13 October 2014

Why Apple is beating Samsung, Mencius has the answer!

The release of Apple iPhone 6 that caused big profit pressure the successful Samsung shows the applicability of Ancient Chinese Wisdom of Mencius who said that "Timing looses to Terrain Advantage and Terrain Advantages looses to People's Support".
The major business news on 6-7 Oct 2014 was "Samsung Electronics has forecast a 60% fall in quarterly operating profit from a year ago because of slowing Galaxy smartphone sales." Practically all reports gave the reasons for the fall as the release of Apple iPhone 6 for the high end smart-phone market and increasing competitions from the low-end smart phone from Xiaomi, Huawei of China and Micromax of India. The fall was not due to lack of effort from Samsung during this time. On the contrary, Samsung has anticipated iPhone 6 release and have introduced many new products like S5, Note 4 and many low end models as well. Why then are they not successful? What can we learn from this? What should Samsung do win back? I think Mencius 孟子, a Confucian Master, about 2000 + years ago has the answer.

《孟子 ‧ 公孫丑》 The Book of Mencius, Chapter Gong Sun Chou 
  1. 齊人有言曰:「雖有智能,不如乘勢;雖有鎡基,不如待時。」
    The Qi people has a saying," Having wisdom and capability is not as good have riding the advantage of momentum; Have the farming equipment is not as good as waiting for the right time and season".

    This saying highlight the importance of Momentum due to the shape of the terrain and the seaonal timimg. Just having the resources of wisdom and equipment are not sufficient to ensure succcess.
  2. 孟子曰:「天時不如地利,地利不如人和。」
    Mencius said, " Having the right season and time is worse than having the terrain advantage. Yet having the terrain advantage is worse than having the harmonious support of people."

    This saying rank the 3 key factors of Seasonal Time, Terrain Advantage and People Support with People Support as most important, then Terrain Advantage with Seasonal Timing last.
1. Apple iPhone Set the New Wave - Got the Right Timing. 得天时

When iPhone was first released in June 2007, there was no competitor. Nokia and others were still producing PDA-phones. (Smartphone is a misnomer. iPhone is actually a cloud-device, for connecting to the cloud of knowledge and social network of people. Nokia PDA phone is for managing the personal things of calendar, contacts, and data). The Android partnership that include HTC, Sony and Samsung was only formed in Nov 2007. The first commercially available smartphone running Android was the HTC Dream, released on October 22, 2008. Apple iPhone has a lead of at least a few years. Many consumers were just finding out the difference that iPhone brought to them.

2. Samsung Got the Terrain Advantage - 得地利 
Though the Android phone missed being first, but many of them working together, they are able to produce products with many more features and released them faster and earlier than Apple once they caught up with Apple (may be 2 - 3 years after iPhone 1st release). The eco-systems and supply chain of the Android camp are perhaps more efficient than Apple. However, I had the suspicion that it was not Apple's inability to add features as fast as the Androids but rather, Apple wanted to skretch the life of its products and make as much profits as possible. We known that only Samsung made good profits but LG, HTC, Sony etc were not doing well despite the rise of Android phones due to various reassons. Android phones took the largest share, pushing Apple to 2nd but the victims were Nokia, Rim's Blackberries, the WebOS phones and the WindowCE phones.

3. Apple is the People's Choice Brand - 得人和
It is amazing that Apple only did less well in the times of the rapid growth of Samsung. They continued to make good profits. Apple could take their time in releasing the market demand for larger screen phones, the 5-6 inch ones. Once Apple release the larger screen iPhone 6, the order for the phone broke all records. It even caused the profit pressure on Samsung. It revealed that Apple customers are willing to stick and wait for Apple. How could it be so? It is because Apple does not just make products, but rather make products that touch the heart and desire of the its customers. See for example the mission statement of Apple in What and Who has the Best Mission Statement?
I summarized it as "we simplify and perfect our offering to enable people to have delight, surprise, love and connection." Consider Samsung's philosophy of "to devote our talent and technology to creating superior products and services that contribute to a better global society and to have the power to enrich lives." It sounds great but is very vague.  Which one can you relate to better?

The company that has the heart of the people is able to out do those only address the rational needs of the people.  If you only address the rational value and not the emotional and identity value of your offerings, then you get involved only in the price sensitive for features war. This is exactly where Samsung got into trouble. Its low end products are out competed by the China and Indian brands and its high ends are cornered out by Apple. Apple is selling style, class, fashion, elegance and ease of use. Samsung is still in the features war! Apple should never sell cheaps because cheapness is against the identity of Apple Brand and People's true desires.

See also:

  1. Understand Innovation's Value and Behavioral Econm...
  2. The Twelve Truths of Innovation
  3. Understanding The Smartphone Battle – Rise of Apple...


Lim Liat (c) 12 Oct 14
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