Warning: Smartphone Makers MUST Produce Less to Profit More!

Vilfredo Pareto (1848-1923) introduced the Law of the Vital Few and the Principle of Factors Sparsity to the world of Marketing and Economics. For years, the law has been known and made familiar as the “20/80 Principle.” This states that 80% of the effects came from the 20% of the causes. A similar principle in Mathematics is the property of inverse proportion. Highly technical as this may sound, it is the phenomenon of when one variable increases, the other variable decreases. Or vice versa. This is the opposite of direct proportionality.

These are just two of the principles that smartphone makers today should imbibe in product management.  Here are the theses of my claims- factoring in the two principles mentioned above:  

1.  For smartphone manufacturers, 80% of the profit comes from the 20% of the total number of units produced.

Example: If Apple decides to make more models and versions of their patents, they will not get as much mass attention and profit as they have been enjoying recently. And if the trend scales up globally, there is lesser chance that people will be attuned to one company only. One of Apple’s secrets to success is by the practice of vertical integration of their products. It focuses on the 20% of their products which brings 80% of the over-all profit.

2.  If companies choose to compete by increasing the volumes per production, the rate of which a certain phone can accrue profitability decreases.

Simply put, the more the choices there are, the lesser the chance that a certain variable will be chosen. Enough said. 2012 is the year when the industry must decide to make “few yet really good models” rather than pitching in a great bunch of new models to see what will stick and what will not. This is a superb idea- the kind that all electronics makers should imitate.

Let’s have a simple game. Read through the list of handsets below and take note of how many you know exist or even recognize:

1.    ThunderBolt
2.    Titan
3.    Arrive
4.    Amaze 4G
5.    Rezound
6.    EVO Shift 4G
7.    EVO 3D
8.    Rhyme
9.    Vivid Sensation
10.    Status
11.    Inspire 4G
12.    Trophy
13.    7 Pro
14.    Merge

Whew! That was a lot right? How many were you able to identify? 5?  Or 6? Did you know that all those handsets are from HTC? This is nothing but a trivia. But what’s astounding is that those smartphones were released in a span of one year. Yes! Theoretically, this means that even before a month passes, HTC is already prepped to release a new model.

At a first glance, this is quite impressive. But not for HTC’s sales records. Indeed, the long generational timeline of Apple serves some intelligent and lucrative purpose: By intermittently releasing their products (approximately a year after the previous one has been launched), people are able to consummate their excitement and craving before snagging the newest Apple product. This is how the power of emotions works. And this makes Apple an epitome of the philosophy “less is more.” If a company has to provide quality support and software upgrades to each smartphone model, the essential factor of numbers is a necessary discussion. A good strategy is aimed to increase profits while decreasing the costs of the resources. By spending time on each smartphone model, customers will be happier and profits will definitely soar!