What makes major tech companies like Apple and Google so successful?
Jan Dawson, founder and chief analyst at independent research firm Jackdaw Research, has a few ideas.
Dawson, who also blogs at Beyond Devices and at Techpinions, put together a slide deck called “Business models in consumer technology” to show what makes the biggest names in tech so successful, and what those companies have in common.
The main things to know about a successful business: it has a profitable core business, and it competes across a number of other categories to create a powerful ecosystem.
There are 6 major domains: Hardware, Software, Content, Communications, Connectivity, and the Digital Layer.
Cores are different for different companies . Not every major tech company derives its high margins from the same sector -- in fact, there's a wide range of sources for these high margins.
Each of these companies has also expanded out into the other domains, building way beyond its profitable core.
Amazon is the exception to the rule among the largest consumer technology companies, sharing with the rest of the retail world relatively low margins, and suffers as a result.
There are two fundamental business model types -- those where products or services are directly monetized, and those where they are not monetized.
Across software, hardware and content, subscription models are starting to take over from one-off sales models.
Business models where products and services are not directly monetized usually fall into one of three categories: bundling, channel or data.
Certain business models -- notably advertising and data -- create tension between the user of the product or service and those paying the bills, while other models align users and customers perfectly. This has implications for user satisfaction.
Some examples of software which is being monetized in other ways, such as advertising, hardware purchases or subscription services.
A ballpark summary of the annual revenue opportunity in various categories and sub-categories, within the consumer technology market.
Margins are highly variable by company, but certain categories and sub-categories tend to be far more profitable than others.
Putting the revenue and margin pictures together at a category level shows where some of the most lucrative opportunities lie.
Ecosystems emerge as companies start to build value around their products and services by creating synergies between devices and other products, and by bring third parties on board.
All of the big, successful consumer technology companies have eventually began to compete across major categories
Competition in consumer tech hardware is extending to new domains, including the body, the home and the car, either with new hardware or with extensions of existing hardware to provide interfaces in new settings.
Apple, Google and Microsoft are competing across these three new domains as well as in legacy computing, and Samsung is arguably trying to build a similarly broad platform.
One of the keys to success for an ecosystem is its scale -- this slide shows the scale of various major ecosystems.
Most successful consumer technology companies end up moving beyond single products to become category companies and then to building ecosystems.
This slide shows how Apple has slowly transformed itself from a single-product company into a category company and now an ecosystem company, with activities across five of the six domains.
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