What Drives Innovation In Apple?

Apple generates ideas, manage innovation and then effectively diffuse the innovation. They generate ideas or search for opportunities by carrying out effective research and development, Apple has an innovation factory which carries out all experiments using the talented pool of people they have. It follows competition and tries to stay one step ahead of them.

Effective linkages and networking is very important as valid information can be gained from them, so relations should be maintained with suppliers, dealers and other partners. Apple believes in learning and working in teams. Apple’s innovation is driven by external uncertainty and competition. Apple is also very effective in finding new market opportunities and reorganizing areas which were inefficient. It fills the gaps existing in the markets for example the gap of a product which was needed to fill the gap between a computer and a phone, so Apple came up with IPAD.

Authority is delegated by Apple so that the innovative people can focus on their creative work rather than sorting out other problems. Apple’s credibility is very high, it is a trustworthy company and trust breeds innovation. Criticism is accepted willingly by the company as it helps out shaping good ideas into great ones.

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Optimum use of Apple’s resources the right time and place and proper project planning has enabled it to innovate. Effective marketing activities have been carried out to position the new idea or product in the minds of the customer. For E.g.: Think Different Campaign.

Apple is way ahead in this field in comparison to the other competition it develops such a demand for its products even before its production, for instance their pre-booking of the new product IPAD even months before launch of the product, proves that they are pioneers in innovation and customer’s belief in them to create strong and innovative product.

Strategic enablers for innovation

Enablers of innovation capability in Apple are its Organizational Culture, People Management, Innovation Strategy and its Innovation Competencies.

Apple develops an innovative culture right from the top of the management. Apple’s culture of innovative thinking also fosters the innovation process. Moreover leadership of Steve had been empowering to the company, he has inspired many new ideas and helped sharing the visions of the company. Apple’s functioning has been smooth and open, without any bureaucracy. Apple has been able to develop models of change and innovation through systems theory and used focused groups and experimentation.

Apple’s motto “Think Different” promotes all working people in the organization to be innovative. Apple recognizes, protects and encourages all innovators in the organization. Innovators in the company are also rewarded either in monetary terms or recognition based. Apple has invested many resources in innovation because innovation requires much funding and lack of it can hinder creativity. Apple promotes diversity in their workforce as people from different background perceive things differently, so new interpretations and ideas can be created if diverse thinking is involved.

Innovation is internalized in all people working for Apple as it is everyone’s role. Apple regularly evaluates all on going projects, as analyzing current activities is essential to ensure proper work is being done, double loop learning should be followed.

The employees of Apple are skilled so they are able to handle the risk; it also tries to learn from their mistakes in the fast.

Financial resources available to Apple also help in funding the innovation of the company. Best human resource is available to Apple which keeps them a step ahead of the rest, as there is no substitute for knowledge and talent, unless Apple innovates and tries to comes up with an alternative.

Barriers to Innovation

Apple faces a few hurdles which curtails their innovation capability. Apple always launches any new idea quite early and gives a date for the product launch in the future; it starts it marketing activity early. So Apple has to be efficient to make the deadline, this hinders any further innovative changes that could have been brought to the product as its focus shifts on to production. Moreover under delivery pressure products are made costly, rather than cost effective. Administrative pressure also increases as the products have to meet the launch date, so they stop thinking about things differently. Under this daily pressure to stick to time horizons and budgets, innovation leaves to be of prime importance until the goal is met. Apple sometimes tries to avoid risks, but low risk leads to low rewards, so Apple must take some calculated risks if it wants high rewards, Apple can do so.

Apple’s culture and structure of the organization can sometimes constraint innovative thinking even if the technology is available, so culture needs to be shared by all and communication should be open. Public can sometimes doubt the effectiveness of some of the Apple products and expects a lot. This expectation can burden Apple a lot, so constant efforts have to be made to keep up the innovation. Apple sometimes tries to protect its reputed identity to increase their credibility and sustain itself, so it creates limits and gives responsibilities and lays down rules but innovation crosses the limits set by the organization. So instead of limiting its network, it should broaden it and manage all stakeholders effectively. Apple sometimes calculates the value of innovation in quantifiable terms like market share and profits and forgets things like reputation, leadership, talent, etc. These things neglected sparingly make the value of the firm so it should change the way it values innovation.

Apple leads the customers rather than following them, this can hurt their company in the long run. So customers should be given utmost importance. Apple may have diverse workforce but overtime their thinking will start matching this may hurt the innovativeness of the company. Apple tries to make all its products look quite similar, this stops the creativity of the design innovation. Apple itself is its biggest enemy so it manages innovation effectively. Negativism and giving up can hurt Apple’s innovation capability. Complexity should also be avoided, managed or used effectively. Innovators come up with many ideas but which is the most appropriate one is hard to decide Apple has to keep that in mind. Microsoft were not going to work on the internet idea until now but they did this made our life so much easier.

Apple’s market research is limited and this can hinder their organization as customer is the ruler and not Apple and importance should be given to their needs. Apple has also faced some barriers to Innovation when it has outsources some parts to other companies and they have come up short, or some suppliers did not provide in time. Apple relies on logic a lot but innovation is not derived by logic and some assumptions are also made which may be incorrect.

Apple’s Designing Process

Apple’s innovation strategy involves terrific new products and innovative business models.

Genius ergonomics make Apple products effortless to use. “Design is not just what it looks like and feels like. Design is how it works,” said Steve Jobs.

Apple has repeatedly demonstrated with its innovation management what a success user friendliness and design can generate. Some key elements of Apple’s design process are:

Matching Top-down and Bottom-up Strategies

Senior managers describe their dream products and outline what they want from any new application. In response, design teams select and present the best ideas from the paired design meetings to leadership, who might just decide that some of those ideas are, in fact, their longed-for new products. In this way, the dream products morph into deliverables. Top managers are also involved in the development process to ensure that there are no nasty mistakes down the line.

Paired Design Meetings.

Every week, design teams at Apple have two meetings: a right-brain creative meeting and a left-brain production one. At the creative meeting, people are to brainstorm, to forget about constraints, to think freely, and to go crazy. At the production meeting, the designers and engineers are required to nail everything down, to work out how this crazy idea might actually work. This process and organization continues throughout the development of any application. The balance shifts as the application progresses. Options are kept for creative thought even at a late stage.

Developing Perfect Mockups

Creating a full-size model of a design or a device requires a huge amount of work and takes an enormous amount of time, but it removes all ambiguity. That might add time up front, but it removes the need to correct mistakes later on.

Apple’s “10 to 3 to 1″ approach

“I’m as proud of what we don’t do as I am of what we do,” used to say Steve Jobs. Apple’s strategy for innovation demands that design ideas to be generated in multitudes. They are all run through a sort of artificial natural-selection mechanism that kills off the weak and only lets the strongest ideas rise to the top. Apple designers give themselves room to design without restriction and come up with 10 entirely different mockups of any new feature. Later they whittle that number to three, spend more months on those three and then finally end up with one strong decision.

4.5. Apple’s Venture Acquisition Strategy and Practices

Apple’s venture investing and acquisition strategy is not very aggressive To stay ahead, Apple usually over-invests in its supply chain. The company is reported to pay a significant portion of the factory construction cost in exchange for exclusive rights to the output for a set period of time, and then for a discount once this period expires. Not only does this allow Apple to come out with new components long before rivals, but these components are very difficult to duplicate.

The company makes fewer acquisitions than their competitors. When Apple does buy companies, it’s almost always tight lipped about how they will fit into its strategy and how easily their technologies can be integrated into existing company projects. Yet, some acquisitions stand out in terms of adding important features to existing product lines or opening doors into new markets.

The company made its first acquisition in 1988 when it purchased Network Innovations. Apple’s $429 million acquisition of NeXT in 1997 helped the company move smoothly from PowerPC to Intel processors. This deal also brought Steve Jobs back to Apple.

In 1998, Apple acquired the intellectual property and the development team from Macromedia to make Final Cut Pro one of the top video desktop editing programs on the market.

In 2002, Apple’s acquired a German firm Emagic for $30 million. The Mac versions of it’s high end audio recording and production application Logic was further developed by Apple to produce Logic Studio. The PC version of Logic was buried.

By acquiring FingerWorks, a developer of gesture recognition technology, in 2005 Apple added a significant patent and engineering value to its multi-touch technology package.

PA Semi was another essential acquisition. Apple which is now referring to itself as a mobile device company wants as much of the value chain under their control as possible. Purchased in 2008 for US$278 the chipmaker startup was tasked with making system-on-chips for iPhones and iPods.

Apple’s $275 million acquisition of mobile advertising firm Quattro Wireless in 2010 reflects the company’s desire to strengthen its mobile technology portfolio. Quattro deal gives Apple an alternative to Google’s entrenched dominance in mobile advertising. Quattro is a counterpart to AdMob, the mobile advertising firm that Google acquired in 2009 for US$750 million. With Quattro, Apple is able to deliver advertising to mobile devices while improving the measurement and execution of digital ad campaigns.

Strategic Leadership of Steve Jobs

Centralized , disciplinarian style of leadership

Mechanistic approach to organization

Core Strategy – product based – aimed at being creation of products to stay ahead of the market

Core Focus – Design Aspect of the product – which included not only the aesthetic pleasing nature of the products but also simplification in it’s working

Long Term View with focus on investments in the new products (Iphone, Itunes) which are not inside the core business of the company (Apple Computers)

Mr. Jobs had exhibited roles of strategic leader such as :

Talent Advocate – When recruiting Mr Tim Cook in operational role , Sir Jonathan Ive as the the VP of the Industrial Design

Strategist : Shifting of the focus and investing in products outside the core playfield of the company – Iphone , Ipod .This long term approach of getting into the products which could be profitable in future had lead to development of Iphone which is the cash cow for Apple contributing to more than half of it’s revenue

Captivator – Mr Jobs had build passion & commitment in his team to drive them to achieve new milestones in both product and service arena

Strategic Canvas

: Strategic canvas apple vs dell vs samsung

: Strategic canvas apple vs samsung

: Strategic canvas apple vs dell

Value Elements

Eliminate :

Price Range: Apple’s products are premium and don’t really come on a broad price range. Apple essentially serves a premium segment.

Inventory Management: Apple is not able to en cash upon economies of scale as much as Dell and Samsung in their respective core industries which have specialization in Just in Time inventory management.

Reduce:

Supply chain innovation: Apple has not innovated much on the front of Supply chain management despite the fact that It sources it’s integrated chips from a set of suppliers.

While Dell and Samsung (to an extent) have much robust supply chains to sustain their JIT system.

Customization: Dell specializes in customization which is a big plus point.

Apple doesn’t provide as much variety for different customer segments at different price ranges as much as Dell and Samsung do.

Raise:

Features: Although Samsung also provides a rich set of features, but, Apple is even more highly loaded with innovative features. Apple’s interface and apps provide a completely different customer experience.

Create:

Product Innovation :Apple Products are at the frontier of product innovation . They have brought new paradigm to innovation by introducing multi-touch ,Firewire , Aero Theme

Design & Quality: Apple focus highly on design aspect where products created are high on aesthetic appeal .The components used are of highest quality and sometimes custom-made (Scratch Free Glass Screen of Iphone)

Targeting High Profit Margins :Apple products follow strategy of more for more and have higher margins . For Eg : On high end macbook pro Apple captures margin as high as Rs20k ,while dell on similar laptop are able to capture on Rs 5k as profit margin from the user.

Innovation-Radar

: Innovation radar : apple vs dell

: Innovation radar : apple vs samsung

4.10. Strategic Innovation Milestones by Apple

Launch of Lisa &Machintosh

The ‘Lisa’ followed by Macintosh:”putting a dent on the universe”

Initially the whole PC market was captured by IBM.Though the first IBM PC was too expensive for the home market, but it proved a huge hit with business.That time IBM failed to realise the importance of the operating system and it purchased one from Microsoft. As a result other manufacturers were then able to copy the IBM hardware design and ship their ‘Clones’ with copies of MSDOS purchased directly from Microsoft. As a result, even without IBM’s approval or participation, their PC became an open standard with virtually unstoppable economies of scale. By 1990 IBM Compatible PCs captured an 80% market share, by 2000 97%.Following graph shows the market capture by incumbent.

: personal computer market space

Now, Apple innovated the market by following an entirely different business model for which it will remembered as the innovative company behind the first mass market GUI based computer.

What -Who-Why Model applicable to Macintosh & Lisa

What:

The first mass market GUI based computer which replaced the text based interfaces.

Did not worked on product innovation , rather worked on bringing revolution – The computer’s mouse could move diagonally, it had overlapping windows, dialogue boxes, and its operating system moved away from keyboard commands(not an existing idea then)

Who :

The “Lisa” computer was an expensive machine targeted at business and academia .Though ‘Lisa’ proved to be a commercial failure but a year later Apple launched their successful “Macintosh” computer for consumers.

How:

Responsiveness & Prediction of future of technology- After seeing Xerox-Alto, running on graphical interface Steve Jobs instantly started working on the technology with his engineers. Before Xerox could realize its true potential and launch its next ‘Star 8010’, Apple was already hard at work on their own GUI based computer

Capturing competitors resources: Jobs hires 15 Xerox employees to work on the Lisa Project

WHAT:GUI based computer replaced text based

HOW: Responsiveness, Strategic leadership ,capturing competitor resources

WHO: For Busness& Academia

Although Apple remained a niche player, it should be remembered that the IBM PC was a sort of meteor that hit the earth and wiped all life, Apple was essentially the single survivor of this dramatic evolutionary event.

Apple Newton:

The Apple Newton was an innovative and cutting-edge product , a handheld device with features like handwriting recognition, virtual keyboards, and an effective portable OS.The Newton was a breakthrough for the 90’s and still at par or above some of the smartphones on the market today.

Despite a glowing reception by consumers and Apple loyalists, the product failed and the idea of a tablet/PDA/phone was not resurrected by Apple until a few months ago with their announcement of the upcoming iPhone.

Reasons it failed:

Ahead of time : Market was not ready for this kind of product

Not right timing: Apple was just not ready to integrate a non-computer product into their portfolio.

Wrong positioning : Many saw the Newton as a competitor rather than a complement to the burgeoning laptop market. Basically, the product was too good.

“The Newton project’s broad vision fell victim to project slippage, feature creep, and a growing fear that it would interfere with Macintosh sales. It was reinvented as a PDA which would be a complementary Macintosh peripheral instead of a stand-alone computer which might compete with the Macintosh.”

iTunes

iTunes is a media player computer program used for playing, downloading, saving, and organizing digital music and video files on desktop or laptop personal computers. It can also manage contents on iPod, iPhone, iPod Touch and iPad devices.

iTunes can connect to the iTunes Store to purchase and download music, music videos, television shows, iPod games, audiobooks, podcasts, movies and movie rentals , and ringtones. It is also used to download application software from the App Store for the iPhone, iPad and iPod Touch. iTunes has been criticized for not being able to transfer music from one portable device to another.

iTunes was introduced by Apple Inc. on January 9, 2001.

The Strategy behind iTunes

Over the past decade, Apple Inc. has been extremely successful in formulating and implementing a coherent and focused strategic vision. Its success is evident not just in the company’s bottom line results but also in it’s attractiveness to investors. Innovation has continued to keep Apple on the cutting edge of the consumer electronics market. One of Apple’s key innovative successes was the integration of its iTunes platform strategy with its overall vision of the company as a “digital convergence company”.

Apple observed the flood of illegal music file sharing that began in the late 1990s. Music file sharing programs such as Napster, Kazaa, and LimeWire had created a network of Internet savvy music lovers freely, yet illegally, sharing music across the globe. By 2003 more than two billion illegal music files were being traded every month. While the recording industry fought to stop the cannibalization of physical CDs, illegal digital music downloading continued to grow.

With the technology out there for anyone to digitally download music free instead of paying $19 for an average CD, the trend toward digital music was clear. This trend was underscored by the fast growing demand for MP3 players that played mobile digital music, such as Apple’s hit iPod. Apple capitalized on this decisive trend with a clear trajectory by launching the iTunes online music store in 2003.

In agreement with five major music companies-BMG, EMI Group, Sony, Universal Music Group, and Warner Brothers Records-iTunes offered legal, easy-to-use, and flexible à la carte song downloads. iTunes allowed buyers to freely browse two hundred thousand songs, listen to thirty-second samples, and download an individual song for 99 cents or an entire album for $9.99. By allowing people to buy individual songs and strategically pricing them far more reasonably, iTunes broke a key customer annoyance factor: the need to purchase an entire CD when they wanted only one or two songs on it.

iTunes also leapt past free downloading services, providing sound quality as well as intuitive navigating, searching, and browsing functions. To illegally download music you must first search for the song, album, or artist. If you are looking for a complete album you must know the names of all the songs and their order. It is rare to find a complete album to download in one location. The sound quality is consistently poor because most people burn CDs at a low bit rate to save space. And most of the tracks available reflect the tastes of sixteen-year-olds, so although theoretically there are billions of tracks available, the scope is limited.

In contrast, Apple’s search and browsing functions are considered the best in the business. Moreover, iTunes music editors include a number of added features usually found in the record shops, including iTunes essentials such as Best Hair Bands or Best Love Songs, staff favorites, celebrity play lists, and Billboard charts. And the iTunes sound quality is the highest because iTunes encodes songs in a format called AAC, which offers sound quality superior to MP3s, even those burned at a very high data rate.

Customers have been flocking to iTunes, and recording companies and artists are also winning. Under iTunes they receive 65 percent of the purchase price of digitally downloaded songs, at last financially benefiting from the digital downloading craze. In addition, Apple further protected recording companies by devising copyright protection that would not inconvenience users-who had grown accustomed to the freedom of digital music in the post- Napster world-but would satisfy the music industry. The iTunes Music Store allows users to burn songs onto iPods and CDs up to seven times, enough to easily satisfy music lovers but far too few times to make professional piracy an issue.

Today the iTunes Music Store offers more than 8 million songs. iTunes is the largest music retailer in the US with sales exceeding 5 billion songs. Apple’s iTunes has unlocked a blue ocean in digital music, with the added advantage of increasing the attractiveness of its highly successful iPod player and other Apple products like iPhone and iTab.

By entering the market early and firmly entrenching its brand name, Apple was able to leverage a first mover’s advantage with its iTunes Music Store. By 2010, the iTunes store had grown into the world’s largest music store. Apple was able to further exploit this advantage by creating a proprietary technology for the iPod which protected songs downloaded from the iTunes store against piracy. An additional element of this Digital Rights Management System was that no competing MP3 player could play songs protected by it. Hence, Apple was able to gain an important advantage over existing competitors and potential new entrants into the MP3 arena.

Apple also was able to take advantage of its economies of scale in controlling the pricing of digital music content made available through its iTunes store. Music labels were very concerned about the impact of this new a la carte pricing model on their CD sales, but there was little that they could do to stand in Apple’s way in light of its enormous market share of MP3 players. By 2010, Apple held more than 70% of the U.S. MP3 market.

Apple has also utilized this controlled open platform strategy to develop content for its iPhone and iPad product lines. The App Store was introduced to the world as a part of iTunes which already was a hit amongst consumers. Apple once again gained first mover advantage in this smartphone arena by being the first smartphone app outlet that made it simple to distribute, access, and download content directly to its iPhone. In addition, third party developers flocked to have their content distributed via the App Store despite Apple’s strict control over content. Apple reserved the right to refuse content and received 30% of all sales made through its distribution channel. Apple continued to follow the model that made it successful with iTunes and the iPod, by using its market dominance to keep app prices low. Many of the apps distributed via the App Store were free or priced at a mere ninety-nine cents. Once again Apple’s competitors were left to play catch-up. In 2009, Apple pulled in nearly $1 billion dollars in app sales alone.

Apple’s true success lies in its ability to innovate and create new experiences for the customer based upon its ever burgeoning content base. Some would argue that Apple could gain an even greater competitive advantage in the marketplace by removing restrictions on developer access to its platform. The continuing restriction on compatibility with Adobe products is an obvious example. However, Apple has for at least a decade now been able to stave off the introduction of disruptive innovations by adhering to its strategy. As the market leader in consumer electronics, Apple’s future course may be rocky since competitors are vigorously working to create the “magic bullet” which will unseat iTunes dominance as the essential platform for distributing digital music, books, movies, TV shows, and other content. If Apple remains true to its platform strategy, this will be difficult for competitors to accomplish.

iPad

The iPad is a line of tablet computers designed and marketed by Apple Inc., primarily as a platform for audio-visual media including books, periodicals, movies, music, games, apps and web content. Its size and weight fall between those of contemporary smartphones and laptop computers. The iPad runs on iOS, the same operating system used on Apple’s iPod Touch and iPhone, and can run its own applications as well as iPhone applications. Without modification or a developer certificate, the iPad will only run programs approved by Apple and distributed via the Apple App Store (with the exception of programs that run inside the iPad’s web browser).

Like iPhone and iPod Touch, the iPad is controlled by a multitouch display-a departure from most previous tablet computers, which generally used a pressure-triggered stylus-as well as a virtual onscreen keyboard in lieu of a physical keyboard. The iPad is sold with Wi-Fi and cellular models. The Wi-Fi connection is used to access local area networks and the Internet. Cellular models connect to mobile data networks with 3G or 4G in addition to Wi-Fi.

The iPad was announced on January 27, 2010, by Steve Jobs at an Apple press conference at the Yerba Buena Center for the Arts in San Francisco. Jobs later said that Apple began developing the iPad before the iPhone, but temporarily shelved the effort upon realizing that its ideas would work just as well in a mobile phone.

The strategy behind iPad

The iPad success strategy is the result of being able to pinpoint your company’s competitive advantages in a given market and identify an effective strategy to tie these factors together. Apple did just that by building its Apple iPad around its competitive advantages, and as a result has seen tremendous success with tablet, maintaining its dominance in the technology devices market despite tremendous competitive pressures. Apple is a perfect example to demonstrate that knowing your company’s identity and competitive advantages will provide great direction in terms of what marketing and product strategies will and won’t work for a company. Ultimately, that will increase the likelihood of success with implementing new corporate strategies.

A little over 6 months ago, Amazon took the tablet market by surprise and decided to enter into the space with its $199 Kindle Fire tablet offering. With that entrance many thought Apple would be forced to alter its iPad strategy because Amazon was offering a commodity-priced tablet that the lower-end of the tablet market might consider a sufficient substitute for the iPad, and that it also might challenge Apple’s dominance of tablet content consumption, as well. Rather than cave to pricing pressure from competitors – like most companies facing similar situations would – Apple did not budge. It knew its competitive advantages did not lend themselves to a price war. Instead, Apple stood strong and built a compelling strategy around its competitive advantages in the tablet space.

Michael Porter Competitive Advantage Table

: competitive scope versus competitive advantage

Apple’s key competitive advantages in the tablet space are its:

Premium brand image

Market position

Technology leadership and patents

Product development

Large number of ancillary service offerings

Despite the entrance of price targeted competitors and the opening of a new set of more price-sensitive customers in the tablet space, Apple refined its iPad marketing strategy to address these changes in market dynamics, but made sure its competitive advantages in the market were at the heart of its iPad marketing strategy. The company has built its 3rd generation iPad marketing strategy and product strategy around the following eight factors, and has maintained a laser sharp focus to maintain its market position despite many competitor attempts to unseat Apple from market leadership in this product category.

Don’t compete on price, regardless of competitor offerings. Maintain the iPad as a premium brand.

Utilize Apple exclusive services like FaceTime and iCloud to further differentiate the iPad from competitors.

Exploit network effects like benefits to having more people on FaceTime.

Make sure the hardware is profitable and the additional content revenue is just add-on revenue.

Lead the race in research and development to ensure that the iPad