主题：谨以此文献给Steve Jobs和AllenKid（一） -- letitbe

In most of the cases, top management functions as a dominant player in forging the innovation strategy and implementing the plans. During Apple’s initial years, it is Jobs’ vision to make “easy-to-use” computers that transformed the computer industry and granted Apple a significant competitive edge in the PC market. Inevitably, a successfully innovation will be cloned and its benefit spread thin. After reputable rivals like IBM entered the PC market, Jobs failed to recognize that when selling a high-priced product to home market customers, the deciding factor in product competitiveness is capability and cost effectiveness. He continued to focus on the user-readiness and design factor of the product, and refused to recruit outside help in R&D efforts. These mistakes in combination cost Apple a huge decline in PC market share, a loss it was never able to recover. In retrospect, should Apple opted to license its Mac OS and allowed other companies to design compatible software when it still commended a sizable market share, it wouldn’t have lost the platform war so easily. Once an ecosystem is already built around a platform, its dominant position will be too hard to topple (Iyer & Davenport, CR).

With its market share shrinking and innovation pace sluggish, the next CEO John Sculley avoided full-on competition with Apple’s rivals, and instead made the best of Apple’s strong suit and appeal to niche markets. Taking advantage of Mac’s tight product integration and superior graphic processing capacity, Apple quickly occupied the desktop publishing and education market. Apple was also able to woo a particular group of customers who value ease of use over pricing and computing capacity. Catering to a less price-sensitive customer base also allowed Apple to earn a higher profit margin on its product, and become the most profitable PC company in the world. However, the exceptional gross profit margin was not sustainable, and given Apple’s declining market share, the inevitable drop in the gross margin would cause a disaster in Apple’s growth. Sculley made several attempts to cope with the lurking crisis: he tried to cut cost by outsourcing, changing product manufacturing process (by switching to Intel-based platform), and collaborating with other companies (such as IBM) in R&D; he also tried to diversify the product portfolio by launching a low-end Mac line and venturing into PDA market. His strategy seemed to be on the right track, but some plans failed to work out, and the fundamental problem (i.e., the PC market share) was not addressed. When the gross margin started to drop, Scully was replaced.

The Spindler and Amelio years were the dark ages for Apple. A string of questionable decisions were made, which sent Apple’s world wide market share further down to 3%. Spindler abandoned the plan to transfer the Mac OS to Intel chips and instead chose to license other companies to make Mac clones. While it might be a good idea during the stage of battling for platform dominance, now the market share for Mac OS-based computer was already fixed at a low percentage, licensing would almost surely cause cannibalization of Apple’s own sales (which also happened to IBM). He also sought to cut cost by reducing R&D spending, which if carried out without enough discretion, might compromise Apple’s existing competitive edge. Similarly, his successor Amelio cancelled the development of the next-generation Mac OS in order to slash cost, which seems to be a classic act of sacrificing long-term goals for short time gain (Dodd & Favaro, CR). He also tried to return to the high-end PC market and venture into other high-margin market segments such as servers, Internet access devices, and PDAs. However, innovation of completely new product lines is never an easy thing to do, and cutting R&D expense in the same time would only exacerbate the situation. When Apple’s worldwide market share plummeted to 3%, Amelio was forced out and Steve Jobs took over as the interim CEO.

During the Steve Jobs years, Apple went through a dramatic restructuring process. He quickly reversed several old strategies, such as the licensing program, the slash on R&D investement, and the halt on Mac OS development. These decisions allowed Apple to retain its edge in product integration and design. Jobs also attempted to portray Apple as not merely a consumer product company but a cultural force. This image went along seamlessly with Apple’s product position, and signaled Apple’s paradigm innovation, which is still undergoing.

Nonetheless, if we look carefully at Apple’s financial data, we would find that its worldwide PC market share continued to hover below 3%, and its market value remained stagnant until 2004, which correlated nicely with the trajectory of iPod sales. In spite of all the innovation efforts, the loss in PC market share, which stemmed from the defeat in the platform war, proved too hard to recover. Instead, Jobs rejuvenated Apple by entering a new market and “changing the rules of the game”. Jobs’ decision to choose MP3 players as the target for innovation deserved applause. Back in 2001, MP3 players only accounted for about 5% of the portable audio market and lacked a real market leader. As a typical consumer electronics (CE) product, customers are less sensitive to its price, and put more emphasis on pleasant user experience and sleek appearance. Apple’s strength in superior design and user interface fit very well with the rule of this new game, and iPods came out as a huge hit. This time, Jobs also made a wise decision to quickly decouple iPods and Mac computers, so that the iPods can reach the much larger windows-using customer base. As a stand-alone product in a highly-competitive market, iPods faced a constant challenge from its rivals, from the angle of either product design or pricing. Therefore, once iPods established its supremacy in the MP3 player market, Apple started to bundle iPods with its other products to retain its customer base, most notably the iTunes music store. The iTunes system by itself was a pioneer in online music retail market, but competitors also quickly followed suit—the first major competitor, buymusic.com appeared 4 months after the launch of iTunes, and several others also entered the market in the same year. However, when combined with iPods, the two complement each other beautifully: iPod users will have a natural affinity to iTunes (also, it’s worth noting that Apple kept the profit margin for iTunes at a very low level to ensure its competitiveness), while iTunes users simply have no choice but use iPods to play the downloaded music. As iPods conquered more and more market share with its technical elegance, the iTunes system made sure the new market gets “addicted” to iPods.

The iPhone line was also a masterstroke. It again entered a market with huge potential but not currently overcrowded. Its preemptive strike in smartphone platform at the age of “digital convergence” of PC and CE products may even bring another revolution in a scale comparable to the first generation Apple computer (will discuss in detail later).