Let’s say you have the absolutely best product on the market. You out-innovate your competitors and have dominant market share. Things are pretty good: your customers love you, you have the best Net Promoter Score in the industry and you are making amazing profits.

Competition ensues. Extraordinary profits are a signal to the capitalist economy; picture the scene in “Finding Nemo” where the seagulls all start shouting “Mine!” The profit pool is deep, come dive in the water is lovely. Sooner or later, the profit pool gets eroded; either someone out-innovates you or the availability of close substitutes reduces prices and profits. It’s hard to keep the party going.

Unless.

Switching costs are the enterprise’s solution to the long term seeming inevitability of eroded profitability. If you can create significant costs for your customers to defect, you delay the inevitable. It’s the fountain of youth for corporate profits. Wireless contracts, pharma patents, up-front capital expenses – all great switching cost strategies that defend profits beyond their sell-by date. All legal, and all smart business practice.

From a customer perspective, the benefits are less clear. Companies that enjoy significant switching costs typically also demonstrate lower Net Promoter Scores. Of course! You now have reduced incentives to innovate and take care of your customers. Comparative NPS rules the outcome and all of a sudden you have a leg up when it comes to customers making a real comparison. I may not like my current provider as much as new entrants, but with the hassle and costs of switching they may keep my business.

Although it’s not part of a plan, companies with higher switching costs almost inevitably end up with lower NPS, and firms who are subject to brutal competition are more likely to fight to raise their scores (or just concede market share). And all companies are trying to create switching costs.

The Apple/Adobe spat in the news is, at one level, a simple business conflict. Adobe benefits from standardized tools that run their popular flash technology on all kinds of devices. Apple benefits from creating differentiation around those devices. These two perspectives inevitably lead to competition. The question is, how does this game play out for their customers?

A lot hangs on Apple’s ability to execute their strategy of being best when they go it alone. Nobody else in the industry has been quite as  good,  quite as innovative, at creating products that allow their customers to remain loyal despite switching costs. Once you have your itunes library, your iphone, your Mac, your switching costs are significant but your vendor has not, yet, exploited them – to the contrary, they have rewarded your loyalty with innovation. But the conflict with Adobe seems to take this strategy to the next level. Developers are being told to choose sides – which they hate to do – and Apple customers may face less choices and higher switching costs as a result.

Apple will be successful in creating switching costs, they have done so for some time. They are comfortable going it alone. But the pressure will only get more significant if competitors can create promoters using popular technologies such as flash. The table stakes just shot up.

Read also Josh Bernoff’s take on this at Advertising Age. Or, for an alternative, a view I don’t subscribe to from Simon Dumenco in the same publication.