This almost sounds like a plot for a novel. Microsoft creates a successful strategy called “Embrace, Extend, Extinguish” and then promptly forgets it, resulting in a string of failures.
Google, which up to now seemed happy to repeat Microsoft’s mistakes, accidentally picks up a successful Microsoft practice and uses it against Apple — likely taking out a number of its Android partners in the process.
I’ll share some thoughts on the impact of Google’s Pixel phone and related product strategy in the context of Embrace, Extend, Extinguish, and why this doesn’t bode well for Apple, and then close with my product of the week.
The Most Powerful Forgotten Strategy In Tech
Back when Microsoft was starting out, its most powerful platform wasn’t Windows, which was almost an industry joke at the time — it was Microsoft Office. The purpose of Microsoft Office was to take out Lotus 1-2-3, which was one of the most successful PC applications of its time.
Microsoft brilliantly figured out that to remove Lotus it first had to embrace what made the product unique, which meant it not only had to load Lotus 1-2-3 files, but also to run the complicated macros that came with them. So Microsoft created Excel, and it was as close as you could get to Lotus 1-2-3 without being a copy of the product. That made it easy for people to switch.
Then Microsoft extended the offering with word processing, a basic database offering, and eventually a presentation product. It priced the package competitively against Lotus 1-2-3, and that motivated people to switch. You see, it’s not enough to make an offering as good and as easy to get to as the competition — you still have to motivate folks to switch.
Finally, Microsoft coupled the competitive edge it had gained with enterprise discounts and incentives, heavy marketing, and heavy advocacy to become the standard in office productivity packages. It extinguished Lotus and Lotus Notes in the segment, and Symphony — the much-too-late response to Office — failed in market.
Microsoft used a shorter but very similar strategy against OS/2, which helped wipe it out of the market as well. It didn’t use the same strategy with Zune (it just didn’t execute) or its mobile phones, and those efforts failed.
Pixel Phone: Embrace + Extend
With Android phones, the embrace phase came early on. Android was about as close to a clone of iOS as an operating system could get. It wouldn’t run iOS apps, but Android attacted most of the same developers, who developed on both platforms, which reduced the switching cost substantially. However, Google seemed to stall there for some time.
It just kicked off the extend part of the strategy with the new Pixel phone, which not only adds a host of impressive additional capabilities, but also ties into Google’s emerging IoT strategy.
You can get a phone that’s priced less than the new iPhones with a better camera, far faster charging, better performance on paper (waiting on reviews), and a far more useful digital assistant.
However, the real extension is the growing host of products Google has integrated, including an Amazon Echo-like offering, a relatively unique smart router, an updated TV offering, a growing list of Nest devices, and a new VR headset.
Granted, these products mostly will work with iOS devices as well, but they’ll undoubtedly work better with Android phones, and some will work best or only with the Pixel. That makes the Pixel more attractive than the iPhone and motivates people to migrate to it.
Extinguishing the iPhone
Google already is pricing the Pixel at less than the iPhone, but Apple customers are exceedingly loyal to their company. However, Apple clearly has been cutting the cost of manufacturing its product while holding the price constant, and the user experience has been degrading as a result.
All it would take would be a substantial number of Apple users seeing this cost-cutting as taking advantage of them, and if Google could give them a voice, then they likely could cause a stampede away from the platform.
That is where Google Search likely comes in. Donald Trump recently accused Google of altering its search technology to favor Hillary Clinton (echoing a claim that surfaced this summer). You’d likely be able to toss this out, except the EU has accused Google of manipulating its search tech to favor its own offerings over those of competitors, and it is considering the imposition of historic fines against the company as a result. That’s enough smoke to suggest there really is a fire, given the level of EU interest.
In the end, the combination of a very strong product that more than matched the iPhone 7 (which is being pounded for its lack of headphone jack rather than praised for its solid advances), a massively growing ecosystem of products, unique technical enhancements (even I’m interested in a phone that will charge to 7 hours in 15 minutes), and the most powerful manipulation tool on the planet (Google Search) adds up to the potential to eliminate the iPhone.
Granted, Google still would need to execute, and it has the attention span of a 4-year-old on sugar, but all of the ingredients to take out the iPhone are there.
Wrapping Up: Embrace, Extend, Goodbye iPhone
This is the first time that a firm has put together all of the elements of an Embrace, Extend, Extinguish strategy since Microsoft introduced in the 1990s. As always, the success of this strategy hinges on the firm’s willingness to execute, but it does represent the most powerful threat to Apple’s iPhone yet.
That said, the part not yet addressed is what happens to the other Android phones. The low-end phones likely are safe, as this is clearly a high-end offering, and most can’t afford it. However, given its massive phone problems at the high end, Samsung in particular should be concerned. Long before Google’s Pixel takes a big chunk out of Apple, it is likely to take an even bigger chunk out of the other high-end Android phones.
To them, this is Microsoft Surface on steroids, and Microsoft pretty much cornered the market on Windows tablets with that offering. Yes, Google definitely will hurt Apple, but it may wipe out a few of its Android phone partners long before Apple feels a pinch.
There could really be no other choice this week. I just saw 15-minute charge for 7 hours of battery life (total battery life around 13 hours), and I instantly fell in love. Granted, given Samsung’s battery problems, I wouldn’t want to be the first one with this phone — it would be kind of embarrassing to have an airline tell you that you couldn’t use it anywhere near an airplane — but once vetted, this appears to be an impressive bit of kit.
It has arguably the best camera in market, and it actually has a headphone jack — who knew that would be so important? It has Qualcomm’s very impressive quad-core Snapdragon 821 processor, a gorgeous FHD or QHD AMOLED screen wrapped with Gorilla Glass 4, a glass aluminum case, and MIMO support for stunning, cutting-edge WiFi performance (though it will require a MIMO router).
Among the phone’s downsides are that it isn’t highly water resistant (it will stand up to sprays of water), and presently it runs only on the Verizon network in the U.S. Given the carrier issue and the fact that it is a brand new and as-yet-untested phone, I will wait to buy it — but for that 15 minutes to 7 hours charge time, the Google Pixel Phone — and particularly the XL version — is my product of the week.