Sunday, May 8, 2011

Apple, Cannibalization

In my previous entry I speculated that the recent rumors that Apple was going to switch at least their laptops to ARM processors might be rooted in leaks of a new product offering that would exist between the iPad and the MacBook Air. To be clear, this speculation is based on no outside information and the odds of it being true are very very small. Even so, I do like the idea of a slightly beefed up iPad with an easily detachable keyboard for around $700 base price. I'd wouldn't be surprised if Apples clever design and engineering teams could create such a device in a form factor only slightly bigger than the iPad 1.

You'd need a touch pad on the keyboard, but that shouldn't be a problem. Maintaining the same size as the iPad wold lead to a somewhat cramped keyboard but for casual to intermediate complexity tasks I think it would work well enough.

Of course you can already attach an external Bluetooth keyboard to an iPad. Carrying around even a small keyboard is cumbersome though and not as convenient as an integrated solution would be.

So, imagine what would be possible if you had an iPad with keyboard/touchpad combo. You might have to remotely connect to a more full featured computer to do some of your more esoteric work but for a majority of day to day tasks you would have a very capable platform. The biggest limitation would be the size of the screen and even that could be addressed by versions with larger screens. Lets call such a device an "iKey"

Assume for a minute that an iKey would be as cool and successful as my initial geeky instincts tell me. Is there some reason why Apple wouldn't produce something like this? In short, yes.

A very important consideration in product development is cannibalization. The basic idea is that new products may impact the sales of existing products if their is substantial overlap in their capabilities. This is particularly true if the new product offers a price advantage over the existing product or products. Cannibalizing your competitors sales might or might not be good. If you're entering a new market segment and can build a product that is likely to maintain your desired margins then cannibalizing sales from existing players is a very good thing. This is not generally true if you're contemplating a product for a market that you already have a presence in that is likely to steal sales from your existing offerings. There are circumstances under which this is done, but based on my understanding it's rare. At one time Starbucks was opening so many new outlets that they were starting to steal sales from themselves. This was deemed OK since the thought was that it was better for them to steal sales from themselves than to have others do so. Keep in mind that Starbucks eventually closed a lot of under performing locations.

So, the potential strength of an iKey like device is also it's weakness. If it could provide a significant percentage of the user experience that the MacBook Air provides at a lower cost then Apple would be unlikely to bring such a product to market unless they could sell enough additional units to make up for revenues lost on sales reductions of the Air and other Apple products. This may seem counter intuitive if you're a tech savvy consumer hungry for neat gadgets but it makes good business sense.

Ideally new products need to either slot in nicely between existing products or replace aging offerings. The base MacBook Air retails for $999 with 64GB of storage and 11 inch screen. An iKey would either need to fit between the iPad and the MacBook Air or replace one of the two. While it's possible that Apple could incorporate a keyboard into the iPad line it seems more likely to me that they'd either wedge in such a product between the iPad & MacBook Air or replace the Air.

As I said above, this is all just speculation and tech geek wishful thinking on my part. It is fun to try to figure out where  technology is going to take us in the future and speculate on what companies like Apple might be doing in regards to future product offerings. It helps to have an MBA when doing this but it doesn't make me omniscient.

Image by rafm0913 via Flickr
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