Market Leader Mentality vs. Follower Mentality

When comparing market leaders and followers, I often notice large differences in how they view the market and future innovation. These have large implications on their respective strategies and what products they introduce.

Market leaders look for ways to expand the market. They notice new applications that will bring in new customers. They simplify the product so that it becomes accessible to a wider audience. They often redefine the market to look for more room to grow.

Followers look for ways to take customers away from the leader. Instead of expanding the market, they try to attract customers with higher specs and lower costs. They tend to be oblivious to whether the specs are truly useful or not and are more focused on specs that attract the attention of prospective customers.

By market leaders, I am not referring to the companies with the largest market share. I am using this term to identify the companies that define the market and how it will evolve. These are often the companies that initially created the market and are also the companies that have a strong brand. Sometimes a market will no longer have a leader. Sometimes a market leader will not have the largest market share. If a leader is present however, that is the company in which the vast majority of innovation will be found.

What is interesting is that market leaders in a certain industry segment are also often leaders in another. For example, IBM was the undisputed leader in mainframe computing. It also continued to be the leader in personal computing. Even though it found its market share eroded by Compaq and other IBM-clone vendors, it still was the leader in laptop computers with the ThinkPad line. The ThinkPad brand was strong, not because they had the laptops with the highest specifications or because the laptops were the thinnest and the lightest. People bought ThinkPads because they trusted IBM to make the decisions that meant most to people in business. Decisions around the keyboard, pointing device, durability and all the things that do not make sexy specifications. IBM knew what business people really needed and made decisions that really counted for getting work done.

In comparison, IBM-clones were more focused on low-price and high specifications. Decisions were made to bump up the specifications while keeping prices low. The actual usability of the keyboard or pointing device was often neglected, because they don’t add to the specs. IBM-clone vendors had little regard for actual business needs.

When discussing Apple and trying to figure out what their next move will be, it is important to understand that there are these two completely different mentalities in the market.

Apple obviously has the market leader mentality. They have continuously expanded the personal computer market, first the the Apple II, then the Macintosh. After Steve Jobs’ return, the iPhone and then the iPad. All of these products brought new customers and completely new applications to personal computing.

Looking at the smartphone and tablet market, all the other vendors, including Google appear to have the follower mentality. Google copied Apple’s touch user interface and then attempted to gain market share by providing it for free. Google also copied Apple’s AppStore concept which allowed users to download and purchase software easily and cheaply. Samsung copied Apple’s designs and created phones that had very powerful CPUs and large screens; sexy specifications. Both Google’s and Samsung’s penchant for being a follower actually goes back before Android. In fact the original prototypes for Androids were Blackberry clones. Also if you look at the designs for Google Docs, you can easily identify the similarities with Microsoft Office. Google Docs is an attempted clone of Microsoft Office that is free to use.

It has been discussed that Apple should and will offer a larger size screen for the iPhone. This is typical follower mentality. Large screen phones are succeeding in the market and maybe eating away at Apple’s market share, hence Apple needs a large screen phone. This conclusion may or may not be true, but this is not really the point. The point is that because Apple has market leader mentality, it does not really care about specs. What market leaders often care about is whether or not large screens will allow new applications and expand the market as a whole. I doubt large phones will.

When we realize that Apple is more concerned about expanding the market rather than fending of Samsung, then we can make very different predictions. First of all, expanding the market means much more than selling iPhones in China. It means making iPhones and other iOS devices a larger part of our lives. It means truly integrating with cars and many more devices. Importantly, I suspect that it means iPhones should be smaller and lighter so that we can take them along even when we are not wearing baggy jeans or carrying a purse; for example, when we go jogging.

Going further, it is possible that Apple is not thinking of smartphones in the same way as they did in 2007. Steve Jobs introduced the iPhone as a “Phone, an iPod and an Internet communicator”. I suspect that Apple might have gone beyond this definition and moved towards something different. The clue is that they included the M7 chip inside the iPhone 5s. The M7 chip is something that most people would expect to find in a wearable device. It is therefore possible that they now define the iPhone itself as the wearable device that everybody is clamoring about. If so, the direction would be to make the iPhone as small as possible.