Innovative Success Factors for Apple Business - Case Study Example

Introduction In the fast-changing ad competitive corporate world, firms are striving to thrive in the market by adopting various organizational strategies. Among these firms is Apple Inc., which is ranked the most innovative technological firm in the world today. To achieve this position, there are certain factors that have contributed to the firm’s success in innovation. This paper intends to explore on some of the innovative success factors for the Apple business. Business model innovation (BMI) To understand Apple’s use of BMI, it is critical to understand the concept; business model. A business model comprises of customer value preposition that performs a significant function for a customer better than rivals’ presentations. It also consists of profit formula showing how the firm will generate money whereas providing value for clients. Besides, a business model comprises of essential major resources, such as, products, technology, equipment, facilities, and brands to offer this preposition to the client. Additionally, it involves main processes, such as, development, training, budgeting, production, sales, planning, and services, enabling the firm to generate value (Johnson et al., 2008). Value preposition for the customer, key resources, profit formula, and main processes comprise of crucial pillars of business model. Whereas, profit formula and value preposition define the company’s value to the firm and the customer (Johnson et al., 2008). Generally, business model assembles business parts in agreement in a manner that conveys value to both the firm and the company. In the late 1990s, Apple’s first path to success was failing gradually and that implied that the company was collapsing unless a different business model was adopted. The firm’s proprietary method was to design both software and hardware, but this greatly limited it into a niche market player and hindered its capacity to compete on prices of its products and services. In 2001, the firm started to introduce a series of effective services and products, which include the iTunes online music, iPod, and iPhone. These products and services were instrumental in propelling the firm to the top in the industry. However, the shift did not only involve product innovation. The firm’s success was as a result of its potential to create a practical business model used in downloading music, a product that the music industry had not experienced for decades. The blend of business model innovation and product innovation placed Apple at the core of the market about 30 times bigger than its initial market share. This also enhanced the expansion of the firm’s share of the conventional computer market, as new clients got very close to their iPods, which created another image for Apple’s computers (Johnson et al., 2008). Goffin and Mitchell (2010) assert that he bigger occurrence of dislocation and disruption in several industries is shortening the lifecycles of business model. Modern global competitors are increasingly emerging, as activities and assets migrate to countries with low costs. Additionally, there is a growing systemic risk as international businesses get more interconnected. Besides, ecological and social barriers on corporate action are budding. All the aforementioned factors need businesses that boost and hasten innovation in the industry. The field of BMI provides a new way of thinking about refurbishing competitive advantage as well as restarting growth in the demanding environment. It is worth noting that BMI implies more than a bright insight that comes the right time at the appropriate place. To present a dependable competitive advantage, BMI should be systematically developed, adequately supported, and clearly managed (Goffin & Mitchell, 2010). Further, Goffin and Mitchell (2010) posit that business model comprises of two important elements including the operating model, and the value preposition. The value preposition element consists of three dimensions. The first dimension is target segment, which entails the nature of customers that the company chooses to serve and the specific needs that need to be met. The second dimension involves service or product offering that entails what the firm is set to offer the clients in order to meet their needs. The third dimension entails the revenue model, which is about how the firm is preparing to compensate for its offering (Johnson et al., 2008). On the other hand, the operating model addresses the issue regarding the way the firm is profitably delivering the offering. This captures the firm’s business’s options in three vital areas. Firstly, it captures the firm’s value chain, which entails the way it is configured to deliver based on client’s demand. This also necessitates the firm to determine what it does in-house as well as what it can outsource. Secondly, it captures the cost model, which involves identifying how best the firm should configure its costs and assets in order to deliver on its value gainfully. Thirdly, it captures the firm’s organization, which regards the way the company deploys and develops its people so as to sustain and improve its competitive advantage (Johnson et al., 2008). As Apple shows, innovation regarding a business model goes beyond a mere service, product, and technological innovation. It also exceeds single-function plans, such as promoting the sales model, or the sourcing method. Innovation gets BMI when at least two business model elements are reformulated in order to offer value in a new manner. Since it entails an orchestrated and multidimensional array of activities, the BMI is both demanding to implement and hard to duplicate. It is imperative to distinguish BMI from service, product, and technology innovation. Firms that confuse process or product innovation for model innovation are at a risk of undervaluing the success’ requirements (Lazonick & O’Sullivan, 2000). Moritz (2010) says that BMI is particularly beneficial whenever there is some instability. This is because it helps in providing firms with a way of braking out of stiff competition, under which processes or products innovations can easily be copied, competitors’ plans have converged, whereas sustained advantage is subtle. Besides, BMI may aid to handle disruptions, such as, technological and regulatory changes, which normally demand necessarily fresh competitive methods. What is more, Lindgardt et al. (2009) says that BMI is crucial in addressing downturn-particular opportunities, enabling firms, for instance, to reduce their prices, or minimize costs and risks of ownership for clients. In fact, firms that thrive in downturns regularly do so by influencing the crisis to rediscover themselves instead of just deploying protective operational and financial strategies. More so, whenever there is crisis, firms always prefer gaining consent around the bold strategies needed in reconfiguring an already existing venture. Nonetheless, BMI may be more difficult as compared to process or product innovation but it also gives great results. The recent study by the BusinessWeek and the Boston Business Consulting (BCG) identifies the leading innovative firms. According to BCG’s database for innovators, grouped under process or product innovators and business model innovators, indicated that whereas both innovators attained a finest for the industries’ average overall shareholder return, the BMIs got an average premium, which was at least four times bigger than that used by process or product innovators (Lindgardt et al., 2009). Moreover, BMI provided more sustainable returns; even beyond a decade, BMIs continued to outdo product, competitors, and process innovators. In fact, several companies embrace BMI as a protective way of safeguarding a dying main business or defending against forceful business rivals. However, BMI may be very influential when it is dealt with proactively to discover fresh growth avenues (Tidd & Bessant, 2013). For the better part of its history, Apple focused on producing innovative software and hardware, mainly for personal computers. The creation of iTunes and iPod, a legitimate internet music downloading by the company led to the introduction of a fundamental innovation of its model. It was the computer firm to incorporate music distribution as a task, connecting it to the creation of the iPod software and hardware. Through the addition of the new function to its model that connects the end users and music brand owners, the firm changed music distribution. Instead of growing by just introducing the innovative latest hardware in the market, the company changed its business model to include a lasting relationship with its clients just like it is with Gillette’s Razor and blade (Goffin & Mitchell, 2010). This move empowered Apple, and partners of its business model to extract a continuous value from using the company’s software and hardware. This way, the firm extended its innovation’s locus from mere product space to business model. Besides, its profit, stock price, and revenues change have indicated that the effective BMI (Polsson, 2013). This kind of performance may be difficult for some high-performing firms to match if they solely depend upon product innovation. For instance, HTC is known to have been highly profitable, innovative, and creating original equipment since its inception in 1997. At first, HTC produced handsets for mobiles phones that are powered by Microsoft for firms including T-Mobile, Palm, and HP. In 2006, it transformed its product-market tactic from a contract OEM manufacturer to own HTC-branded smart phone seller to operators of wireless network, and the general public via different channels of distribution. Consequently, the firm has succeeded in several ways, recording numerous leads smart phone market space and in winning several awards for its countless technological innovations. However, HTC’s model remained focused on product innovation and hardware design. HTC’s business model enables it to enjoy sales of its state-of-the-art tablets and smart phones, but not from their utilization. Analyzing the stock performance of Apple versus HTC in the last three years, it is clear that the in a rapid-growing technology market, product innovation without BMI might not often offer adequate competitive advantage (Lindgardt, et al. 2009). As Amit and Zott (2012) argue, unlike Apple, HTC has not participated in the delivery or creation of mobile services or content, and its equipment work on third-party systems, such as, Google. It generates revenues for HTC merely from hardware returns. On the contrary, Apple obtains value from economies of scale because of its software base interoperability. Additionally, Apple succeeds from express ownership of own distribution channels, such as online App store. As well, its business model allows it to generate revenue from the sales of its third-party applications from AT &T and iTunes for the utilization of its iPhone for data and voice (Polsson, 2013). An innovative model may either establish a new market or enable a firm to create and utilize available opportunities in the present markets. For example, Dell executed a customer-driven, business-to-order model that substituted the conventional build-to-stock business model of delivering computers via retail stores (Trembath, 2011). Nevertheless, Trott (2011) asserts that alterations to the design of a business model may be slight, even without any potential to interfere with the industry; they may still lead to positive results to the innovators. Another way in which Apple benefits from its business model is through offering an owner a savvy or cool appearance while the firm’s product offers the most elegant look in the technology market. Even so, the main driver of Apple’s financial accomplishment has been the increasing adoption products for business use. In the corporate world, the important promise that transformed Blackberry and PC users to Apple brand entails the customers saving their time and minimizing frustration. Genius ergonomics enable Apple products easy to use, as it can be used by both young and old individuals. The firm’s easy products enhance the users’ management of more digital data, making the products timesavers. In fact, Apple got into applications swifter than its rivals as saving time and reducing frustration are the main purpose of the firm’s brand promise (McCray, 2009). As Mazzucato (2013) argues, Apple’s business model value is comprehensive; hence, it is the important for leaders to balance the advancement of all elements involved. Instead, strategic leaders compel their team to identify the joint breakthrough solution, which progresses both elements and thus total value. According to Trembath (2011), Apple’s initial problem’s solution opposes both value guarantees. Initial adopters currently have to spend more time to request for refund or order a buffer case for a product that they have bought but look reasonably less smooth with necessary case. Eventually, the firm will identify the antenna solution that provides easy time savings, whereas retaining the iPhone 4’s original look. In fact, Apple’s delay to do this wasted the clients’ time as well as intensified frustration levels, avoidable costs if Apple the firm acted more practically. Apple also devised a business model, which creates a lasting customer value. Creating customer value implies establishing a business model, which ensures a repeated value creation. Hiring customer-obsessed workers, as well as establishing retail stores are a large part of value creation for Apple clients. Nevertheless, iTunes must also be seen as an essential to the business model. Whereas, iTunes itself is not the leading money maker for the company, the iTunes Music Store and iTunes desktop software enable firm’s hardware even more priceless (Shields, 2013). In terms of strategic control, the nature of personnel at Apple was strategically placed to help propel its business model towards the achievement of the set goals and objectives. For instance, Apple had a strategic thinker, Steve Jobs, and electronics guru, Steve Wozniak. Together, the two founded Apple in 1976, alongside Ronald Wayne who had 10% company share. The necessity for funding so as to create an improved scale and computer production implied that during the firm’s launch, Jobs shared strategic control with Mike Markkula, an investor, who offered the fledging business $250,000 in loans and equity in exchange for a 26% stake (Isaacson, 2011). Initially, Markkula generated enough funds from his share decisions at Intel that had left work at 34 years in 1974. In fact, he ended up remaining the leading person at Apple for the next 20 years, until the second generation of jobs. When he joined Apple in 1977, Markkula instantly employed Michael Scott, a professional manager, to be the first Chief Executive Officer (Isaacson, 2011). In times of financial commitment, Apple strategizes in such as way that it creates value for its business model. It is imperative to note that innovation is a cumulative and collective process. Strategy helps in setting the process of learning innovative in action, and the firm ensures that the innovative learning happens. Finance is instrumental in sustaining the innovation process since when the investments in productive abilities happen until when via the creation and utilization of the abilities, the innovation process may produce returns. The sum of money necessary depends not only on the size, but also on the time of investing in productive abilities, which consequently on the kinds of technologies that should be changed and the markets that should be met in order to make product revenues that are in extra of the distribution and production (Polsson, 2013). The financing requirements of a company develop with time. The financial needs of a startup could be modest. If, however, the business model indicates success signs, scaling the firm naturally needs big cash infusions to allow it cross the challenging paths. If the company could successfully attain this innovation gap in terms of cash flow, it will then utilize in-house financial resources to uphold, in part or in whole, its further development (Schwartz & Duhigg, 2013). Apple attained an upbeat cash flow in its initial years and never faced any financial trouble until the start of the fiscal year 1994. For the next few years, nevertheless, the financial situation of the firm got fragile, threatening its capacity to thrive as an autonomous venture. In 2010, Green Capital’s David Einhorn, a key hedge fund, purchased Apple’s stake of about 1.4 million shares at around $280 per share. When stock price rose at $705 in 2012, Einhorn would have offered the shares for $600 million profit. However, he decided to cling to the stock even though it was plunging to below $450 per share in 2013. Then, Apple held liquid assets of $137 billion on its financial report (Isaacson, 2011). Conclusion Without doubt, Apple Company is the most innovative business in the world today. This success is enjoyed currently because of the right decisions that made by the leaders after numerous challenges. Apple adopted a new business model that enabled a turnaround for the struggling firm in the industry. The firm also facilitated partnerships with various company leaders, and strategized on its employment, management, organizational, and financial aspects. References Amit, R. & Zott, C. (2012). Creating Value through Business Model Innovation. Strategy in Changing Markets: New Business Models. Springs. Pp. 1-11. Isaacson, W. (2011). Steve Jobs, Simon & Schuster. Pp.1-20. Johnson, M.W., Christensen, C.M. and Kagermann, H. (2008), Reinventing Your Business Model, Harvard Business Review, 86(12), 50-59. Lindgardt,Z., et al. (2009). Business model innovation. When the game gets tough, change the game. Business Consulting Group, BCG. Pp. 1-20 http://www.bcg.com/documents/file36456.pdf Mazzucato, M. (2013). The Entrepreneurial State: Debunking Private vs. Public Sector Myths, Anthem Press, 2013. McCray, W. P. (2009). From Lab to iPod: A Story of Discovery and Commercialization in the Post-Cold War Era, Technology and Culture, 50 (1); pp. 58-81. Moritz, M. (2010). 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