The eight secrets that make Apple No. 1

Last week I wrote about how Apple's growing success will trigger accusations that it is a monopolistic, copycat bully and why the company should be defended against such complaints. This week, I'll discuss the secrets of Apple's growing success and call on PC makers and consumer electronics companies to steal those secrets so they can start making better products.

Apple isn't the biggest consumer electronics company, nor the most profitable. So what do I mean when I say it's the No. 1 consumer electronics company?

Basically, you can divide consumer electronics companies into two groups: Apple, and everyone else. Apple really is that different. Its influence on global design is many orders of magnitude higher than its nearest competitors. It engenders customer loyalty significantly greater than that earned by any other company in the consumer electronics space. The Apple brand and awareness of its products in the general culture far exceed what you might expect, given the company's actual sales.

Microsoft CEO Steve Ballmer is famous for a crazy video in which he yells, "I...love...this...company." With Apple, it's the customers who shout that.

It's no accident, and it's not a passing phenomenon. Apple knows something that other companies don't. Here are the eight secrets that make Apple the best company in the industry.

Secret 1: Engineering supports design -- no exceptions

Most companies bring designers in late in the product development process to create an experience "wrapper" around all the features and technologies the engineers and marketing people created.

At Apple, designers rule. Apple's brilliant designers figure out in detail how the product will look, feel and work, and then the engineers are tasked to make it happen.

Years ago, Jeff Hawkins changed the world by creating the Palm Pilot. He designed it by walking around with a Palm Pilot-size block of wood, pretending to use the device. He took notes about what he wanted to do with the device and how he wanted to use it. He refused to be influenced by existing organizers.

By the time he gave the engineers their marching orders, the Palm Pilot was conceptually complete. He got massive push-back on it from his engineering team -- "If we add six more buttons, we can make it faster..." -- but the original conception prevailed, and an awesome product was born.

Palm seems to have lost this visionary approach to product design and is paying the price in the marketplace. Apple still has it.

Secret 2: Fewer is better

Far too many companies give too much power to market analysts as a substitute for product vision. One result is product oversegmentation that reflects the finely tailored targeting of a product to a specific market segment.

Sony, for example, just unveiled four new Blu-ray HDD recorders -- four! -- each with minor, largely irrelevant differences. The company obviously thinks consumers will dedicate an hour of their time just to consider Sony's various Blu-ray options. In reality, eyes will glaze, and people will wander away, confused. Imagine if Sony poured all its energy into just one Blue-ray HDD recorder. You'd probably want it.

That's what Apple does. It tries to develop the fewest possible number of products, each with the broadest possible appeal. Yes, there are multiple iPods, but feature overlap is close to zero, and it's super easy to learn which product does what.

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Look at the iPhone. Or OS X. Or any other product area. The experience of going into an Apple store provides a relief from product variation overload. You can pretty much try every product in the store in 30 minutes, not including content and accessories.

Microsoft should have learned this secret in January. Vista came in so many versions that online experts had to publish tables to explain what was for sale. Consumers still have no clue about the differences between the various versions. Buying Vista isn't a thrill. It's a homework assignment.

Let me make this extremely clear for all you companies out there that still don't get it: All these subtle product variations create anxiety. And anxiety makes people not want your product. Fewer is better.

Secret 3: The experience is the product

Everyone knows this secret, but few actually employ it. But Apple is dead serious about this secret, even to the point of offering US$35,000 to the city of Montreal to remove three parking meters in front of the Apple store there. The city refused, but this is how seriously Apple takes the Apple "experience."

Another example is Apple's packaging. The company's products come in beautifully designed packaging with obviously expensive packaging materials and manuals. Compare that with Apple's competitors, which see packaging as a place to save money or as an afterthought that doesn't matter.

Why raise the price a few dollars and sell something in a better box? Because the box is part of the experience, and the experience is the product.

Secret 4: The product is the product

The bigger companies get, the less energy they seem to spend on creating great products. Instead, whenever the CEOs of most computer and consumer electronics companies speak in public, they blather on about alliances, services, improvements in the sales channel and other things buyers don't care about. Apple CEO Steve Jobs talks about the actual products above all.

One of the weird things about buying a cell phone is carriers are clearly more interested in selling you plans, options and reliability. The physical handsets seem to be an afterthought. But consumers are crying out for better handsets, and the carriers don't seem to notice. Apple does notice.

Secret 5: You can't please everyone, so please people with good taste

Every major company performs many kinds of market research to find out who the buyers are and what they want. But one problem with market research is that people are inaccurate sources of information about their own buying behavior. And that is often reflected in the products these companies offer.

Say you offer survey respondents a choice between Product A and Product B. Both have identical functionality, but Product A looks a lot better and costs more. People are likely to tell you they would choose A, but they'll buy B.

What you do learn from market research is what you already know: People vary. You can go after the high end of the market, the midrange or the low end.

Targeting the low end cheapens the brand. Going after the "average" consumer shrinks margins. Only the high end creates the pixie-dust intangible quality of buzz, brand affinity and, ultimately, brand loyalty, which can be converted into higher margins and higher sales.

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Secret 6: Leave the past behind

Some analysts slam Apple and praise Microsoft for, respectively, abandoning or supporting legacy versions of their operating systems and other products. All things being equal, it's better for users to be able to run all their old stuff on new systems.

However, all things are not equal. Legacy support comes at a great cost to the company, which is eventually paid for by the customer.

I think one of the reasons Vista is such a mess is that it tries to sell the same OS to businesses as it does to consumers. Legacy support is absolutely essential in enterprises. However, with Windows, consumers are burdened with all that legacy support code, but they don't have IT departments to sort it all out.

If Microsoft created a consumer OS as a blank-slate exercise, starting from scratch and refusing to support anything older than Windows XP, it might be able to offer a faster, easier-to-use and more stable environment.

It's a tough decision. But in the consumer electronics marketplace, it's better to drop legacy support if it's slowing the pace of innovation or degrading product quality.

Secret 7: Product names are important. Really important

One of Apple's few competitors in the cell phone handset market is the LG KU990 Viewty.

Wait, what?

What sounds better: The "iPhone" or the "KU990 Viewty." Which is easier to remember? So many products are so badly named, and for such bad reasons. Companies should agonize over product names and ban ugly non-word strings of letters and numbers designed to make it easy to categorize products internally. It's the easiest and cheapest way to improve brand appeal and loyalty. Why do so many companies fail to do it?

Secret 8: Group affiliation is the driver

And now we get to the mother of all Apple secrets, the secret that explains why people buy its products.

If you monitor (or participate in) the ongoing religious wars between Apple fans and Apple critics, you'll notice a curious phenomenon: Apple fans are the most rabidly active, fiercely loyal group in the industry. Why do Apple fans spend so much time and energy fighting for the honor and glory of a consumer electronics company?

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The answer is that identity is a primary human motivation. One of the major components of self-identity is group affiliation. People want to belong to a group that immediately identifies them as being superior to other people in other groups. That's just how human beings are wired. It's the same aspect of human nature that drives all fandom as well as nationalism and religious zealotry.

Buying a laptop, media player or cell phone is more like buying clothes or a car than buying a dishwasher or a vacuum cleaner. It's less about functionality and more about what it tells other people about who you are and what group you belong to.

This is what's so great about Apple: Its products get a "B" on features and functionality -- they're almost best in class in most of their respective categories. But they're an "A+" on what really matters -- coolness, which translates into both boosted self-identity and appealing group affiliation.

I'll get slammed on this last point by readers who hold features and functionality above self-identity. And I'll also get slammed by Apple fans who believe their product choices are driven by more substantive concerns than boosting their self-image.

But Apple executives will read this rule and say, "Well, yeah. Obviously." That's why their "Choose a Mac" ads are so effective. They're fun and highlight actual product differences between PCs running Windows and Macs. But they also clearly emphasize the idea that PC and Mac users are different kinds of people. Your choice is really about what kind of person you want to be or which group you want to belong to.

Most surviving consumer electronics companies know and use at least one of these secrets. But Apple is the only major company I can think of that employs all of them. And that's why Apple is No. 1.