Today, the Handset; Tomorrow, the Automobile. The Present and the Future of the Ecosystem Approach.

[Using the example of Apple and Samsung]

Ecosystems, now more than ever, play an important role in company’s strategy and ability to drive consumer success. Businesses that construct rich ecosystems around their solutions enjoy greater profitability and stability, due to increased pricing power and consumer loyalty. Now consumers want their devices to work seamlessly together for better user experience. User profile control and management is a central enabler of an ecosystem strategy.

According to Q4 2014 smartphone sales figures, Apple made more money than all of its competitors combined, capturing 93% of the profit in the mobile device market. Samsung, a recent leading incumbent in the telecommunications industry, made 9% of the profit for the quarter. Numbers add up to over 100% as other players like HTC, LG, Motorola and Nokia are losing money from their mobile divisions.

Apple vs Samsung Profit Share

The figures above illustrate remarkable phenomenon in recent business history: a key player in the handset industry faces a continued profit share decline. Simultaneously, a company that had almost no presence in the smartphone market 8 years ago takes the lead, gobbling up the profit from a long-standing giant.

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Numerous large, once-successful businesses fail because of a lack of differentiation from competitors, and a failure to adapt to market shifts. The example from handset manufacturers, which needs to be applied to automobile makers as well, should lead us to think of crucial keys to business success. Here, ‘success’ refers to the ability of a company to create a sustainable platform-based ecosystem of complementary products and innovation around itself – Tweet That! In this case, the primary issue for Samsung has been its decision to go with an open platform approach in contrast to Apple’s closed platform and intense focus on ecosystem development.

Apple understood early that “software is eating the world” and that it is necessary to create a rich ecosystem around its products to increase the value for customers and grow business. Samsung, on the other hand has been mostly reliant on Android OS and continues to operate within an ecosystem that other vendors control (Facebook user ID, Google Maps for navigation, Google Play Store). However, Apple’s ecosystems is unmatched with such components as iCloud, iTunes, App Store, Apple Pay and AppleCare protection plans. Success factors of Apple’s iOS Ecosystem are:

Success Factors of Apple’s iOS Ecosystem

The growth of connected cars could cause a similar redistribution of profits among automakers and other companies that are trying to enter the automotive industry. If car manufacturers want to secure their business and remain the sole provider of revenue-generating services, they should create rich ecosystems around their products and focus on producing complete, end-to-end mobility solutions. Due to safety concerns, automakers have a good argument for implementing a walled garden approach to application development. The automakers’ market shares in the new environment are at risk if they are slow – and for the taking if they are fast.

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March 17th, 2015 - Posted by in connected car, ecosystems