Application of Operation Management at Apple, Inc - Case Study Example

Application of Operation Management. Apple, Inc. Contents 1. Company Background …………………………………………………………… 2 2. Business Process ……………………………………………………..…………… 5 3. Solution ………………………………………………………………………….. 12 4. Implementation Plans ………………………………………………….……….. 19 References …………………………………………………………………….…… 24 Figures / Charts and Diagrams Figure 1 – Apple Organisation Chart ……………………………………………….. 3 Figure 2 – Apple Business Process …………………………………………………. 7 Figure 3 – Visualisation of Operations Management …………………..…………. 16 Chart 1 – Apple, Inc. Organisation Chart 2013 …………………………………….. 4 Chart 2 – Research Phase …………………………………………………………. 20 Chart 3 – Modification Stage ……………………………………………..………. 20 Chart 4 – Review Stage …………………………………………………………… 21 Chart 5 – Finalisation Phase ……………………………………………………….. 22 Chart 6 – Overall Project Management Scheduling …………………………….… 22 Diagram 1– Fishbone Diagram for Apple ………………………………………… 11 Table 1 – Concepts of Operations Management ……………………………..…… 14 1. Company Background This report examines the operations management of Apple, Inc. Its purpose seeks to identify management problems the company faces in order to maintain successful operations in the future. In conducting an analysis of the company the loss of its visionary leader Steve Jobs has resulted in the question if the company will be able to maintain its pace of new product introductions. It has been this segment of operations that has vaulted Apple, Inc. into the position of being the world’s number one corporation in just over a decade. Founded in 1976 from a garage in Palo Alto California, Apple, Inc. is a corporation engaged in the design, manufacture, and sales of consumer electronic products (Securities and Exchange Commission, 2011). The company’s history is dominated by its visionary founder Steve Jobs whose return to the company in 1996 marked the company’s rise to the position as the most valued company in the world. The preceding brief summary has been brought forth because Apple has three distinct periods. The first is marked by 1976 to 1985, the period of Jobs leadership before leaving the company (Securities and Exchange Commission, 2011). The second period marks the gradual decline of the company from 1985 through 1996 when Apple almost filed for bankruptcy (Securities and Exchange Commission, 2011). As the above clearly reveals, Apple prospered under the leadership of Steve Jobs and it is this foundation that is the core of this examination of the company’s operation management. The above currently is an issue for the company since his passing. For decades analysts have lamented over the fact Steve Jobs was the singular creative driving force behind the company’s innovations (Securities and Exchange Commission, 2011). Hailed as the company’s visionary, Jobs and the board of directors were aware of this dependency of one man as the chief architect (Securities and Exchange Commission, 2011). As shown in the following organisation chart, Apple, Inc. revolved around Steve Jobs: Figure 1 – Apple Organisation Chart (Elmer-DeWitt, 2011) The post Jobs era has seen a change in the organisational chart for the company with Timothy Cook assuming the leadership role at Apple, Inc.: Chart 1 – Apple, Inc. Organisation Chart 2013 (The Official Board, 2011) Apple, Inc. was the creation and development of the mind of Steve Jobs who took the company from the brink of potential bankruptcy to the world’s leading company in slightly over a decade. The current organisation chart looks like that of any successful multinational, but as shall be demonstrated herein the company has the mark of its former founder. This represents the crux of the management issue, as innovation is the reason for and behind the success of the company. This shall be examined in this report, that seeks to ascertain how the management of the company can address this core issue. 2. Business Process As a point of clarification, the business process of an organisation (also referred to as business method) is the collection, structures and related activities/tasks a company uses to produce its products or service (Van der Aaist et al, 2003). In the case of Apple, this is an extremely involved and complex area as the company is the only fully vertically integrated consumer electronics company in the industry (Johnson and Christensen, 200611). The above means Apple’s management controls all of the important processes of the business needed to produce its products and software (Johnson and Christensen, 2006). In examining the core business process of Apple, one would normally treat its vertical integration as one unit, when in fact the company actually represents five companies in one. The above areas are innovation and customer design leading to new products, design and manufacture of internal components such as the processor chip in the iPad, software design and development, internal manufacturing control of cases, parts and components along with direct sales and mass marketing (Johnson and Christensen, 2006). Rather than approach the above from the five individual business processes, the operating mode of Apple has always been introducing innovative new consumer products (Johnson and Christensen, 2006). The above summary concerning Apple’s business operation was important as the company is geared to innovate, which is how it established its leadership position. Competing companies in the computer, MP3, tablet, software, and smartphone segments innovate off Apple’s ideas and new products (Teece, 2010). As a result, their business process differs as innovation is not their core. The exception is Microsoft that works on innovating software as its central business process (Teece, 2010). The background provided has been used to show the culture of the company. An extensive search of source materials did not uncover internal information on Apple’s business process. As indicated, the company actually represents four processes connected to innovation (design and manufacture of internal components such as the processor chip in the iPad, software design and development, internal manufacturing control of cases, parts and components along with direct sales and mass marketing) the business process mapping mirrors the organisation chart that had Steve Jobs at the core: Figure 2 – Apple Business Process The above process includes considerations represented by technological feasibility, degree of sophistication compared to existing products or software and difficulty for competitors to copy. The foundational question repeated and asked at each stage is what purpose does the product serve to fill and the needs it creates or addresses. This aspect is the cornerstone of Apple’s innovation as it found a niche foundation in terms of need or use and then built on it. The number of objectives should be minimised to allow concentration on key points of emphasis as opposed to a long list of qualifiers that could potentially obscure what is being sought. The objective is to determine the viability of the innovation through the business process and then use the fishbone diagram to emulate its technological and market potential. Today’s global market means consumers need consistency in the product offerings of a company. If one looks at Coca-Cola, it looks and tastes exactly the same in every country it is located in. Apple has mastered the art of global markets with this simple strategic approach. An iPod in China is exactly the same as one in Europe or the United States with regard to look, feel and the way it operates. This also holds true for the iPhone and every other Apple product. The variety the company offers is through additional memory and accessories, but the basic products remain the same. In terms of process design, Apple's strength is the innovation stage. The core mantra of the company is ease of use, reliability and intuitive operation. At Apple function precedes form. The above are additional reasons why the innovation business process has been examined as opposed to manufacturing or other areas. The above represents core stages in terms of steps to capture the major components in the process. The loops represented by moving from idea through the yes/no steps could represent tens of steps for each idea. The process seeks to examine, question, test and explore the aspects present in the ideas to hone down the final recommendation. That recommendation then repeats these steps in detail for each aspect of the product. In looking back on Apple’s prior innovations this entails looking at user friendliness and ease of use as product strengths. This also includes the look, feel and size of the product, software solutions and the capacity it holds in terms of processing and computing power. Packaging and style have always been a foundational hallmark of Apple products. They look, feel and perform better as well as different than competitor products thus setting the standard for operation. The iPod did this so well it basically is the only viable choice in the MP3 category in terms of capacity, functionality, size, price and new approach to navigation. As shown by the above, the start and finish of an idea/innovation represent the core around which the company revolves (Denning, 2011). Apple is a highly customer-centric company using its stores, customer service, industry shows, and internal correlation of an enormous amount of feedback to create new products and improve existing ones (Denning, 2011). The customer-centric focus is a theory that represents an operational culture at Apple. It is a way of thinking concerning the approach to the customer that values them from the standpoint of designing products, obtaining feedback, and ensuring the best in customer service (Stefanou et al, 2003). The above is a part of the innovation process represented by the top segment of the business process diagram above. As the customer segment of operations is the core of Apple’s new product innovations and ideas, the practical application of other theories is also a part of the business process. Associated with the above is customer relationship management (CRM) that is a computer-based model that allows companies to gather information for future as well as current customers (Payne and Frow, 2005). The interaction the company has with customers at its retail stores, customer service point of contact, and on warranty feedback forms are some examples of input factors in the innovation process (Payne and Frow, 2005). The above includes integrated marketing communications (Tsal, 2005). This consists of inputs or feedback that flow back to the company from points such as sales promotion, advertising, direct marketing, social media, online communications and public relations (Tsal, 2005). The present situation of Apple is in the post-Steve Jobs era. This consists of the company maintaining its pace in generating a consistent flow of new ideas and products to match its former successes. Whilst Jobs did leave the company with extensive plans, the rapidly changing nature of the consumer electronics segment could render some of these as unworkable (Gardner and Thornhill, 2011). These plans represent Steve Jobs notes, ideas and instructions for new versions of the iPod, iPad, iPhone and computers (Gardner and Thornhill, 2011). However, some plans may need revision to respond to new conditions. More importantly, Apple needs to further refine and develop its innovation process to survive in the future. This means it will have to modify, adjust and improve to strengthen feedback, and customer-centric information flows to stay ahead of competitors. The following fishbone diagram illustrates areas and issues that form a part of the above scenario. As stated, the business process for Apple lies in its ability to innovate and invent new consumer products before its rivals. An article in BusinessWeek that interviewed top executives and business analysts found they think Apple manages to come up with new products that consumers did not even know they wanted (Nussbaum, 2006). Diagram 1– Fishbone Diagram for Apple Cause (System) Effect (Result/Impact) Materials technology software Special plastics reliability hardware design Special glass user-friendly Apple retail stores Quality orientation pricing level Department stores ease in switching costs competitors Online convenience and ease replacement or new The above diagram shows considerations to be addressed in the design and concept of a product to demonstrate its market desirability. The top level under cause represents push factors. These (push factors) are termed as technological and are the operational features in a product that creates utility and use benefits for consumers (Brem and Voigt, 2009). Identified as cause factors, these areas are additives to the business process steps that examine the areas the product needs to satisfy in order to have an edge on existing product types or opportunities in the market. The foundation comes from the inputs identified through retail stores, customer service, and allied areas under the business innovation process diagram. The theory applicable as a further yes/no evaluation aspect is found under Porter’s Five Forces (Birkinshaw et al, 2005). The above draws upon key business areas as a means for a company to evaluate the viability of its business strategy and assessment of the industry environment (Birkinshaw et al, 2005). Of the forces, three are external and are termed as the microenvironment (Birkinshaw et al, 2005). The five forces mentioned by Porter are the threats represented by new competition, substitute products, customer bargaining power, supplier bargaining power and competitive rivalry (Birkinshaw et al, 2005). The business process assessment must consider these factors in the determination if to proceed, along with the areas raised in the fishbone diagram. Pull factors are aspects that exist or can be used in the market that will contribute or aid in the success of a product. As indicated the categories for consideration in product innovation to be considered as part of the business process are identified as channels for distribution, customer relations, and market segmentation. Product innovation entails understanding the market potential in terms of alternative product impact (Brem and Voigt, 2009). The understanding of important push and pull factors is a critical aspect of the innovation business process as it aids in reaching a determination of the eventual marketability of a proposed product. 3. Solution In looking at or searching for potential solutions, one needs to be cognizant Apple is moving on without its resident genius. Jobs’ vision that enabled him to understand the state of the market, future application possibilities and the guiding of a new innovation from concept, to design, adjustment, packaging, software, and practical use represents a once in a lifetime occurrence. The point is, the current executive and management staffing at Apple carries segments of his genius as a carryover from working with him. The task is to take these day-to-day lessons and integrate them into a refined operative business process that uses as much of his genius as can be remembered and effectively integrated into the company. The management challenge faced by Apple with regard to its business process is continuing and maintaining its impressive record of new product innovation. This above being the case, standard approaches to management or company issues does not focus on developing the company’s innovative strength. As such, approaches under operations management needs to be looked at creatively. In order to understand the above, operations management as a term needs to be discussed. Stevenson and Hojati (2002) state operations management entail various business functions and operations geared and designed to convert resources into finished materials or products. Slack et al (2010) state it is addressing and crafting business issues through the use of operations management techniques. Helzer and Render (2011) add to this list of operations management foundations by indicating it is a means to oversee, design or control production and the redesign of operations. Schmenner and Swink (1998) state operations management seeks to find ways to increase or ensure operations of the business are efficient and maximise the use of resources. They add it also seeks to find effective ways to meet customer requirements and manage business processes to maximise returns. In fact, the palette of areas covered by operations management is so encompassing, the following table proves an understanding of the depth and range it covers: Table 1 – Concepts of Operations Management (1 of 2) (Wee, 2009) Table 1 – Concepts of Operations Management (2 of 2) (Wee, 2009) The purpose in providing the above is provide additional clarity concerning the rationale for selecting the innovation business process approach described for Apple. The linkage or interconnected nature of the business processes of a business under operations management is further illustrated by the following: Figure 3 – Visualisation of Operations Management (SharedConcepts, 2012) The centre segment in the above reveals the significance and importance of technology development and the competitive environment. These are the strengths demonstrated by Apple as a result of its mastery of introducing new and innovative products that cause its rivals to play catch up. The above also helps to explain the selection of innovation as the choice for the business process for the company as opposed to manufacturing or another area. Varied theories, models, tools and concepts employed under operations management include Six Sigma, Total Quality Management (TQM), Pareto, Lean Thinking, and Just in Time (JIT) as a few examples. The above all have a general similarity that in this particular instance renders them as not the most viable choice concerning Apple’s innovation business process approach. Six Sigma represents a series or set of tools to aid companies to improve quality output and reduce defects (Linderman et al, 2003). Total quality management is a similar business tool or concept devoted to improving the quality of a company’s product as well as processes (Powell, 2006). TQM and Six Sigma, although having different internal operating processes and methods, work in much the same manner and have similar ends, (improvement of quality and the minimisation of defects). The above has not been Apple issues or management challenges since the mid-1990s. The company is known for quality products that work exceedingly well. In terms of other operation management tools and concepts such as Lean Thinking and Just in Time (JIT), these are approaches used to control costs and heighten efficiency (Hines et al, 2004). The principles behind lean thinking is a shift from the batch approach of mass production to one that aligns the process of produce what is needed based on demand (Hines et al, 2004). It consists of manufacturing amounts in keeping with volumes to fulfill market needs and the delivery of components parts to meet figures forecast (Hines et al, 2004). This is similar to Just in Time, which is a production strategy that improves the efficiency of the supply chain to minimise inventory build up for suppliers as well as the company (Davenport and Glaser, 2002). Of these two approaches, Apple uses lean thinking as the demands represented by fluctuating product delivery levels across a broad range of categories demands a highly organised and controlled process (Bernstein, 2009). The above concepts, tools, theories, and processes have been used to demonstrate that these areas, whilst significant and important, do not reflect the core business process of Apple. As indicated, innovation is the mantra of the company. Whilst Apple has produced a broad number of firsts in the industry (graphical user interface, first colour monitor, first mouse, first animation technology, first laser writer, first plug and play, etc.) (Bellis, 2009), it is primarily an innovator. The smartphone was not an Apple innovation as Research in Motion’s Blackberry hit the market years ahead of the iPhone (Charlesworth, 2009). Despite the lists of firsts, Apple has built its stellar reputation by out-innovating other companies (Dyer and Gregersen, 2011). The iPhone set the standard for smartphones through its innovative full size screen and touch interface (West and Mace, 2010). The same holds true for the iPod, iTunes and iPad, which were innovations off of themes that had not been fully developed. In looking at the management challenges faced by Apple, innovation is its biggest management and company challenge. The concept that best applies in this instance is business process reengineering (Attaran, 2004). As a company, maintaining the pulse beat with the consumer market, new developments and the successful innovation of products is the major challenge facing Apple, Inc. Under business process reengineering, the focus is refining and developing a process that captures the core, philosophy, and attention to detail pioneered by Steve Jobs. The recommendations to achieve the above entail revisiting Apple’s past product introductions. This includes successes as well as failures such as the Newton. The rationale for the above is the company as an innovator has a history of new product successes unmatched in the consumer electronics industry. Through business process reengineering, the approach represents mapping the stages of every prior introduction, market conditions at the time, existing products and product development during the period. Through a point in time analysis of prior new product introductions and the degree of success they achieved, common areas concerning assessment can be developed. The pattern calls for the construction of a standardised new product developmental model. The standardised version would allow for computer matching and point ratings to be developed for each segment from start to finish. The success of the iPod, iTunes, and iPhone are potential level ten rating examples that changed or created new industry segments. The points system would then compare these against the iPad, and various other products for their innovation projection rating. 4. Implementation Plans The recommendation of the construction of a standardised product evaluation format represents the core aspect of the development of an innovative business process plan. The actions to achieve this needs to be carefully crafted, reviewed and tested to ensure important points are factored in. As a means to demonstrate this, the following Gantt plan has been created as a template guideline and timeline. 1. Research Planning Stage First Task This represents compiling the product development plans from start to finish for the most successful Apple products. By way of recommendation the iPod, iTunes, and iPhone represent products and services that changed the face of their respective industry sectors. By gathering information on these and then gathering data on the iPad, and Nano foundational information for the construction of the standardised innovation business processes can be started. The above represents a lengthy process that includes the initial development of the standardised framework. This is a rough draft stage that will be added to in successive stages. The estimated timeframe is estimated as four months. Second Task This represents a review of the prior stage and refining the standardised innovation business process to add more categories and input factors. The estimated timeframe is estimated as two months. Third Task This stage consists of reviewing the prior two tasks to add or subtract common areas and draft an initial points rating system. The estimated timeframe is estimated as one month. Chart 2 – Research Phase Months 1 2 3 4 5 6 7 8 9 10   Task 1   Task 2     Task 3       2. Modification Stage First Task This is a review of the Research Planning Stage to look for areas to amendment and refine in the standardised innovation business process format. Essentially, it entails repeating the first stage using a new team to perform an analysis of the first stage and recommend additions, subtractions or format modifications. The estimated timeframe is estimated as two months. Chart 3 – Modification Stage Months 8 9 10 11 12 13 14 15 16   Task 1     3. Review Stage First Task The process has been divided into a series of stages to enable the first two teams to collaborate on what has transpired. The reason for the separation of these two teams in the above stages is to provide a process that brings new thinking and approaches. In this manner, a constructive series of discussions on each point will occur. This is a highly intensive stage in the process that requires each step and area to be justified with the points system compared for the products reviewed. Due to the in-depth nature of this stage, the timeframe is expected to be lengthy. The estimated timeframe is estimated as four months. Chart 4 – Review Stage Months 8 9 10 11 12 13 14 15 16   Task 1     4. Test Stage First Task This stage represents the testing of the standardised innovation business process. As can be deduced, there are a host of areas that will need to be tested, recalculated and modified. This stage represents the means for the tests to occur. The estimated timeframe is estimated at three months. Second Task It is expected there will be the need to repeat the process again to further refine it. The estimated timeframe is estimated as two months. Third Task The size and complexity of the process mean further testing, recalculation, and modification as a result of the above processes will be needed. This stage also includes the initial test runs. The estimated timeframe is estimated at three months. Chart 5 – Finalisation Phase Months 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25   Task 1     Task 2       Task 3   The following Chart shows all of the above stages: Chart 6 – Overall Project Management Scheduling Months 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25   Research Stage       Modification Stage       Review Phase       Finalisation Phase               As can be seen, the timeframe is a period of two years. This is not what could be termed as non-productive as information is being correlated throughout the process and tested. As indicated, the business process reengineering is the core foundation of the above. The attention to the details under the Gantt charts indicates areas to address to achieve the end result. References Attaran, M. 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