Apple innovation and strategy - Essay Example

? INNOVATION AND STRATEGY by [Insert Here] [Insert and Number Here] [Insert Here] [Insert s Here] [Insert City and State of Institution Here] December 11, 2011 Innovation and Strategy Introduction Technology changes almost every day and it greatly impacts the way business is carried out. It makes tremendous changes in today’s business contexts. One critical aspect of technology advancement and its impact on business is that technology by itself has no single objective value, but the economic value of the technology depends on how effectively it is commercialized. The same technology, commercialized in different ways, will yield different returns. In most instances, companies find highly strategic and effective ideas to bring innovation to their business in order to achieve sustainable competitive advantages. Innovation is more often considered as fundamental prerequisite for competitiveness and economic well-being. In major industries, to innovate has almost become less risky and since both consumer and industrial markets have come to expect regular changes and improvements in the products, most firms find it profitable to make innovation their grand strategy (Pearce and Robinson, 2004, p. 207). This piece of research paper explains the theoretical aspects of innovation strategy and details how this can be used as an effective tool to achieve competitive advantages, based on the innovation and strategy experiences of Apple Inc. Company Overview Apple Inc., the American Multinational company that was established by Steve Jobs, Steve Wozniak, and Ronald Wayne in the 1970s, has emerged as one of the most successful Fortune 500 companies; and perhaps the best known for innovation. It designed, manufactured and marketed personal computers, portable music players, software, computer peripherals and a number of different kinds of electronic products, through its own retail stores, online stores and sales force or third party sellers (Sander and Slatter, 2009, p. 81). Apple Inc. has been able to create and establish a strong brand name for the company through a number of strategic and innovative steps such as Macintosh, iPod, iPad, iMusic, iTunes, iPhone etc. As Kerin, Hartley and Berkowitz (2005, p. 395) pointed, Apple Inc. has always been thriving on innovation. Its history showed that it has ignited the personal computer revolution during 1970s with Apple II, and it reinvented the personal computers in 1980s and gaining a brand loyalty with iMac in 1990s. It has alter been able to discover increased opportunities through iPod, Apple iPhone and 3-G iPhone in recent years. Apple Inc. has thus become academically important and practically an effective model since it has made use of technology and considered innovation as the central to its strategies. Milestones in Apple’s History Apple has been thriving on innovation, which in turn has helped it gain sustainable competitive advantages. Apple’s innovation strategy is very evident from its innovation designs, product differentiation, own-store retailing and brand loyalty focus. These strategic developments are detailed below: The Innovation Strategy of Apple Inc. Product Designs Innovation can be of different forms and at different stages of product designs and development. A firm may innovate in manufacturing, or planning or designing, R&D, distribution, marketing etc. When it comes to Apple’s case, the main success factor was its innovation in product designs. Betz (2002, p. 194- 195) argued that Apple Inc. hasn’t long been coasting on borrowed innovative technology and it wasn’t a technology creator until the mid of 1990s. Apple’s CEO Steve Jobs then realized that an organization can never stay long on a technology leader strategy unless it becomes a technology creator. In 1997, Steve Jobs cut Apple’s total product lines to four such as laptops for consumers, laptops for professional users, desktop for consumers and desktops for professional users. This was one of the turning points in Apple’s history as it helped the company start innovative strategies in designing and developing the products according to customers’ individual requirements. Innovation simply means bringing or introducing something new of an idea, method or device. An organization is said to be innovative when it is attempting to introduce a new idea, method, process and technology or combination of all these in order to enhance better performance in the organization. As Endsley (2010, p. 1) noted, innovation is the first, practical, concrete implementation of an idea done in a specific way that brings broad-based and extrinsic recognition to the individual or the organization. It is not only mere creativity, but rather implementing the idea and establishing it in to reality. Innovation refers to the introduction of newer goods and services. Business organizations are required to adapt to changes in consumer demands and to the competitors as well. When some companies identify new dimensions of their existing products and design and develop their products or services according to the needs and wants of the customers, others may have to customize their goods for customers and get a competitive edge (Bateman and Snell, 2003, p. 11). Companies are thus putting efforts to think strategically, spend much on Research and Development to find better strategic ways and to innovate in their marketing landscape so as to turn their strategies and innovative ideas to long term sustainability and profitability. Lendel and Varmus (2011, p. 819) defined innovation strategy as innovative direction of organizational approach to the choice of objectives, methods and ways in order to fully utilize and develop the innovative potential of the enterprise. The quality, standard and level of innovation strategy used in a company depends on various elements such as ideas, knowledge management, human resources, capabilities, technology, management, process and operational efficiency. Product Differentiation Innovation is the creation of something new. In such a context, Shearer (2007) described that innovation occurs within the enterprise, not just through the technology, but also through a number of other factors like branding, business methods and other operations that help it do things either faster, better, smarter, simpler and more efficiently. According to him, innovation is also the sustenance of long-term viability and competitiveness and it most often leads to product differentiation (p. 5). Product differentiation is the means by which consumers gauge differences and make selections accordingly. For consumers, one of the available products or services in the market will be preferable due to that it is distinctively superior in terms of quality, price, benefits, designs and customer value that is presented through any other factor (Shearer, 2007, p. 5). When it comes to Apple’s example, it has been innovating through unique and highly effective product differentiation. Product differentiation has been the outcome of Apple’s innovation strategy. As Hoskisson, Hitt, and Ireland (2008) emphasized, Apple’s strategy was to develop computers and other products and services that were highly differentiated. Many of its competitors like HP, Dell and Nokia focused on keeping costs low and selling high volume of products whereas Apple focused on technology, innovation and product differentiation (p. 133). The product differentiation strategy of Apple Inc. started from its development of iMac in 1998. The company introduced an operating system in 1999 as its second step towards differentiating the product (Linzmayer, 2004, p. 297). After iMac and iBook were marketed, Apple Inc. introduced iPod as the central for digital lifestyle strategy, causing tremendous changes in the way people approached and listened music around the world. Its product differentiation strategy continued with the introduction of innovations in flat panel LCDs and improved notebooks in 2002. By 2003, its innovation and product differentiation were more evident from the developments of iDvd, iMovie, iPhoto, and iTunes (Linzmayer, 2004, p. 300- 302). Schmitt (2003, p. 168) noted that Apple’s product differentiation and innovation have helped the company create its very own history through iMac, iTunes, iBook, iMusic, iLife, iPad, iPod and iPhone. Its marketing campaign labelled as ‘Think different’ has been an illuminating example for how effectively and successfully an innovative idea can spread better word-of-mouth among the customers. The company has socially been responsible and rather more committed to bring personal computing, mobile communication, digital music players and video services to various types of customers like students, kids, professional teams, and educators through its innovative hardware and software services. One of the very unique business strategies of Apple Inc. was to design and develop its own hardware, software and other products with superior ease of use offerings to customers (Apple Annual Report, 2009). The Attacker’s Advantage With regard to innovation in the technological realm, there are two primary forms. Christensen and Rosenbloom (1993) refer to these as “radical” and the other “incremental” (p. 233). Radical innovation refers to a technology innovation that is brand new or different from previous market introductions. Whereas incremental innovation refers to adjustments or improvements made upon technology already in existence (Christensen & Rosenbloom 1993). From Apple’s perspective, a radical innovation would be the iPod and an incremental example would be the iPad and iPad 2 or iPhone and the following sequential or incremental introductions that have since followed (i.e. iPhone 2, iPhone 3, etc.). Each of the iPhones are fundamentally the same, but improvements have been made, bugs worked out, features enhanced, and aspects that proved to be of little value removed or altered based on consumer feedback and company research and development. The S-Curve In relation to the above discussion on incremental and radical innovation, the S-Curve helps to visually convey the natural innovation lifecycle. The curve is the visual representation of the habit of the five categories of technology adopters: innovators, early adopters, early majority, majority, and non-adopters (Christensen & Rosenbloom 1993). When a product is initially introduced into the market, there are few adopters; therefore, the curve begins at the bottom left of a graph where the x-axis represents time and the y-axis represents adoption rate. As time passes, early adopters begin to show interest in the technology, thus the adoption rate climbs. This product follows an S-Curve as it passes through all stages as seen in Fig 1 below. Fig 1 – Source: http://www.icsb.org/wiki/images/thumb/9/9f/Adoption.gif/800px-Adoption.gif Achieving Competitive Advantage ‘Competitive Advantage’ is perhaps one of the most common buzzwords of today’s business literatures. Though the term has been used several years back, it has been defined and explained by the marketing guru, Michael E Porter in 1980s. According to Porter (1998, p. 3), competitive advantage grows fundamentally out of values that a business organization is creating for its customers in excess of the cost of creating the same values. Value is what customers are willing to pay for a product or service. An organization can be said to generate superior values when it offers products or services with higher quality and lower prices than that of its competitors’ offer for the similar products or services to same customers. There are basically four sources of establishing sustainable competitive advantages. They are, 1) ownership- based, 2) proficiency-based and 3) access-based. Competitive advantage arises when a firm is becoming different from the other along with some dimensions of attributes and specific characteristics that make it better in terms of customer values than what its competitors make (Ma 1999, P. 259). As O’Shannassy (2008, p. 169) described, one of the main elements of competitive advantage is value creation. A firm becomes able to gain competitive advantage when it is able to implement a value creating strategy that hasn’t been adopted simultaneously by competitors and this cannot be easily duplicated by others including their competitors. When it comes to the innovation or strategic aspect of innovation, it is obviously an effective tool that a firm can create values, offer superior values to customers and thus to help it achieve sustainable competitive advantage over its competitors. Apple’s Own-Store Retailing Traditionally, almost all the businesses were using middlemen for distributing their products. In recent years, as part of supply chain or effective distribution strategies, many companies, like Dell Inc., eliminated middlemen and took advantages of direct selling. But, when Apple Inc. opened its first own-store retail-marketing in McLean, Virginia in 2001, it has changed the history of marketing distribution itself, because, Apple remained far positive to many rumours and debates despite the fact that many companies that have implemented same strategies weren’t able to prove the success. By June 2008, Apple was able to record greater success with phenomenal record of some 215 own-stores in six countries, including USA, UK, Australia, Canada, Japan and Italy (Mohr, Sengupta and Slater 2009, p. 326). Neither the idea nor the practice was new, but the way Apple approached it was different and with extreme confidence. This is how innovation turns matters around. As Kerin, Hartley and Berkowitz (2005, p. 395) noted, beginning with as few stores as one or two in 2001, Apple has emerged to be able to launch more than 25 stores per year. By 2004, about half of the US population was residing within 15 miles of AN Apple store. These stores were selling Apple’s products and services exclusively, targeting tech savvy customers. All these stores facilitated displaying full lines of its products, software, accessories and Genius Bar that was staffed by an Apple specialist (Kotler and Keller 2006, p. 485). Apple’s stores facilitated a genius bar that served as a friendly place where all its customers, mainly Mac and PC users are freely permitted for playing and exploring Apple’s technology. This has attracted wide population to its stores and this has proved how innovation can bring impression to a company. The founders did not realize that they were establishing a multibillion dollar PC industry when they created Apple II in a garage on April 1976 (Kerin, Hartley and Berkowitz, 2005, p. 247). The same success story has repeated in Apple’s retail-store too. Apple’s own-store marketing, despite media’s predictions and rumours, has emerged to be one of the greater achievements. This has later been addressed as a wise move. Apple’s stores helped the company achieve $1 billion revenues faster than any retail stores. Around 40% of the customers coming to it and purchasing items from it are found to be mew customers (Kerin, Hartley and Berkowitz, 2005, p. 395). This success story shows how effective was Apple’s innovation and how it has helped it achieve sustainable competitive advantage. What was most interesting or highly differentiating its stores? That was the design, facilities and superior service being offered to its customers. Apple has always thrived on innovation. When it comes to its products or services, design played vital role in creating and establishing a strong brand image. When it comes to its own-store retailing strategy, innovative store design has been an important success factor. Davis (2009, p. 340) evaluated that Apple’s own store retails were designed and arranged in a way that it has known as a cultural phenomenon, with bright lighting, clean layout, easy access to items displayed in, and with almost museum-like zeal for captivating the products displayed in the stores. All the customers who visit it were fascinated by play-facilities and they are automatically attracted to play with its products. Genius Bar helped customers ask questions, clarify their tech-doubts and interact with Apple experts. The way Apple arranged and facilitated its store was very innovative and this was the main reason why Apple’s stores succeeded while many others couldn’t prove the same. As Danziger (2006, p. 12) noted, the own-stores strategy of Apple Inc. has been successful because it was revolutionary in today’s business contexts. It’s very specific layout was the key to unique shopping experience. Customers were always welcomed to get hands-on with computers and other products, check their mails, use networks, make test drive of computer hardware or other items. This also served as a friendly place for enjoying music with iPods. Conclusion As part of Apple’s innovative strategy, the company planned its retail stores carefully and thought much about its effectiveness. Floor (2006, p. 206) stressed that Apple launched its stores only when it expected them to become highly profitable within a short time period. The organizational thought was that using a computer is as simple as buying one would be. The store layout was done with much simplicity and logically and its design and fixtures are kept as simple as possible. Apple’s stores were white box with bright lightings, and they were equipped with materials like stone, metal, glass, transparent synthetic and beech-wood in order to attract huge numbers of customers. As the image depicts (see Fig 2), Apple has designed its store in a way that it was able to maximize net profit per square foot of the available space. Customers entered or exited the store from ‘cash wrap’ area and varying lines of Mac and iPods are located in the first section on the left and right in counter and wall-displays (Jacobs, Chase, and Aquilano 2009, p. 237). This piece of research paper explained the theoretical underpinning of innovation as a strategy and described the strategic steps of Apple Inc. This paper has highlighted that Apple has been very successful in innovation and this has helped the company achieve sustainable competitive advantage through innovative product design, product differentiation and very effective own-store retailing strategy. References Apple Inc Annual Report, 2009, Annual Report, Retrieved from http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MTg1OTB8Q2hpbGRJRD0tMXxUeXBlPTM=&t=1 Bateman, TS and Snell, SA 2003, Management, the new competitive landscape, Sixth edition, The McGraw Hill Companies Betz F, 2002, Executive Strategy: Strategic Management and Information Technology, John Wiley and Sons Christensen, C. Rosenbloom, R., (November 1993), "Explaining the attacker's advantage: Technological paradigms, organizational dynamics, and the value network", Research Policy, vol. 24. 1995, pp.233-257. Davis, JA 2009, Competitive Success, How Branding Adds Value, Illustrated edition, John Wiley and Sons Danziger, PN 2006, Shopping: why we love it and how retailers can create the ultimate customer experience, Illustrated edition, Kaplan Publishing Endsley, S 2010, Innovation in Action: A Practical Guide for Healthcare Teams, Illustrated edition, John Wiley and Sons, Floor, K 2006, Branding a store: how to build successful retail brands in a changing marketplace, Illustrated edition, Kogan Page Publishers Hoskisson R E, Hitt M A and Ireland R D, 2008, Competing for Advantage, Illustrated and revised second edition, Cengage Learning Jacobs, FR, Chase, RB & Aquilano, NJ 2009, Operations and Supply Management, Twelfth edition, McGraw Hill Irwin Kerin R A, Hartley S W and Berkowitz E N, 2005, Marketing, Eighth Edition, McGraw Hill Companies, Irwin Kotler, P & Keller, KL 2006, Marketing Management, Twelfth Edition, Prentice-Hall, Pearson Education, Inc. Lendel, V and Varmus, M 2011, Creation and implementation of the innovation strategy in the enterprise, Economics and Management Linzmayer O W, 2004, Apple confidential 2.0: the definitive history of the world's most colorful company, Illustrated second edition, No Starch Press Ma, H 1999, Creation and preemption for competitive advantage, Management Decision 37/3, MCB Univeristy Press Mohr, JJ, Sengupta, S & Slater, SF 2009, Marketing of High-Technology Products and Innovations, Jakki Mohr O’Shannassy, T 2008, Sustainable competitive advantage or temporary competitive advantage Improving understanding of an important strategy construct, Journal of Strategy and Management, Vol. 1 No. 2, Emerald Group Publishing Limited Pearce, JA and Robinson, RB, 2004, Strategic Management, Formulation, implementation and Control, Ninth edition, The McGraw Hill Companies Porter, M 1998, Competitive advantage: creating and sustaining superior performance : with a new introduction, Illustrated edition, Simon and Schuster Sander P and Slatter J, 2009, The 100 Best Stocks You Can Buy 2010, Adams Media Schmitt B, 2003, Customer experience management: a revolutionary approach to connecting with your customers, illustrated edition, John Wiley and Sons Shearer, R 2007, Business power: creating new wealth from IP assets, illustrated edition, John Wiley and Sons Read More