Questions for 10/28 podcast

<p>Have you seen this interesting piece by Ben Thompson, <a href="https://stratechery.com/2016/surface-studio-nintendo-switch-and-the-potential-of-niche/">SURFACE STUDIO, NINTENDO SWITCH, AND NICHE STRATEGIES</a>? &nbsp;I extracted the Surface Studio portion below, but basically he makes the argument that for many people, especially the billions in the developing world, the smartphone is now&nbsp;the default, general-purpose, personal computing device while PCs have become more niche. &nbsp;Seen in this light, Microsoft’s approach with Surface Studio makes more sense.</p>
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<p><span style="text-decoration: underline;"><strong>THE SURFACE STUDIO</strong></span> (excerpted from Ben Thompson)</p>
<p>Perhaps the most important feature of the Surface Studio is its price: $3,000 for the lowest-end model, and that doesn&rsquo;t include the innovative &ldquo;Dial&rdquo;. This price point immediately attracted a lot of consternation on Twitter amongst Windows fans in particular, while some industry observers argued that most consumers weren&rsquo;t artists anyways. Both true!</p>
<p>But what is also true is that all PCs are niche devices: for most people, particularly outside the U.S., a smartphone is all they need or care to buy. The world today is the exact opposite of the world a mere decade ago, where we bought dedicated devices to plug into our digital hub PCs; the smartphone (and cloud) is the hub, and everything else is optional.</p>
<p>Selling a niche device is a fundamentally different proposition than selling a general purpose one: the question of why a consumer would buy a general purpose device (like a PC ten years ago, or a smartphone today) is a solved one; the only question is which. Niche devices, on the other hand, face two hurdles to adoption: before a consumer chooses which device to buy they need to be convinced as to why they need a niche device in the first place. And, because answering &ldquo;why&rdquo; is even more difficult than winning &ldquo;which&rdquo;, niche device makers ought to focus on being a clearly superior solution to an identified market need; being cheap is not only not a priority, it&rsquo;s a distraction.</p>
<p>The Surface Studio does this brilliantly; as the launch video shows, an incredible amount of engineering and expensive manufacturing went into the physical product, particularly the screen and hinge. The result, though, is that if you are an artist or graphic designer or architect or musician or do any sort of activity that requires drawing on or touching your display, and need the productivity capabilities of a PC (hello file system!), then there is nothing on the market like the Surface Studio (including the Surface Pro). Microsoft has rightly pulled out all the stops to make the perfect device for you. Does it cost a lot? Of course it does! But as Apple has demonstrated for years price is less important than differentiation. To insist that Microsoft make the product cheaper is the exact wrong strategy for a niche device maker, and I suspect it is rooted in the false assumption that the PC is a general purpose device that ought to appeal to everyone.</p>
<p>Certainly the Studio&rsquo;s success is not assured, in large part because Microsoft&rsquo;s target audience is using OS X. It is a tall order to get people to switch operating systems they are familiar with, which emphasizes the importance of Microsoft focusing on differentiation, not price (if price was all that mattered Windows would have never lost share to OS X in the first place). Just as importantly, though, is that today more people are even considering the possibility: the single best way to build a brand that attracts (as opposed to being the default) is to build a product that is the best possible one you can build, and only then make it as affordable as possible. For too long Microsoft approached that problem backwards, exacerbating the secular shift from PCs to smartphones.</p>
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