Apple, the King of innovation

For the fifth consecutive year, Apple Inc. heads Business Week’s rankings of the most innovative firms. Riding high on the success of its flagship products, such as the iPod, iPhone and the MacBook, Apple definitely sets the tone where innovation is concerned. A fact that has been confirmed by the release of the iPad. A success that is due both to the technical quality of the products and the business model shaped by Steve Jobs.

300,000. Apple sold 300,000 iPads in the United States in just one day. Apple’s latest creation combines all the technologies developed by the company in recent years. Very much in the tradition of products that bear the Apple hallmark, it is more attractive, more functional, faster and boasts an improved memory.

Technological innovation Every ambitious industrial company looks to make a technical breakthrough. Clayton Christensen coined the term  “disruptive technology” in The Innovators’ Dilemma, published in 1997. A disruptive technology unseats the preceding technology, which gradually becomes obsolete.  Part of Apple’s success is based on these disruptive technologies. The first example was launched in 1977, with the  appearance of the mouse, graphical user interfaces and the Multitouch screen. Every disruptive technology   proposed by Apple simply shatters the market standard.  The iPod invented a new and free way of enjoying music anywhere, using MP3. An ambitious option that sidelined the inventor of the walkman, Sony, from the portability stakes. Apple may not have invented digital music, but the      company helped to develop it from a very early stage.  And Apple made another breakthrough when it decided to combine a mobile phone, an MP3 player and a web     browser in a single appliance, the iPhone, with its revolutionary touch-sensitive screen. More than 30 million       iPhones have been sold since its launch in 2007. But Apple has also given us some innovative tools, as demonstrated by the digital library, iTunes, and the           corresponding on-line shop, iTunes Music Stor

Between disruption and supportive innovation But the California-based firm also strives to improve its products in a continuous manner. This is what C. Christensen calls “supportive innovation”. By way of example, Apple released four versions of its Apple II between 1977 and 1984. Each release kept the basic innovation, in this case the screen and a mouse. It was the electronic components designed to improve the product that were innovative. The same applies to the iPod, with its Shuffle, Nano, Classic and Touch versions. The more recent innovations have been made in terms of the design, the content (music, photos, podcasts) or the storage capacity. By way of example, the capacity of the hard drive of the iPod Classic has increased from 5 GB in 2001 to 120 GB in 2009.   The Apple culture Innovation can be found in the realms of both technology and marketing. An innovative and federating design made a significant contribution to Apple’s success. For the very first time, the designers held sway over the engineers with the iMac.  And for a good reason too. Many users prefer a well designed product to technical excellence. And the few Apple Stores located in major cities all over the world, enhanced the sense of rarity and luxury. This innovation consisted in creating a brand effect. Consumers needed to feel that they were part of an exclusive community of users, who share the MacWorld values.

It was the charismatic leader, Steve Jobs, who drove the communications campaign. Every Apple event is organized down to the last detail in order to create a special feeling. Unlike other American supershows, Apple trade shows tend to be very sober and traditional, reflecting a sense of professionalism and technical excellence. 
At the annual press conferences, where Apple’s new releases are unveiled, Jobs appears alone, dressed in jeans and a roll neck sweater, to make his keynote speeches. Both the form and the intrinsic quality of the products create plenty of media buzz.


A business model driven by innovation

The decision to diversify was taken in 2001 and cemented in 2007, when Apple Computer Inc. became Apple Inc. The company now developed computer hardware and software, portable digital music players and mobile phones. Its competitors are Windows, Linux, Dell, HP, IBM, Blackberry and even Nokia. This change was also reflected in the figures. In 2000, Macintosh accounted for 88% of Apple’s revenue, but by 2009, it represented about 43%.
The innovation was in a new analysis of the market. Right from the outset, the aim was to make computers and computer technology available to the masses, at a time when computers were only used in military or organizational spheres. The strategic innovation consisted in countering the spirit of the age, broadening the market and reconsidering the target.
Apple succeeded in diversifying its customer mix by diversifying its product offer (see Fig. 2). It focused on audio hardware, like the iPod, and intuitive, easy-to-use software. Thanks to its strategic shift, Apple succeeded in extending its market to previously neglected consumers, such as women, children and even seniors. And it succeeded without betraying the MacWorld community.
Apple also reviewed its strategy to protect its innovations. The firm opened up its system to independent developers with the iPhone and its App Store, consequently benefiting from a multitude of applications that can be downloaded onto its appliance.
Apple believes that strength lies in the capacity to innovate quickly: a capacity that is facilitated by the integration of software and hardware.

Challenging Microsoft appears to be out of reach

Until the 2000s, Apple focused on keeping its original customers loyal, much to the detriment of the compatibility of its Mac tools with other operating systems. The lack of interoperability between Mac and Windows was a serious obstacle to winning over new customers. Windows had become the standard operating system. Apple had the sense to adapt its own hardware. 
The stroke of genius of Apple’s strategists consisted in using one standard to impose another one. This is the case with on-line music. While iTunes is Windows-compatible, it remains necessary in order to use an iPod. Through music, iTunes has won over the segment of Windows die-hards.

Boot Camp is another example. Launched in April 2006, this software allows users to choose between Mac OS X and Windows XP every time they switch on their computer.
But Apple’s operating system has failed to gain ground. The Mac is starting to lag behind. According to an AT Internet Institute survey published in January 2009, the operating systems market is still dominated by Microsoft. Windows is installed on 93.3% of personal computers, compared with just 4.46% for OS X (see Fig. 3).
The probable cause is Apple’s refusal, in the 1980s, to reveal its source code, unlike Microsoft. Thousands of independent programmers helped to enrich and promote Windows, while Apple’s innovations remained a carefully guarded secret.

The king of innovation is on thin ice

Apple faces another risk, described by C. Christensen as the “Management Paradox”. Leadership based on disruptive technology can be undermined if another company creates its own disruptive technology.
Reigning champions tend to rely on their experience in order to remain on top of the pile. So it becomes difficult to take a step back and gain a global vision of the market. As a result, the firm only creates supportive innovations. This situation is confirmed by an analysis of Apple’s investment in research. Since 2006, the proportion of Apple’s revenue invested in R&D is stable, at less than 5%. It is even less than the investments made by some of its rivals for the title of the most innovative firm.

More recently, doubts were heightened when Jobs failed to attend the Keynote in San Francisco in June 2009, an event that was supposed to be the CEO’s great comeback. A fact that indicates that his return is only temporary.
Jobs might only come back to organize the handover of power.
But will his successor, who could well be the group’s current operational director Tim Cook, have shoulders that are broad enough to keep the firm on the top rung?