When it comes to the battle of the smart-phones, there are two clear camps.
iPhone vs. Samsung Galaxy.
If we took a traditional market competition perspective on this duopoly, we’d assume that this was a battle for market-share. Apple would be doing all they could to capture the market with their latest-technology and snazzy marketing, while Samsung returns fire with lower prices and greater accessibility.
However, this is only looking at innovation as an external capability, focused on market-growth. Although important - this is (at best) 25% of an organisation’s capabilities.
So, it shouldn’t come as a surprise when it was announced that Samsung’s Component Division will make more money from the iPhone X sales than they will from the Galaxy S8.
How is this?
Samsung are the only company that make the high-quality screen and DRAM chips - in the required quantity - that the iPhone X requires. The Wall Street Journal estimates that for each iPhone X sold, Samsung Component Division will make $150 NZD.
And, the WSJ continues to estimate that as Samsung’s Component Division accounts for approximately 35% of Samsung’s total revenue - they could stand to make $4b USD more from iPhone sales than from Galaxy sales.
Samsung have developed a strong internal profit-growth innovation capability - where they focus on innovations around their processes and supply chain. By growing this capability, they have created a competitive advantage across their supply chain - resulting in a win whenever an iPhone or a Galaxy is sold.
- Do your innovation actions only reflect an internal, market-growth capability? How do you know?
- How could you create a business model that would allow your business to win when your competitor wins?
- How do you currently measure your capabilities? How do you track and benchmark them?