordable to mainstream users. Tesla did it proactively to catch up competition and lead the electric-car market, even the presentation of Elon Musk was based on presenting their strategy. Apple did it reactively to respond to dropped iPhone sales for the first time after the launch of the product line, and even Jony Ive was missing from the frame.

The opportunity for Tesla to disrupt the car industry worths this transition.

The opportunity for Tesla to disrupt the car industry worths this transition, but is it equally important for Apple? Apple does control the (value not the size of the) smartphone market already which has been already disrupted by Apple , while it has multiple other product lines that are quite expensive (i.e. there was a reduction also in the Apple Watch). Why did Apple has chosen to do this lately?

Apple couldn’t stand missing the strategic role of iPhone in its ecosystem.

Apple is in a critical point of maturity. Many Apple fans complain lately about the lost hype of Apple. iPhone 6 didn’t impress many people but only followed the hype of larger screens; iPad has more name tags than Windows Vista; Same with MacBooks, which show no progress and still remain extremely expensive ($1,800 for a serious laptop is insanely expensive); Apple TV is still immature, Apple car makes no meaning lately, Apple Watch has one more chance to impress us. In the center of this ecosystem is the iPhone, everything connects and interacts with an iPhone, thus Apple couldn’t stand missing the strategic role of iPhone in its ecosystem, as well an entry point to its ecosystem of products and service.

If a more affordable iPhone is enough for Apple to keep growing – or if new product lines or more affordable versions of their existing products are required – will be realized by the end of 2016. For Tesla we have to wait a bit longer to see how its strategy goes in action…

Facebook vs Google: Who is going to be your next phone carrier?

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Today Google has announce Google Fiber has started enrolling customers, so it is a no-brainer  point to say that Google is interested to become your next phone carrier, both on land phones but also on your cell phone with Google Project Fi. What you may have not thought about is that Facebook tries to do the same, in a brilliant, indirect (i.e. thus more risky) strategy.

Facebook follows a reverse innovation strategy combined with the network effects power to beat the phone carriers in their own game.

Lately you may have read about Internet.org as a vehicle to give internet access to developing world where Facebook will be a basic internet application for users (and how India reacted on that), or about the Facebook Lite version of the largest social network as an application to give faster and cheaper access to users with small data plans or slow connections. Zuckerberg has even announced publicly that they have such intentions.

What you might have missed is Facebook’s acquisition of Ascenta, a solar, drone company back in 2014, and the announcement of test flights by Facebook in 2015. The acquisition of many compression algorithms like QuickFire Networks signal their interest to enter less technologically developed networks. Even Facebook’s greatest acquisition ever,  the outstanding $22b deal (at the end) with WhatsApp (somebody believes it is the best deal ever), apart from a mobile strategy and a defensing tactical move against the chatting apps, was an entry point to many devices around the world and of course in their SMS/chat applications.

The interesting thing is that few believe that Facebook is going to make it, and this is the most brilliant part of their strategy. In the Internet.org deal, some of the greatest infrastructure companies have signed in, like Ericsson. As an Ericsson manager told me back in 2014 when the deal was up, after a Barcelona mobile conference he attended, “Facebook is like a kid that tries to play with its toys, we do the serious work on the antenna-level with algorithms to improve services on the network level while they want to use our technology to expand“. What this point misses is that Facebook -like a smart kid- absorbs more information and learns faster than its teacher, while it uses them as a vehicle to enter an anticipated market of billion of users.

Telecommunications have by definition strong social characteristics

But still, you didn’t tell us why I may buy a service plan from Facebook” you might say. This is the best part in my opinion. Facebook follows a reverse innovation strategy combined with the network effects power to beat the service providers in their own game. In detail, as Facebook tests networking infrastructure in remote areas (like the Project Loon by Google)  but no one expects to see soon such a solution in developed world. But in remote areas where a smartphone is the only access point to the internet, Facebook wants to capture those users, give them an access to the Internet through its platform, reduce the cost of media loading and subscribe them to its Facebook application with a social profile. In other words, each application or technology in the broader Facebook ecosystem works in favor of a dominance strategy in those areas. When Facebook will improve the networking technologies, after tested in extreme environments, while Google operates on high-end technological networks mainly. Facebook will be then able to enter also the mainstream markets of technologically developed world with their innovations on wireless networks; the definition of a disruptive innovation. And together with the technology will bring a community of billion of users to its existing products. Just brilliant… if it works.

So the question is who is going to win this race for vertical solutions in the telecommunication game. We will see what carriers will achieve in response to this threat with the net neutrality pressure, and how hardware companies (e.g. Ericsson, Huawei) will team up in this game. Google has taken the lead with a bigger cash pile and existing operational projects both in developed and developing world. Facebook follows a different approach as it plays its bet on the game it knows best; enter unsaturated markets and win through the virality of its offerings. At the end, telecommunications have by definition strong social characteristics… Let the battle begin!