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The Double Play Strategy

The Double Play Strategy

I explained in the duality element that digital products which thrive are typically both products and platforms. It would be hopeless to build modern digital products without having a moat through platforms. Interestingly, the greatest digital ICT utilities have double plays in their business models: if Amazon decimates many brick-and-mortar stores, it would welcome many online to sell them cloud services. Alibaba welcomes you to its marketplace platforms, and you certainly have signed up for its (partly affiliated) payment processing solutions (Alipay) which command commissions.

Double Play is playing out right now: Samsung is predicting record profits as its chip business grows.

The South Korean electronics giant is forecasting operating profits of around 17.5 trillion won ($15.5bn; £11.9 bn), up 20.4% from a year ago. The guidance is above analyst estimates for the period, boosted by its thriving chip business.

The firm expects consolidated sales will reach around 65 trillion won in the three months to September, up 4.8% on last year. Shares were steady following the guidance update.

The South Korean firm has seen earnings surge in recent years largely due to demand for memory chips in mobile devices, but falling prices for some electronic components could hit further earnings growth.

Chips account for nearly 80% of its operating profit, according to Reuters.

Do you know the company that is making Samsung greater? Apple. Yes, that arch-rival is also the company that is feeding into the profitability of Samsung. As I explained in the One Oasis Strategy, there are just few firms in the world that can meet the quality and scale Apple needs. One of those firms is also the main competitor in Apple’s core business of mobile devices. The rivalry between iPhone vs. Samsung Galaxy is just for the newspapers: many things hold them together. The mobile devices are born from the same semiconductor factories.

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For Samsung, provided Apple continues to place orders for chips, it would be fine irrespective of what happens in its mobile phone business where Samsung has been lagging: “Samsung posted lower-than-expected sales of its flagship Galaxy 9 smartphones”. But having the Galaxy series ensures that Samsung does not have to secure external orders before innovating in the chip business.

Yes, provided the chip business has an internal customer (the mobile device unit, the oasis in my strategy), Samsung will continue to commit resources as the oasis has removed most of the risks in investing billions of dollars to build new factories in the chip business. Yes, the mobile device unit (the oasis) makes the chip business better by being a “reliable customer”, irrespective of whatever happens externally. That is the heart of the one oasis and the center of Double Play Strategy in business.

Update

Very brilliant comment on LinkedIn on this piece.

I do not even see Samsung mobile unit as a rival to Apple’s iPhone, it’s a media thing anyway, the former should be more worried about Huawei, and not Apple.

Samsung has virtually perfected the art of chip making, so Apple will always come around, when looking for high quality chips at scale. And Samsung can afford to use its Galaxy series as a ‘testing ground’ for chip making, with all the confidence in the world.

Both Samsung and Apple have a business model that works so well, and innovation means different things to both. That’s why it sounds ridiculous when some people argue that Apple ‘does not innovate’, seeing innovation only from engineering lenses of course . But innovation is endless, and in Apple’s case, it does simple things in extraordinary ways that turn customers to fans. There’s more to Apple’s iPhone than Samsung chips inside, that’s where its mystery and seeming invincibility is located.

At the end of the day, both Samsung and Apple smile to the banks, and live happily ever after.

Note Nov 12 2022: .I coined the term from watching baseball. Double play, a pitcher’s best friend, occurs in baseball when two players in offense are ruled out within the same play. Think of using one stone to kill two birds. I translated that analogy to business strategy in Harvard. Many startup founders in Lagos will tell you about their double play. Of course, many have upgraded to multiple play.


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5 THOUGHTS ON The Double Play Strategy

  1. At the end of the day, both Samsung and Apple smile to the banks, and live happily ever after.

    This got me laughing. I have learnt a lot from reading this.

    I am interested in the Mini-MBA.

  2. Our small business in Anambra, Nigeria is into interlocking works. Some of our competitiors don’t have a compacting machine which we saw as an opportunity to link up with them to hire our machine. We are not concerned with whether they sell interlocks or pavestone more than us as long as they hire our machine. This may be double play strategy.

  3. Prof. i do have a question, and that is the basis of infrastructural inefficiencies, i know it is wisdom to outsource your weakness (in this case it will be apple unwillingness or lack of capacity to produced samsung grade chips) and focus on your strength which would be innovative concepts, designs and product fanatism as in the case of apple. however, what happens if Samsung Goes Bankrupt or decides to increase the prices of its chip or decides to cut out apple by supplying to a new competitor, probably like elon musk ( that is of course if he decides to come into that world). would that not affect the fabrics of apples business model and in such paralysis what would be the way out for such business? this also applies to other startup like fintechs relying on infastructure companies (flutterwave for instance) what are your thoughts prof?

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