Innovative Organisations: Apple Inc - Case Study Example

 Innovative Organisations: Apple Inc. Company profile With only a budget of 1,300 USD, Apple was founded by Steve Wozniak and Steve Jobs in 1976. In the early 1980s, Apple Inc. revolutionised the personal computer and brought computing into many international households. The company’s first innovation in personal computing, the Apple II, was the first product of its kind to use colour graphics. The company’s ability to create innovation in product design and function brought many software developers interest in providing technology and support for this machine (ipodtopctransfer.com, 2008). Because of the Apple II and its ability to interest consumers of many different demographics, such cooperations inspired ongoing hardware and software innovations. After going public in 1980, the company experienced annual sales of over one billion USD (fundinguniverse.com, 2007). In the late 1980s, another innovation known as the Apple PowerBook, a very archaic version of today’s laptops, helped put the company on the map toward success through innovation and improved sales (ipodtopctransfer.com). These innovations continued with the development of the Mac OS and lead to the capital needed for modern product innovation offerings on the consumer technology marketplace. Apple competes primarily in the technology and software sectors, offering a variety of commercial and consumer-based product solutions in multiple market environments. Apple currently holds 10 percent of market share on handheld devices and personal computers (Palmer, 2009). This is a significant volume of market share considering the heavy amount of competition from companies like Microsoft, Dell, Gateway and many other technology providers. The company’s main competitive strategy is reliance on its strong customer loyalty with certain segments that identify with the quality and integrity of Apple products. It also penetrates new markets with new innovation for delivery in a variety of international markets, relying on the existing distribution network already established with previous Apple products, as a matter of cost savings and efficiency in retail channelling. Apple’s innovations are the primary competitive strategy and the company does not have the same strong reliance on concentrated promotional materials that some of its competitors budget such as Dell and Gateway. The main challenges that Apple will face in the future is limited life cycle on some of its current innovations as they are adapted or improved upon by other technology companies. Some of its most recent innovations already have new models with upgraded features being released into consumer technology markets that can limit their longevity in their chosen market environments. Additionally, the company recently experienced a short-term stock drop when the CEO announced an illness, therefore potential shake-up of corporate governance could pose an investor-related risk to future profitability in the event of a loss from the founding pioneer. Apple rates very well in the technology sector, having a diverse portfolio of products aimed at both commercial and consumer accounts. Buyers include government agencies, consumers, creative markets, SMB, and education, none of which make up more than 10 percent of total sales (Apple, 2008). This means there is no single buyer group that the company must rely on as a means to minimise sales risks. With such intense competitive rivalry, diverse buyers groups give them an edge, and holding 10 percent of market share is an accomplishment based on the volume of competing manufacturers and developers. “Apple’s success lies in deploying existing technology in ways that meet consumers’ needs and in attracting buyers through coolly designed devices that do not require you to be a computer geek to use them” (Kay, 2009, p.11). The user-friendly aspects of product innovation is a key competitive strength. Characteristics of innovation Apple is currently listed as the #2 most innovative company in the world (Salter, 2008). In order to promote this innovation, the company must have certain organisational components and philosophies to be considered an innovative business. The first is having a human-centered framework that aligns the organisational structure with the needs of its largest buyer group, the consumer. This puts a focus on having more human resources to help develop and conceptualize solutions to problems that are identified in the needs of buying groups. At Apple, innovation starts with structuring the organisation to promote the free exchange of employee-generated ideas and concepts and building a human resources model to have motivation to meet corporate goals for ongoing ingenuity in product design and function. “To achieve sustained innovation, organisations must be able to draw upon the skills and knowledge of employees at all levels of the business” (Dawson, Shipton & West, 2005, p.52). Apple currently has a functional structure, one where the company is segmented into different functional divisions that report to a single governing body. For example, the human resources department, research and development, customer support, and sales and marketing (among many others) are functional divisions that offer support to the main strategy of improved market share. All of these organisational components are directly linked to innovation as the need for human resources supports employee needs and motivations whilst research and development produces ideas that require generic customer support services to handle consumer and business requests about existing technology and software products. This is the company’s cross-functional business structure (Rodino, 2008). Without this inter-linkage between different concept and support divisions, Apple would not have the ability to produce rapid product and service innovations since it relies on human talent in order to accomplish a team environment. Innovations also require an environment where new concepts can be prototyped and tested, and Apple supports this type of environment with its functional structure and ample resources. Experimentation involves putting innovative prototypes through a rigorous series of market and technical test procedures before introducing them to the market. “Experimentation platforms give organisations a neutral environment for building and testing solutions in simulated or near-real world contexts” (Nambisan, 2009, p.45). Apple designs products that can be used by any consumer, government or business buyer without having to have a great deal of technical expertise. Any innovation designed for the consumer in mind must have certain key features and benefits that rely on ease-of-use and functionality or they will be abandoned in favour of products with a better application to lifestyle and convenience. Launching products into these markets without first experimenting on their functionality could be a business risk and lead to lost sales and lost buyer interest. Innovation is also created by the impact that the external environment has on success. External conditions include the current state of the economy in which the company operates and different regulatory demands placed on the business. In order to develop an effective strategy for growth or sustainability, companies need to consider whether their market role is that of a follower, leader or imitator which dictates the importance of innovation to their profit success (Ortt & Van der Duin, 2008). Apple is very much a leader when it comes to rapid production of innovation, however they must comply with certain intellectual property laws or tariff laws (or any other barrier to market entry) depending on the location of their production or distribution systems. Apple rejects the divisional structure which isolates business sections in favour of the functional structure which tends to centralize all business segments into a single unit. Innovation cannot be created if reliance on human talent is necessary in a structure that is divisional. The functional structure chosen is somewhat of a product of the external environment and how the company must interact or respond to externalities. In order to have products be considered innovative, another external factor drives whether Apple Inc. can genuinely consider itself innovative. Network externalities involve the value of a product as perceived by the intended end user based on the volume of users already using the product or availability of support products used to make the product more beneficial (Hauser, Tellis & Griffin, 2006). An example of a network externality would be the fax machine, as use of these products continues to rise as more and more buyers have their own machine. With limited direct network externality, sales of fax machines would be minimal. Apple must recognise in order to create innovative products that the buyer will consider whether they can use their new technologies to communicate to others, gain additional software support benefits, or anything else related to how these products interact in the social or professional environment. There is a risk to new innovation based on network externalities that some of its products might not be considered valuable until they have sold in high enough volumes to make them a cultural symbol that has meaning to the buyers. This is why the functional structure and experimentation platforms are vital to actual innovation production and market success. Apple’s most innovative products Two of the most innovative products recently launched by Apple include the iPhone and the iPad. These are technological innovations that changed the nature of communications and networking in the social environment for consumer and business buyers. They are contextual innovations with a human-centered focus that frame new solutions to problems with communications that required solutions and new contexts for the end user. These products have capabilities of convenience in how Internet software is utilised by the user as well as providing platforms for information storage and retrieval in a way that no other company has been able to mimic. The iPhone and the iPad have visual and touch interfaces that give consumers ability to respond to communications or Internet needs with single touch screens instead of complicated menu systems. The visual aspects of both devices are colourful and sustain considerable graphics and colour support. The life cycle of the iPhone is dependent on certain network externalities and the ability of the device to communicate successfully with a variety of hand-held communications devices. The iPhone is currently serviced by AT&T as the only service provider, therefore there are risks to extending the life cycle beyond, say, three to four years based on the reputation of their service provider brand. If customers already have preconceptions about the value of AT&T as a service provider, it will limit ongoing sales of the product until new service provision contracts can be developed by Apple. This is a cooperative-based innovation for the iPhone that relies on dedication and excellence in service support and delivery from the telephone service provider, in this case AT&T. If this provider maintains high standards, the life cycle can be extended and have a longer period of growth before eventual sales declines. The iPad, however, has no other device on the market that is similar and it was just recently launched. Until competing firms develop a similar device, consumer interest will grow especially if Apple launches new versions of the iPad to keep it relevant to changing lifestyle needs in its buyer groups. The portability of this device, along with its convenience in accessing its many different service options, could extend the lifecycle of this product for up to five years, perhaps more depending on the innovative timelines of companies looking to mimic or outperform this device. There is no evidence that competition has a similar model ready for prototyping or launch, therefore it could be many years before reaching an eventual decline stage or total consumer rejection. These innovations are protected by Apple through licensing agreements and by the development of trademarks and conformance to certain intellectual property laws (Apple, 2008). The software used to support these devices are protected under licensing agreements, much like its personal computer software, and infringement of trademark laws must be proven that a competing device has directly mimicked these protected aspects of the innovations. In an environment where technology developers have access to large financial resources, it is possible that a completely unrelated version of the product could be launched as a competitive tool without necessarily infringing on protected rights related to the product. Personal contribution to Apple Apple relies on internal creative talent in order to generate new ideas for innovative products and to ensure that they can be supported after launch. In addition, speed to market is often a major competitive concern which relies on the functional, centralized support teams to make this happen. As the personal level, I am a very creative and artistic person with a great deal of educational knowledge about marketing and consumer behaviour. My contribution in areas of marketing could be the generation of new strategies designed to segment and target customers in a way that is directly related to their personal values and beliefs. As a competent researcher, I could also gather valuable primary data, such as through surveys or questionnaires in different buyer groups, to uncover what features they prefer on existing products or would like to see on new versions. Using my ability to conduct and analyse research findings would be highly beneficial in a company that must consider contextualizing new products based on end user needs and lifestyles. Also, as a person with much knowledge in arts and designs, I could conceive of many different design aspects of new products such as different downloadable skins for these devices as they are produced and then subsequently launched into their desired markets. Having a knack for design and colour, I could conceive of new icon images for use in different menu functions, such as with the iPad, to make the device more attractive to potential buyers that have done hands-on research with these devices. By making the product ore visually appealing, my contributions would be in the form of creative consultation and design to improve upon existing products or help in the research and development of new innovations. Further, as a self-managed and motivated person, I work well in functional organisational designs where knowledge transfer is common and appreciated. I have many talents in business and management, such as in transformational leadership theory, that promotes better organisational culture. I could be a valuable support person that deals with client issues face-to-face, or perhaps a salesperson that works with business clients with my knowledge of cultural differences with certain international buyers. All of these factors are necessary to improve non-consumer sales (since retailers usually perform this function) in order to help Apple achieve new market penetration and exposure. With my knowledge of human resources principles, I could motivate team projects and coordinate their activities by using motivational strategies to boost support for timely submission of new ideas or general work load and support. As a leader, I could benefit Apple significantly. As a manager or creative consultant, my skills would prove quite valuable when innovation is a key competitive tool for success and higher sales and profit. References Apple. 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