Apple iPad2 release exemplifies the Teardown Economy
This past weekend Apple released its highly anticipated iPad2 device. Within hours the device had sold out at both brick and mortar stores and online retail sites. The new tablet is currently back ordered with ship dates of 4-5 weeks from now. But the aspect of the Apple’s supply chain that I found most interesting this weekend was not the out-of-stocks, but rather than the detailed analysis of the tablet’s supplier community performed by various gadget experts around the US. Almost as fast as the product inventories were depleted, various web sites began to release detailed “teardowns” of the iPad2. High resolution photographs of the Printed Circuit Board (PCB), battery and other components were published for all to see. A complete Bill of Materials (BOM) listing each supplier and the cost of individual components were included as well. There was even a teardown of an Apple branded case for the iPad! Although the hype surrounding the iPad2 is significant, Apple is not the only vendor to receive such attention. The Motorola Xoom received similar treatment in late February.
Perhaps the most noteworthy analysis of a high tech device that has occurred happened around this time last year. An apple employee accidentally left a prototype of the iPhone 4 in a German biergarten in Silicon Valley. The phone was handed over to the web site, Gizmodo, which published high resolution photographs of the front, back, middle, top and bottom of the device. Of course, there was a media frenzy that ensued following the publication of the photos. I suspect only Antennagate received more attention in the popular press than the iPhone 4 preview. But what I found most remarkable was how quickly the device was copied. Before the iPhone 4 was commercially launched in the US with AT&T, there were counterfeit clones of the new phone on the streets of Shenzhen. The speed with which Shanzhai manufacturers to replicate technology is both spectacular and terrifying.
iPad2 Teardown (Source www.appleinsider.com)
Yet, the public teardown of new technology devices and the rapid development of both counterfeits and legitimate clones has become status quo on the high tech industry. It is growing more challenging every year to maintain any type of product differentiation for new devices, even in the short term. How many new tablet devices are now on the market? How many hundreds of new smartphones with touch screen interfaces exist? How many new e-book readers have emerged? The competitive dynamics of the high tech industry are shifting dramatically.
Factors such as brand name, product availability and vertical integration via experiences such as app stores are becoming almost as important as product features, performance and price. Earlier this month I had the opportunity to deliver the keynote presentation at the 113th Plenary in Paris, France. Both GXS and STMicroelectronics sponsored this event on how to manage the growing complexity of customer business requirements. My presentation focused on Differentiating the Customer Experience in a Teardown Economy.