increase in bandwidth and a new generation of leadership that has
digital in their DNA, has produced bigger ladders than anyone ever
expected. ESPN, J.Crew, and Jeb Bush... all unassailable, no? No.
Digital ladders (over-the-top video, fast fashion, and @realdonald
trump) can vault almost any wall.
So, what’s a ridiculously successful firm to do? Malcolm Gladwell,
the Jesus of business books, highlights the parable of David and
Goliath to make the key point: don’t fight on other people’s terms. In
other words, once you’ve made the jump to light speed as a tech firm,
you need to immunize yourself from the same conquering weapons
your army levied on the befuddled prey. There are several obvious
examples: network effects (everyone is on Facebook because...
everyone’s on Facebook); IP protection (every firm in tech over $10
billion is suing, and being sued by, every other $10 billion tech firm),
and developing an industry standard—monopoly—ecosystem (typing
this on Word because I have no choice).
However, I’d argue that digging deeper moats is the real key to
long-term success.
The iPhone will not be the best phone for long. Too many firms are
struggling to catch up. However, Apple has a key asset with a stronger
immune system: 492 retail stores in 19 countries.^42 Wait, a marauder
could just put up an online store, no? No. HP.com vs. the Apple
Regent Street store in London is like bringing a (butter) knife to a
gunfight. And even if Samsung decides to allocate the capital, nine
women can’t have a baby in a month, and the Korean giant would need
a decade (at least) to present a similar offering.
Brick and mortar’s troubles have been laid at the feet of digital
disruption. There is some truth to that. However, digital sales are still
only 10–12 percent of retail.^43 It’s not stores that are dying, but the
middle class, and the stores serving them. Most that are located in, or
serving, middle-class households are struggling. By comparison, stores
in affluent neighborhoods are holding strong. The middle class used to
be 61 percent of Americans. Now they are the minority, representing
less than half the population... the rest being lower or upper
income.^44
So, Apple, recognizing that ladders will keep getting taller, opted
for more analog (time/capital expensive) moats. Google and Samsung