Apple, Samsung, and the Parable of the Model-T

Posted on Author by Ben Thompson

Steve Jobs was famously fond of the Henry Ford adage:

“If I had asked people what they wanted, they would have said faster horses.”

It’s true! New products – new categories – require vision and an unflinching focus on the job to be done (i.e. transport), not simply enhancing or extending solutions that already exist (i.e. horses).

So it was with the iPhone. Instead of creating a better phone, Apple created a pocket-sized computer that accomplished multiple jobs; the addition of the app store extended exponentially the potential jobs that could be done by an iPhone.

But the story of Henry Ford didn’t end with the Model T.

Henry Ford didn’t invent the car. Instead, he made it accessible, reliable, and affordable.

He was able to do so by being vertically integrated: raw materials ranging from rubber to iron ore would enter Ford’s massive 100,000 employee complex on one end, Model T’s on the other – 15.5 million in all.

Each one was painted black.

“Any customer can have a car painted any color that he wants as long as it is black.”

Ford’s snark notwithstanding, there was a legitimate reason for the lack of color: given the speed with which Model T’s flew off Ford’s assembly lines, paint simply took too long to dry; Ford instead used a black enamel that could be baked on.

In many respects, this focus on on the efficiency of production was admirable; Ford lowered the price of a Model T from $880 at its 1908 launch to a mere $290 in 1924. But it was in 1924 that Ford’s sales peaked.

In Denial: Why Business Leaders Fail to Look Facts in the Face–and What to Do About It Richard Tedlow writes:

Henry Ford began his business career with a sharp focus on customer benefit. By putting America on wheels, he liberated a nation from the tyranny of distance. During the 1920s, his focus shifted from making customers happy to making more Model T’s.

It turns out customers wanted colors, but Ford didn’t care. His production process was more important.

GM cared. They figured out colors, and they figured out brands. They figured out that cars were a status symbol, highly individualistic, and aspirational. Your car is on display everywhere you go, and it says something about your place in life. So GM made cars in every color, and created brands “for every purse and purpose.” They also introduced the idea of the annual refresh, with the assumption it would drive demand. And starting in 1924, they began to take over the market.

Ford would only outsell GM three times in the next 80 years.

Today Samsung announced the Galaxy Mega. The Twitter snark was strong.

All right — I’ll be the one to say it: “Samsung, please: Stop the madness” – @jr_raphael

New from Samsung. Galaxy Waffle Iron. – @JohnPaczkowski

I am waiting for Samsung’s Ultra Mega. I want to wear it over my eyes like an Oculus Rift and just walk into things while I text. – @tomwarren

But no one was re-tweeted more than Derek Kessler:

Of course, Samsung sells more smartphones than anyone. Turns out customers want different sizes.

And now for the caveat: Samsung leads the way in units, but not profits. That’s fair, and Apple is in a much stronger position than Ford was in 1924. Ford’s problem was that they primarily appealed to first-time car buyers; Apple’s ecosystem advantage means they’re much more likely to retain current customers.

Still, the idea that Ford became overly focused on production as opposed to customer needs is a worrying one; if this fall brings nothing more than a 5S, with the same form factor as the 5, well, that will be great for production costs, but not so great for customers who prefer a larger phone, or a cheaper one (and remember, Cook is a production guy, not a product one).

It’s not 1908, and it’s not 2007. I hope for Apple’s sake it’s not 1924.