Apple new iPhones will be somewhat different to those of the past. They will now have a USB-C charging and data port, and not Apple’s lightning cables. Why? Because the European Union said so. And they said so because they are not happy with the number of different charging cables we all now need for our various devices. Having a single cable that can charge an iPhone, Samsung smartphone, and virtually every other small electronic consumer product makes sense. It means fewer cables, smaller carbon footprints, less electronic waste, and prices will come down as less and less products assume that they need to provide a charging cable in their packaging. I have at least 20 power cables in my office that have been provided with various electronic gadgetry over the years.
So why did it take the European Union to drag Apple (kicking and screaming) to this point? And by that, I mean that unless Apple starts selling iPhones with USB-C ports, they won’t be selling any in Europe. And of course, it is much less expensive to have a single production line, and not two for two different charging cables. So all iPhones across the world will have USB-C ports moving forward as a result. So why didn’t Apple make the decision to change to a USB-C charging point themselves?
Because the lightning cables were making Apple lots of money.
Apple is famously controlling over the technology that appears on and connects with its devices. Apps need to be vigorously tested and approved by Apple before they can be deployed across the Apple eco-system of products. This limits competition, but also is a genuine way for Apple to ensure the quality of its user experience. Other manufacturers (Microsoft, Google and Samsung) have the tradeoff going the other way, where having their devices open to all developers might mean there are some ‘lower quality’ apps that create problems, but the competition means there is always a lot of apps that are cutting edge. The fact that Apple has gone the other way is not a criticism, as it is simply the approach they have found works for them.
But then there are the peripherals. Every piece of hardware that interfaces with Apple products also needs to be approved. And no device can use Apple’s lightning cable with paying a fee. So with the tight control Apple has over its apps and peripheral products (and the fees Apple charges), a lot of money can be made.
Now while the policy of quality control on apps has a grain of (design) logic to it, the control over peripheral hardware does not. It is simply a way for money to be made through an under-the-radar monopoly on hardware and other things that plug into iPhones. Apple has consistently pushed back on the idea of changing the port on its iPhones to accept USB-C cables because they say it takes up too much room inside the phone. But then of course Samsung and Google can manufacture phones with comparable specifications that manage to incorporate a USB-C port perfectly well. So it is possible … if you want to do it.
We are seeing an increasing prevalence of established brands using technology to establish under-the-radar monopolies purely for financial gain, just like Apple did. John Deere manufactures tractors and farm equipment and has somewhat recently stopped ‘selling’ their equipment to farmers. Instead, farmers use the money they would have otherwise spend on ‘buying’ this equipment to purchase a ‘perpetual lease.’ They still get to use John Deere’s tractors for around the same price, but the ‘perpetual lease’ means that John Deere technically still owns them. So why did John Deere do this? So they could install technology within their tractors to ‘shut everything down’ if that technology detects the farmer doing any of his or her own maintenance, or pays someone who is not from John Deere to fix something.
So now John Deere gets to keep all the maintenance profit for the products.
So now we have a company who builds their brand, creates a following, and then cashes in by using technology to create these under-the-radar monopolies. Of course, they will anticipate that some people will choose someone besides John Deere (or Apple) to purchase (or lease) equipment from. But market forces are not always as powerful as many capitalist puritans would like us to believe. If the only tractor repair shop in your small, rural town is a John Deere facility … then you are stuck. As are all the Apple customers who are now so used to the Apple user interface that any change would be quite onerous.
Which is why these sorts of tactics are philosophically similar to the extortion rackets of many organized crime syndicates. There is no way a ‘new’ smartphone or tractor manufacturer would be able to enter the market by demanding their customers purchase unique charging cables, or instead sign up to ‘perpetual leases’ to make sure you also get the maintenance money as well. But once you are there, and have been there for years, you have someone tell you that if you want to stay there you need to pay them more money. Just to be there.
There is a large philosophical and ethical debate about these tactics. And of course, capitalism has limitations that require societal responses for (if you call me a communist for suggesting this, then you are part of the problem). And we are increasingly seeing legislators (like those in the European Union) step in and take it away.
But in terms of what it means for the ‘everyday’ engineer, design and manufacturer, it is always a safer bet to come up with a device and a business plan that doesn’t rely on monopolistic forces to make money. Eventually, monopolies will collapse. Potentially after they have made those in charge of the monopolies a lot of money. But they are not a long-term strategy of success.
So make your products reliable. Make them attractive. Make them adaptable. Make them more functional. Listen to the customer. Try and beat your competitors by doing whatever you do better. While things like public relations and marketing is important, if you use glossy brochures to hide problems with your outputs then you are simply making a bigger problem down the road.
If you do become successful, then there will be plenty of opportunities to ‘cash in’ your brand to create a monopoly across your market. If we assume that your organization will never be as big as Apple, then don’t overestimate your ability to impose a monopoly that will actually make you long term money. And if you do, then it will often take the focus of beating your competitors ‘fair and square.’ And before you know it, your competitors will start beating you by being better than you.