Jag Venugopal's Blog

March 7, 2012

Its not Price vs Features, its Price and Features

Filed under: Business — Jag @ 9:58 pm

Conventional thinking is that companies compete in the marketplace on the basis of features or price. Most business professors argue that differentiation of product induces greater willingness to pay. The thinking is that economy products are built to a lower feature spec and priced lower, whereas top-of-the-line products are relatively immune from price considerations.

The iPad, which had its third release yesterday, defies this conventional thinking. When looked purely from the perspective of features and specifications,the original iPad of two years ago beats virtually every other tablet on the market today. The 3rd generation is yet another game-changer in the marketplace with screen resolution better than HD. However, here’s where Apple’s competitive advantage is virtually unsurmountable — it delivers these goodies for less than the competition. And the competition cannot match it spec-for-spec at the same price.

It is not enough to compete on price or features alone. The new competition is based on price and features. Attention paid on the front-end for features has to be matched on the back-end with efficiencies in procurement and delivery. Its just as important that Apple has an exceedingly efficient supply chain that can source parts such as screens, chipsets and batteries cheaper than the competition, as it is important that the product have a gazillion-pixel display and great usability.

No manufacturer can afford to play the price-and-spec game as currently structured, where Apple is king. Their only hope lies in changing the rules of the game — coming up with a product that is fundamentally different from the iPad. In the ability to produce a game-changer, I still hold out hope for Microsoft — if they ever get around to coming up with a tablet that’s fully integrated into the enterprise, contains Office, Sharepoint, database access, video conferencing, and performs with reasonable speed.

I think there is a lesson for us in services as well. The dichotomy between inexpensive and high-quality is a false one. The service we deliver is just as important as the process we use to deliver it. Consider but one example of an Apple analog in the services world, Narayana Hrudayalaya. If we don’t figure out both sides of the equation — quality/features and cost, someone else will.

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