主题：谨以此文献给Steve Jobs和AllenKid（一） -- letitbe
标题档一把呵呵。对Jobs同学，自从看了他那篇commencement speech就开始崇拜，到后来了解越多越崇拜：）这篇paper里对Apple的发展战略的理解很多都来自AllenKid的科普文章（同样强烈推荐。当然如果我写的gp不通，基本一定是我理解错误：）。其他的，还要感谢Economist的IT system special report和河里邓侃几位，让我认识到platform的重要性。文章大体分三个部分：1. the role of innovation in Apple; 2. the role of top management in managing innovation; 3. the future of Apple Inc. 我对Consumer Electronics industry和management都是绝对的外行，这一篇paper只是一门管理课程的final project。用词肯定很外行见识也很浅陋，不过自己已经尽力了。贴在这里做个纪念，如果有无聊的牛人打酱油路过，还望不吝赐教：）
Apple Inc., 2008 case analysis
What is innovation? There are many definitions for this word, but deep down the essence is similar: innovation is “the successful exploitation of new ideas” (Francis & Bessant, CR). While innovation is unanimously recognized as indispensable to a company’s competitive advantage and profitability, it’s never an easy task to introduce the right innovation at the right time and place. Being a widely-perceived exemplary innovator in the corporate world, Apple Inc. has been pioneering various innovations ever since its birth more than 30 years ago. Undoubtedly, valuable lessons can be learned by examining Apple’s innovation process and its positive or negative impact on the Apple’s development. The case study “Apple Inc., 2008”, written by David Yoffie and Michael Slind and chronicling Apple’s ups and downs during the past three decades, provides us with such an opportunity.
Reading through the case, one would find that the innovations adopted by Apple do not necessarily fall in a single category. Based on the work by Francis and Bessant (CR), there are generally four types of innovation: innovation to introduce or improve products (P1); innovation to introduce or improve manufacturing process (P2); innovation to define or re-define the market positioning of the firm or products (P3); innovation to define or re-define the dominant market paradigm of the firm (P4). These four categories do not have clear-cut boundaries (i.e., an innovation may have the characteristic elements from more than one categories), and innovations with different nature are often concomitant rather than mutually exclusive. However, using this 4Ps system as the reference framework, we can see more clearly what an innovation aimed to do, and what it actually achieved. From now on, we will examine the case with this 4Ps system as well as other analysis tools in mind.
Apple’s foundation came as a disruptive innovation to the whole computer manufacturing industry. Before then, computers were too complicated for untrained people, and therefore had a limited market mainly of corporate users. Apple’s easy-to-use computers tapped into a different market—personal users. With its user-friendly interface and plug-and-play functionality, Apple effectively monopolized the new market, enjoyed an explosive growth between 1976 and 1980, and quickly became an industry leader.
After IBM entered the PC market in 1981, Apple started to lose its market share significantly. One major reason is Apple’s closed innovation model (Chesbrough, CR). Because only Apple itself can design the software and hardware compatible to its operating system, while the “Wintel” system from IBM is open to innovation from outside, Apple fell behind in the competition of processor speed and software spectrum. Consequently, despite the continuing product innovation efforts and the launch of new product (the Macintosh), from 1981 to 1984, Apple’s share in the PC market dropped from about 16% to around 6%.
During the next several years (1985~1993), Apple sought to offset the loss in PC market share by repositioning itself (positioning innovation). Based its competitive advantages in multimedia and graphic processing capability, Apple successfully occupied the PC market in desktop publishing and education fields. Moreover, although the closed innovation model caused elevated cost in research and development (R&D) and limited innovation speed, it enabled the seamless horizontal and vertical integration of Apple’s products. By offering a “one-stop” desktop solution including hardware, software and peripherals, Apple managed to win customers’ heart and in the same time maintain an enviable 50% gross margin.
Mindful of the fierce competition, Apple strove to make innovations in various directions. It launched the Mac Classic line in 1990 to compete in the low-end market; it introduced its own PDA product “Newton” in order to diversify, but to no avail. Apple also undertook dramatic process innovations: it collaborated with IBM to form joint ventures in order to innovate in operating system and multimedia applications; it also attempted to transplant the Mac OS to run on Intel chips; to drive down costs, it outsourced much of its manufacturing to subcontractors. These process innovations aimed at internal structures, signaling that Apple gradually loosened its closed innovation model.
Under the leadership of Spindler and Amelio between 1993 and 1997, Apple went through a rough phase. The collaboration with IBM fell apart. Innovation attempts in process and position, including licensing other companies to make Mac clones, slashing R&D cost, and repositioning to focus on high-margin market segments, failed to stop Apple’s growth decline.
From 1997, Steve Jobs took over as Apple’s CEO, and since then has introduced a series of innovations that fundamentally changed the company’s development. Many previous innovation efforts were retained, such as outsourcing product manufacturing, transferring from PowerPC chips to Intel microprocessors, launching low-end product (iMac) to compete in different market segments, and stressing the differentiating factors from PC (high quality design, user-friendly UI, security, and superior bundled software). New innovations were also initiated to complement this development strategy. Apple renovated the Mac product design to enhance the interoperability with non-Mac hardware. By contracting independent software vendors (ISVs), most notably Microsoft, to make their hit software for the Mac, Apple was able to put priority on the development of newer operating system. With special software allowing Mac users to operate Windows-based applications, the disadvantage of limited Mac software choice is further alleviated. Apple also made a major innovation in distribution process, by setting up retail stores to take advantage of its product integration and introduce customers into the Mac world.
Notwithstanding all the above innovations, Apple’s PC market share still remained in the 2% to 3% range. It was the iPod-iTune system and the more recent iPhone system that brought about a paradigm shift and revitalized Apple. Intriguingly, in both cases, the products (iPod and iPhone) did not incorporate much disruptive technology innovation. Rather, Apple employed the readily-accessible technology (click wheel for iPods, mutli-touch for iPhones) and components and “made things right”. By stressing the same principle--easy-to-use and sleek design, iPods occupied 70% or more of the U.S. market for portable music players, and the much younger iPhone line also poised to compete for supremacy in the smartphone market. Apple also moved fast to setting up service platforms exclusively for its own products (iTunes Music Store for iPods and iPhone App store for iPhones), which further consolidated its customer base.
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).
Different from other successful technology companies, such as Microsoft and Google, which mainly focused on the software field, Apple’s products are usually packages of both software and hardware. While this tight integration may help ensure the “plug-and-play” functionality and better user experience, it may also cause the whole product to lose overall competitiveness when one part is significantly lagging behind. The platform war is largely a “winner-takes-all” game, and the major reason for the consistently low market share data of Mac computers is the inferiority of Mac OS to Windows. However, aside from the operating system, the stylish design had always been coveted by many Windows users, and some of Apple’s software, such as iTunes and quicktime, have already become an integral part of a Windows-user’s software repertoire.
Therefore, I propose that Apple should get the best out of its hardware manufacturing capacity by completely forgoing the bundling with Mac OS and actively competing in the Windows-using PC market. As the price of personal computers entered the price range of consumer electronics product and consumers pay more and more attention to a product’s “quality” rather than price, Apple’s time-proved reputation in product design would help it win over a sizable share of Windows-running PC market. This strategy doesn’t mean giving up the development of Mac OS. On the contrary, if implemented skillfully, the infiltration of Apple into the Windows-running PC market could greatly help its ambition in platform development, in several ways: it brings in more revenue, which can be spent on R&D; it exposes the Windows-using customers to the Apple brand, and establish a trust and even loyalty; more importantly, by preloading the computer with Mac OS-styled software, it allows customers to experience the Mac OS environment under Windows system, and thereby make future conversion to Mac OS platform as painless as possible. In the end, time also seems to be on Apple’s side. New software (such as parallels) had made possible for multiple platforms to coexist in the same computer, which bodes very well for Mac OS. As platforms become less and less mutually exclusive, a Windows user could keep a Mac OS on the side, maybe initially as a “hobby”. With this stepping stone, there is no limit for the future of Mac OS.
The above strategy aims to help Apple cope with a market in which it is being edged out. It should be pointed out that, there are some markets where Mac computers are doing very well. In video processing, music production and graphic design fields, Apple continued to commend an overwhelming market share, partly thanks to the superior softwares only run in Mac computer. Apple should still take advantage of this exclusivity to keep competitors out, a strategy it is no stranger to. It is also worth noting that, as technology and prosperity spread worldwide, new markets are constantly emerging. Unfortunately, so far Apple is losing this war of globalization—in one of the largest computer market, China, the market share of Mac computers is estimated at less than 1%. To learn from past lessons, Apple should make it a pressing priority to aggressively compete in these markets where the leadership has yet to be established.
More than anything else, the success of Microsoft has demonstrated the importance of setting up a dominant platform. So what’s the battlefield for the next platform? Or rather, what’s the future for “personal computers”? It should be ultra-portable, user friendly, versatile and powerful, and able to communicate with the world at any place, in anyway. In my opinion, the prototype is already there—the smartphones. With its elegant user interface and power operating system, Apple’s iPhones have already occupied a significant portion of the smartphone market, and poised to revolutionize the smartphone industry in the same way Nintendo Wii revolutionized the video game industry—by bringing the product to every household. Drawing comparison to Apple’ early days, we would find Apple at a very similar situation. Although currently smartphones are out of reach for untrained consumers, the potential is huge (in 2007, smartphones accounted for only 10% of the total handset market, while its market share in 2013 is estimated at 31%), and the onslaught of iPhones has greatly fueled the speed of innovation. This time, the prominent competitors in the platform war include Google’s Android, Nokia’s symbian. While the operating system on iPhones (Mac OS X) is a closed-source system, both Android and symbian are open-source, or at least scheduled to be soon in the near future. Although having an open-source system is a great way of attracting attention from software developers, Apple also didn’t stick to its old closed innovation model. Instead, it set up the iPhone app store, and creatively adopted a new innovation mechanism, which allows outside innovation to be employed, but avoids the potential problem in product integration by passing it through a quality control system. I personally prefer this novel mechanism. As long as it pays enough attention to the global market, and doesn’t allow bundling to hurt the development of its platform, Apple stands more than a fair chance on this front.
这么好的文章，是不是可以考虑翻译成中文，这样读者会更多一点？
真是惊惧惶恐啊～～～～多谢抬爱，惭愧惭愧....
您和邓夫人的文章我常看，现在好后悔当初没选CS作专业啊～
我的这篇文章基本就是把到处看到的东西翻译成了英文，没什么新意，还是藏拙好了呵呵
以前都把它当成耍酷的公司，刻意回避。当然现在也不太用它家的东西，还是有点贵，怕用上瘾了戒不掉