Apple's Ecosystem as a Defense to Commoditization and Modularization

Just a quick note based on a members only, daily update article from Ben Thompson at stratechery.com (dated February 12, 2015). In the article Thompson discusses identity and Apple's Touch ID, and makes the following comment:

"[T]his is how it so often works for Apple: they attract the best customers with an integrated experience, and by the time the advantages of that integration have dissipated, it doesn't matter because the company has established the best ecosystem."

This is such a brilliant point, and it suggests an important corollary: because there's only one Apple ecosystem, it doesn't matter much whether parts of Apple's business are modular or integrated. Regardless of whether parts of Apple's business modularize, Apple has its unique ecosystem as a competitive barrier. This ecosystem is sticky and difficult for customers to opt out of. It also provides convenience, ease of use, security, and privacy advantages over more open ecosystem alternatives.

Apple's ecosystem moots, or at least tempers, the commoditization problem that plagues most companies. Apple's ecosystem, and the competitive barrier it provides, allows Apple to safely pick modular alternatives when they're better than what Apple could do through its own integrated approach (e.g., modular alternatives like Intel chips in Mac computers, flash memory, display glass, labor intensive product assembly, the thousands of apps created by independent developers, etc.). When modular solutions aren't good enough, and integration allows product solutions or meaningful improvements that can't be achieved otherwise, then Apple integrates (e.g., hardware and software engineering, industrial design, mobile chip design, etc.). See Concepts page and discussion of Clayton Christensen.

Apple's ecosystem allows it to focus on providing the best product solutions for customers -- and the best end user experience -- regardless of whether these solutions are integrated or modular.

The author owns stock shares of Apple.