Innovation on a Company or Product - Case Study Example

Innovation on a Company or Product: Apple and the iPod TABLE OF CONTENTS Introduction 2 Apple 5 IPod 8 Conclusion 10 Bibliography 12 Introduction In 1985, management guru Peter Drucker (1985, pp. 69-70) stated that innovation is a "function of entrepreneurship, and that this function is an essential characteristic for survival, not only of small or new businesses, but also of large, already existing organizations." He based that statement on his observation that innovative activities, services and products is a result of a purposeful objective by companies to become market leaders, or maintain their position in the market as well as consumer minds (Drucker, 1985, p. 72). Crawford (1991, pp. 35-36) as well as Souder (1987, pp. 51-54) in agreeing with Drucker (1985, pp. 69-70) state that innovation is an essential facet of business activity as represented by survival in the fast changing competitive environment whereby organisations need to establish departments that have distinct responsibilities, along with the nurturing and development of a corporate culture that fosters innovation, as these are foundations for looking at products in a new light. Competitiveness in terms of the creation of an advantage for a company emanates from having in place and or developing competitive strategies to achieve that end. In the fast paced world of corporate operations companies cannot afford to stand pat on their developments, and or market positioning as its competitors are always seeking to gain market share through acquiring customers as well as retaining their own brand franchise. The pace of technological change, along with fast changing consumer wants, needs, and desires represents a serious challenge that must be planned for as well as implemented. To fully appreciate the context of this examination, one needs to understand that innovation is defined as "the introduction of something new a new idea, method or device (Merriam Webster Online, 2008). Within a corporate mode, this is not a process that can or does happen overnight, it is a corporate culture that emanates from the top of the leadership structure, and is fostered by an atmosphere that prides new ideas and directions (Tidd et al, 201, p. 228). In helping us to understand the context of innovation in a corporate setting Degraff and Lawrence (2002, p. 2) tell us that creativity is a fundamental part of innovation, and in that sense, today's corporations need to be more creative than in the past as a result of the competitiveness of globalisation, and the increased sophistication of consumers who can access the Internet to compare and analyse products. The information age has heightened the stakes in the consumer arena, thus companies must respond in the product segment of their business. In providing us with a further illustration of this new business climate Degraff and Lawrence (2002, p. 2) advise "Creativity, in short, is the core of all the competencies of an organization because creativity is what makes something better or new". The preceding is a core facet of innovation, which also includes new approaches to the creation of products, maintaining active communication with customers to understand the dynamics of their wants, needs and desires, and then translating this into innovative products (Degraff and Lawrence, 2002, p. 2). The preceding areas have been covered as they represent important considerations in the study of innovation on the part of a company, and or product. In reality, it seems that there is no way of separating these two areas, as innovative products can happen as a one time development, but in the fast paced world of business whereby competitors can obtain, dissect and reverse engineering any product, one time innovative solutions are not enough (Bruce and Cooper, 2000, p. 45). Developing and launching successful new products requires a corporate commitment as an ingrained objective of management and operational culture as the success rate for new products is just 10% (Dozier Consulting Group, 2003). Successful innovation requires a company having a customer-centric organisation that not only is in touch with what customers' need and want, it understands and recognises developing trends and capitalises on them. The preceding entails a customer centric operational approach that utilises relationship marketing. A customer centric operation aligns " the resources of (the organisation) to effectively respond to the ever-changing needs of the customer, while mutually profitable relationships" (Bailey and Jensen, 2006). It, a customer centric company consists of (Bailey and Jensen, 2006): 1. aligning company resources of the organisation, 2. effectively responding to ever changing customer needs, and 3. building relationships that are mutually profitable. The foregoing includes the use of customer relationship management that represents internal processes that are employed by companies to enhance its contacts with customers and elicit information as to their views and opinions on current company products, its service as well as gleaning trending and other information in the development of new product features as well as new products themselves (Schmitt, 2003, pp. 171-172). The factors covered in this Introduction have been brought forth to provide a foundation for understanding the processes involved in innovation, along with product development and the associated facets connected with it. The company that has been selected for this study represents Apple, and the product that shall be examined is its iPod. The rationale for the selection of Apple is based upon the fact that it was ranked as the number 1 most innovative company: Table 1 - Top 10 Most Innovative Companies (BusinessWeek, 2007) 2007 Rank 2006 Rank Company HQ Country Stock Returns 2001-2006 Revenue Growth 2001-2006 Margin Growth 2001-2006 1 1 Apple USA 50.60 29.21 2 2 Google USA 3 4 Toyota Japan 20.50 8.30 5.21 4 6 GE USA 1.11 5.06 1.36 5 5 Microsoft USA 0.83 11.85 -3.04 6 7 P&G USA 12.20 11.69 3.70 7 3 3M USA 7.77 7.35 5.49 8 43 Disney USA 11.71 6.29 7.35 9 10 IBM USA -3.48 1.26 4.97 10 13 Sony Japan -2.62 0.60 1.14 The iPod was selected as the product to be used in the examination of innovation as it represents one of the most successful new product launches in decades. Since its introduction in 2001, the iPod has sold in excess of 100 million models by 2006 (Dalrymple, 2006) - The foregoing made this product " the fastest selling music player in history " (gizmodo.com, 2007). These two reasons, Apple's ranking as the world's most innovative company, along with the sales history of the iPod, represent their selection as the basis for this study. Apple The resurgence of Apple represents one of the more intriguing success stories in the annuals of business. As mentioned, fast paced technological change can shift the fortunes of companies almost overnight, thus today's companies must consistently innovate, or lose their competitive edge. In approaching a study of Apple's innovation using its iPod as the focus, one needs to be cognizant of a few proven strategies employed by the company that helps to account for it success in this product, which is linked to its entire product line. In equating the success that Apple has and is having with its iPod, one needs to look back at the history and reputation of the company that is known for its innovation, quality, unique designs, user friendly software and customer loyalty that has built the company into a marketing and product icon. The foregoing aspects are important understandings and underpinnings in delving into Apple's success with this product. The famed story of the founding of Apple Computer in 1976 by Steve Jobs and Steve Wozniak in a family garage in Los Altos, California marks the beginning of the computer company that started out being different, and continues with that heritage today. The Company's famous advertising slogan "Think Different", as created by TBWA Chiat/Day, effectively defined a company that operates as no other in the industry. It is the only computer, and electronics manufacturer that " makes its own hardware, operating systems that runs the hardware, makes programs that run on that operating system, makes the consumer-electronics devices that connect to all those things, and it runs the online service that furnishes content to those devices". The preceding series of company accomplishments provides a picture of the complexity as well as innovativeness that identifies Apple. The company's highly diversified product lines, limits its dependence on one income stream, thus providing a firmer operational foundation. The foregoing provides the company with product prices that range from $.99 for iTunes downloads, to $2,700 and higher for its higher end computers. This product line diversity helps to keep Apple entrenched with younger consumers that are entering the market, along with retaining its loyal user franchise. Apple's leading edge designs enable it to maintain contact with society's contemporary side, along with meeting end user expectations for innovation, and design. In terms of technology, the company beats its competitors in new developments, products, and designs in all phases of its operations. Apple used its innovativeness to break into the music download industry, providing it with a diverse revenue stream (Caulfield, 2008). The company's success has been a result of its understanding the needs, wants and desires of consumers, and then translating the preceding into designs that capture the public's imagination (Caulfield, 2008). What Apple does best is to devising software that is user-friendly to make this all work. The innovative features of the iTunes Store, iPod interface, iPhone and its computers is the defining foundation that drives the Apple express. Decades of being in advance of its competitors, and responsive to the needs of consumers has made Apple the most admired company in the United States in 2008 (Fortune, 2008). In terms of operations, Apple seemingly understands how to get it right, and at times also gets it wrong. The following represents the foregoing (DygiScape, 2007): A. What the company does right: 1. It is focused The main focus of Apple's efforts represents easy of use for end-users that have helped the company maintain a cadre of loyal users and also serve as a foundation to secure new customers. 2. It markets effectively The company designs, as well as tests, and puts its products on the market on an aggressive time frame that maximises the impact of its products in the market. 3. It's motto - "Innovate or Die" (DygiScape, 2007) Approximately twenty years ago Apple was near bankruptcy. The company was faced with the decision to either innovate or cease to exist. Its innovation paved the way for new products and software that captured the public's imagination and saved the company. 4. Quality Apple has always been known for providing software that is highly user friendly, and for products contain the best quality components for reliability. B. What the company does wrong 1. Transparency Apple not known for effective public communication outside of marketing events, thus representing an area for improvement. 2. Its dark side The company's behind the scenes negotiations and arrangements with AT&T concerning the pricing and other aspects represent what has been termed as a dark side to its operations which it did not publicly disclose, however this information was indicated in its Annual Report. The iPhone AT&T deal is seen as cooperating too closely with the industry, and the locked nature of the device has been perceived as being restrictive. An analysis of Apple represents an interesting as well as daunting task in that it has gone through its rise from the ashes to the highly successful company it is today. One can see the unique customer centric approach the company utilised from its inception, and how after Steve Jobs departure, that forward thinking vision disappeared. Apple was a customer centric company before that approach was either fashionable, or even a part of the corporate lexicon. Companies prior to the late 1990s were product driven, which represented a customer take what the company offers mindset, as opposed to the customer centric focus that provides what the customer needs and wants (Galbraith, 2005). The foregoing is a core concept as well as a reality that is exceedingly important. Johnson and Scholes (2005) advise us that the knowledge of customer needs and wants represents an awareness, familiarity as well as consciousness that permits a company to understand that what customers desire. The foregoing might seem obvious and exceedingly simple, but this approach was not one that was on the corporate landscape prior to the late 1990 when customer relationship management and customer centric operations thrust into the mainstream. Thus, Apple's understanding and mastery of this is all the more remarkable. Johnson and Scholes (2005) tell us that knowledge is a resource that when properly used in a company can contribute to aiding that firm's core competence and thus provide it with an edge in terms of its competitors. That development, competence in understanding customer needs, wants and desires has been the foundational part of the success of Apple. Johnson and Scholes (2005) provide us with additional insight with regard to core competencies: 1. They, core competencies, represent a process or an activity underpinning the value of the product as well as service features. 2. Concentration and or the attention to core competencies also leads to levels of performance that exceed those of competitors as it becomes ingrained in the culture of the company. 3. The implementation of a culture of competencies might become difficult for competitors to emulate due to these competencies becoming so embedded within the culture of a company that they permeate and affect everyone. iPod Apple diversified away from being a computer manufacturer with its introduction of the iPod, and its opening of the iTunes online store. That diversification led the company to drop the word "Computer" from its name in January of 2007 (Longo, 2007). This was underscored in the company's Annual Report (Apple, 2007) that stated "The company is committed to bringing the best personal computing, portable digital music and mobile communication experience to students, educators, creative professionals, businesses, government agencies, and consumers through innovative hardware, software, peripherals, services, and Internet offerings". Apple's diversification strategy has been founded on having a broad line of products from which it derives income, with all of these products having a tie in to its core competency as a user-friendly electronics manufacturer that is innovative. A close look at the company reveals interlocking electronics and software components that promote the company to differing segments of the electronics industry providing them with exposure to Apple products. This competitive strategy entails providing products that cross consumer lines, meaning a consumer who already owns a computer will be open to purchasing an iPod, and or iPhone, as well as a computer. The online music download revolution that originated with Napster, represented an opportunity that Apple came, saw and conquered. The iPod design revolutionised the MP3 player segment with its casing, design and functionality in the typical Apple innovative style. The foundational point in the success of the iPod was and is linked to the iTunes Store whose format allows people to download music at 99 cents (USD) and Apple's deals with "Universal Music Group (UMG), EMI, Warner, Sony, and BMG " (Harris, 2005) gave the iTunes Store the foundation of music that sold 275,000 tracks in the first 18 hours of operation. The company expanded from a U.S. only market format to go international in 2004 and sold in excess of 70 million songs in its first full year of operation, with 1 billion in songs being downloaded by 2006 (Harris, 2005) ). In 2008 the iTunes Store surpassed 4 billion in downloads and has become a mainstay in the company's revenues, along with the iPod that firmly established Apple as a company that is diverse and be able to weather the tight margins of the computer industry segment. The iPod is a direct outgrowth of Apple's innovative corporate culture that has been the credo of the company since its inception, and has resurged since the re-arrival of Steve Jobs in 1997 saw him bring back that culture and the subsequent successes (appleinsider.com, 2004). Conclusion An analysis of Apple represents an interesting as well as daunting task it was a customer centric company before that approach was either fashionable, or even a part of the corporate lexicon. Companies prior to the late 1990s were product driven, which represented a customer take what the company offers mindset, as opposed to the customer centric focus that provides what the customer needs and wants (Galbraith, 2005). The foregoing is a core concept as well as a reality that is exceedingly important. Johnson and Scholes (2005, Pp. 67-68) advise us that the knowledge of customer needs and wants represents an awareness, familiarity and consciousness that permits a company to understand that what customers desire. The foregoing might seem obvious and exceedingly simple, but this approach was not one that was on the corporate landscape prior to the late 1990 when customer relationship management and customer centric operations thrust into the mainstream. Thus, Apple's understanding and mastery of this is all the more remarkable. Apple's strategy has created a line of products that capture differing segments of the market, PC users, smart phones, MP3 users, and music downloads. This mix of product and service offering brings the company into contact with consumers that use competitor products in some area providing it with exposure to their audience on a personal level that makes switching in some other area easier as a result of familiarity. The company introduced its $49 iPod Shuffle line to enable it to come into contact with almost every type of consumer, regardless of price. To enable the device, one needs to connect to the Apple Store, thus providing Apple with the opportunity to showcase all of its other lines. No other manufacturer in the computer, MP3 players, smart phones, and or the music download segment has this capability. That cross selling capacity provides Apple with an edge none of its competitors in any segment has. Pfeffer (1995) advises us that the thing successful companies have in common is the manner in which they manage and motivate their workforce. Jobs concentration on Apple's corporate culture and instilling the values as summarised above represents what today is termed as "a renaissance of interest in culture and values in business " (Edmondson and Cha, 2002). Corporate culture is represented by a set of characteristics and values that makes one set of people and or organisations different from each other (Lencione, 2002). Corporations have identities that shape the manner in which they approach their markets, customers, strategies and competitive situations. Moingeon and Soenen (2002) tell us that an organisation's identity includes facets such as "nationality, core competencies, key activities, zone of operation, structure, degree of unionisation, strategic alliances, governance form, type of growth, visual identity, reputation, leadership style, corporate culture ". The preceding analysis of Apple is a highly important understanding in equating its return from the ashes, and its corporate performance and brilliance in introducing new products. Steve Jobs is acknowledged as the guiding light and drive behind this renaissance, through creativity, and innovation. Bibliography Apple (2007) Annual Report. 15 November 2007. Retrieved on 6 December 2008 from http://www.apple.com/investor/ appleinsider.com (2004) Steve Jobs returns to Apple. Retrieved on 7 December 2008 from http://www.appleinsider.com/print.phpid=643 Bailey, C., Jensen, K. (2006) Becoming Customer Centric: Finding the Voice of the Customer. Customer Centricity, Inc. Hudson, NH, United States. White Paper Bruce, M., Cooper, R. (2000) Creative Product Design: A Practical Guide to Requirements Capture Management. John Wiley & Sons. New York, New York, United States. p. 45 BusinessWeek (2007) The World's 50 Most Innovative Companies. 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(2003) Customer Experience Management: A Revolutionary Approach to Connecting with Your Customers. John Wiley & Sons. New York, New York, United States. pp. 171-172 Souder, W. (1987) Managing New Product Innovations. Lexington Books. Lexington, MA, United States. pp. 51-54 Tidd, J., Bessant, J., Pavitt, K. (2001) Managing Innovation: Integrating Technological, Market and Organizational Change. John Wiley & Sons, New York, New York, United States. p. 228 Read More