IE Focus | By Ricardo Perez, Professor at IE Business School

Only a couple of years ago Apple was the indisputable leader in consumer electronics, but it hasn’t kept up the momentum and now Samsung has it in its sights.

Just two years ago Apple was the undisputed leader in innovation in consumer electronics. Its telephone was unparalleled in features and applications ecosystem. The iPad was sweeping the decks in sales worldwide and it made us learn to work and play in ways that we never imagined, while its competitors tried to copy its products as fast as they could. But the latest products launched by Apple have lost a little of their wow factor. They are merely reinterpretations in different sizes with better features than their previous versions.

Samsung is in total counterphase. After many years of trying to reach Apple’s levels of functionality and ecosystem, it would appear that it is now managing to close the gap. Its telephones are selling at the same price, the company is experimenting with different form factors and they have at least the same technological and software capacities as Apple’s phones. Obviously the war that is being unleashed is not just one of company against company, like Nokia and Motorola years ago, for example. Today these companies are competing in three major fields: technology, ecosystem and integration.

In the field of technology, namely what handsets are able to do, the two firms are very different. Apple has never tried to be the most innovative in this respect. It doesn’t develop its own technology which means it depends on advances made by its suppliers. Its strength in the market is what now keeps it ahead of the rest. Samsung also produces screens and the chips that make telephones work. It invests thousands of millions in research in these areas. It uses these advances for its other electronic divisions, including televisions. That’s where Samsung’s advantage lies.The ecosystem is about having the largest number of useful apps and useful accessories that are not only physical but also in software form- namely the apps that we download. The key here is that there are actually only two platforms competing: Apple’s iOS and Google’s Android. iOS has the best figures for numbers of applications sold, and revenues generated by developers, revenues brought in by application. Hence this by definition is the most interesting field for anyone who wants to make Money. Android, the system used by  Samsung, has lower sales but more variety and more potential to secure the largest market share. It is therefore difficult to say because Apple has more revenues, but Samsung and Android in theory at least, have more potential.

The third factor is that of integration. It is about more than just the ecosystem. It is about how easy it is for the user to manage his or her digital life in the Apple environment and in the Samsung environment. This is where Google has a lot to say – Google and its struggle to be everywhere. Google builds new tools (the car that drives itself, the augmented reality glasses…) which will be able to be integrated with all android devices.  Apple continues to be an environment that only admits Apple devices. Rumors of a possible Apple watch are taking it along the road to integration.

Hence this new innovation war is not only about what leading companies are doing, but also about how many other firms it can recruit into its ecosystem (technological platform) to help them innovate.  The question that every company should ask itself is “how can I participate in this innovation opportunity that I am being offered? How can I find new ways to interact with my client thanks to this war of innovation?

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