Assignment-Answer the 9 questions in the attached PDF with 250 words with APA Format and NO Plagiarism
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Case study
Case study
This case study examines the success and failure of
new products from Apple. Many analysts have
argued that the death of Steve Jobs has had a sig-
nificant impact on Apples innovation ability. What is
more likely is that competition has increased and
profits have been reduced; but did Apple make mis-
takes? Difficult times may lie ahead, but the case
shows that Apple faced even worse times in the
1990s. Jonathan Ives, Head of Design at Apple,
argues Apple is more than one man. High levels of
investment seem to suggest a good future.
Apple, innovation and market vision
Stiffer competition in smartphones and tablets from
the likes of Samsung has raised concerns over
whether the party is over for Apple. One should not
be surprised. Apples fantastic profit margins 38.6
per cent on sales have attracted many competitors.
The iPhones and iPads still generate huge profits. But
margins are being eroded by clever competitors like
Samsung (see Figure 1.10). Apple needs another dis-
ruptive innovation.
Apple made $42 billion in 2012. This was a record
for Apple and amongst the all-time records for corpo-
rations everywhere. Under Tim Cook, Apple has
introduced the iPad Mini a 7-inch tablet (a category
Jobs dismissed as pointless) which has preserved
the iPads leadership in tablets. This is in addition to
Tim Cooks exceptional management of Apples
supply chain. When Cook initially took over Apples
Has the Apple innovation machine stalled?
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Figure 1.10 The rise and fall and rise of Apple
Source: Zeynep Demir/Shutterstock.com
Chapter 1 Innovation management: an introduction
36
supply chain, he cut down the number of component
suppliers from 100 to 24, forcing companies to com-
pete for Apples business. More recently, Apple has
adopted even stricter management over its supply
chain than before. The changes include more fre-
quent inspections, greater time spent on inspections,
and a renewed focus on managing costs and product
quality.
The iPod, iPhone and iPad have all shown
Apples great skill in bringing disruptive innovations
to the market. Disruptive innovation explains the
dichotomy of sustaining and disruptive innovation. A
sustaining innovation improves the performance of
existing products along the dimensions that main-
stream customers value. It results in limited change
for established companies. Disruptive innovations,
on the other hand, often will have characteristics
that traditional customer segments may not want, at
least initially. Such innovations will appear as
cheaper, simpler and even with inferior quality if
compared to existing products, but some new seg-
ment will value it.
The iPod, iPhone and iPad also demonstrates
Apples great skill in market vision. Disruptive innova-
tions require a greater change in existing patterns of
behaviour and thinking; thus consumers would per-
ceive a higher level of risk and uncertainty in their
adoption decisions relative to continuous innovations
that depend on established behavioural patterns and
perceptions.
This ability has been at the heart of Apples suc-
cess. Its ability in market vision or the ability to look
into the future and picture products and services that
will be successful is a fundamental requirement for
those firms wishing to engage in innovation. It
involves assessing ones own technological capabil-
ity and present or future market needs and visioning
a market offering that people will want to buy.
Apple needs more new products. One of these
new products is likely to be a much cheaper iPhone
aimed at emerging markets. Apple sold two million of
its top-of-the-range iPhone devices in 2013.
However, most Chinese shoppers cannot afford
them. Barclays, an investment bank, believes that
Apple could produce an iPhone for less than $150 to
broaden its appeal. This would certainly generate
revenues by appealing to mass markets. But Apple
has rarely targeted the mainstream. A review of its
past may point the way for the future.
The rise and fall and rise of Apple Corp Inc.
Apple computers began in 1977 when Steven
Wozniak and Steven Jobs designed and offered the
Apple I to the personal computer field. It was
designed over a period of years, and was built only in
printed circuit-board form. It debuted in April 1976 at
the Homebrew Computer Club in Palo Alto, but few
took it seriously. Continual product improvements
and wider technological developments, including
microprocessor improvements, led to the launch of
the Apple Macintosh in 1984.
The Macintosh computer was different because it
used a mouse-driven operating system, all other PCs
used the keyboard-driven system known as MS DOS
(Microsoft Disc operating system). Early in the 1980s,
Microsoft licensed its operating system to all PC man-
ufacturers, but Apple decided against this approach,
opting instead to stay in control of its system. The
1980s was a period of dramatic growth for personal
computers as virtually every office and home began to
buy into the PC world. Slowly, Microsoft became the
dominant standard, not because its technology was
better, but largely because its system became the
dominant standard. As people bought PCs, so with it
they would buy the operating system: MS Windows,
hence it became the de facto dominant standard. The
Apple operating system was available only if you
bought an Apple PC. Consequently, Apples market
share plummeted. By the mid-1990s, Apple had
grown to a $12 billion company, twice the size of
Microsoft; but Microsoft was powering ahead on the
back of the launch of Windows and it would soon
become the dominant tech firm.
In 1993, Apple launched the Newton; its first com-
pletely new product in many years. Indeed, it repre-
sented Apples entry into (and perhaps creation of) an
entirely new market: Personal Digital Assistants
(PDAs). The PDA market was barely present when the
Newton was released, but other companies were
working on similar devices. The Newton Message Pad
featured a variety of personal-organisation applica-
tions, such as an address book, a calendar, notes,
along with communications capabilities such as faxing
and email. It featured a pen-based interface, which
used a word-based, trainable handwriting recognition
engine. Unfortunately, this engine had been developed
by a third party, and was notoriously difficult to use
and was partly responsible for the products failure.
This was to represent a low point in Apples fortunes.
37
Table 1.9 Apples new product failures
Apple product Why it failed
Macintosh Portable
(198991)
The 16-pound monster had many cutting-edge technologies for the time, such as
its active matrix LCD screen, but its weight and the fact that it often would not turn
on, even when plugged in, due to its battery design, kept it off users desks. In
1989 Toshiba and others were shipping the 6-pound notebook form we still use
today, making the Macintosh Portable a whale in a market of dolphins.
Apple Newton
MessagePad (19938)
The Newton MessagePad, a tablet-PDA hybrid with handwriting recognition. There
was nothing else like it, but its ungainly size, woeful battery life, and hard-to-read
screen relegated it to technology-cult status.
Macintosh Performa
series (19927)
In the 1990s, Apple was facing increased competition from DOS- and Windows-
based PC makers. Apples then-CEO Michael Spindler decided to sell a line of
cheap Macs, called the Performa. They were cheap: flimsy, prone to failure and
underpowered yet still costlier than a cheap PC. Worse, they cannibalised the
sales of pricier Macs for a while, rather than expanding the market.
Pippin (19956) The Pippin was a multimedia PC aimed more at gaming and CD playback than
traditional computing more like what a PlayStation or Xbox is today. PlayStation,
Nintendo and Sega consoles were already out and more popular, so game
developers and users ignored the Pippin.
Macintosh clones (19957) In the mid-1990s, Apple was struggling. Apple decided to let other companies
make and sell Macs. The main clone maker was Power Computing. Power
Computings clones cost less and soon surpassed Apples own Macs in ratings.
Steve Jobs returned to Apple in 2007 and quickly killed the clone experiment by
releasing Mac OS 9. Apple bought Power Computing and shut it down that year.
Apple USB Mouse
(19982000)
After taking back control of Apple in 1997, Steve Jobs went about redefining the
look and feel of the Mac itself, and his design team created the candy-coloured iMac
line that contrasted dramatically with the traditional beige box. It also decided to
reinvent the look and feel of the mouse. The new disc design certainly got attention,
but for the wrong reasons: it was hard to hold, as it did not fit most peoples hands.
In 2000, the company released the soapbar-shaped Apple Pro mouse the
elongated, yet still simple, curves could be held comfortably and securely.
Apple TV (2007present) Apples networked media player box was supposed to be the new TiVo, but it is
not even as well liked as Windows-based media-centre PCs. Apple TV is fairly
limited: Apple TV is not connected to the vast video libraries of Netflix or
Blockbuster (BBI), so you are stuck with the iTunes Stores offerings, which many
television and movie studios have avoided supporting for fear of suffering the
same loss of control as the music industry experienced with iTunes. In other
words, Apple TV is not that innovative or that capable.
In February 1996, Business Week put Apple on its front
cover suggesting the demise of the company.
With so much success currently washing around
the firm, it is sometimes difficult to recall all of Apples
failures. So I have listed them in Table 1.9. Some of
them were very bad. But learning from your mistakes
is an important lesson in every aspect of life and it
seems that Apple has learnt well.
In the mid-1990s, Apples future in the computer
technology industry looked bleak, with a diversified
product portfolio and a low market share within the
PC market of only 3 per cent. Many were, therefore,
surprised when Steven Jobs returned to the com-
pany as Chief Executive in 1997. He quickly set about
culling many product lines and much of its operations
and decided to focus on only a few products, includ-
ing the new-looking iMac. This coincided with the
economic boom in the late 1990s and allowed Apple
to generate cash very quickly. This provided revenue
for the development of the iPod, which was to trans-
form the fortunes of Apple. Table 1.10 shows the
Apple and Steve Jobs relationship.
Case study
Chapter 1 Innovation management: an introduction
38
Jonathan Ive and life without Steve Jobs
Jonathan Ive is the British designer behind Apples
iconic iPods, iPads and iPhones. It is hard to over-
estimate the influence of Jonathan Ive. He is due to
receive $25 million (15.5 million) in shares, which he
was able to buy for 7 million. The money will con-
tribute to his fortune of more than 80 million. In
September 2012, Ive seems to have committed him-
self to Apple when he bought a $17 million house in
San Francisco. In 2012, Ive was promoted to a bigger
role at Apple where he now oversees all product
design, hardware and software. This follows news
that Apple is parting with mobile software chief Scott
Forstall. Ive will fill some of the vacuum left by Forstall.
Apple announced the following:
Jonathan Ive will provide leadership and direction
for Human Interface (HI) across the company in
addition to his role as the leader of Industrial
Design. His incredible design aesthetic has been
the driving force behind the look and feel of
Apples products for more than a decade.
Ive is softly spoken and has worked at Apple in
California since 1992 and, since 1997, has been in
charge of its designs. This may well make him the
most influential designer in the world. In creating the
iMac, he helped save Apple. With the iPod, he
unleashed a product that profoundly altered the
music industry, whilst the iPhone is doing the same
to the mobile phone industry. The most recent prod-
uct from his team, the Apple Watch, is setting the
standard for an entirely new category of device.
He studied design at Newcastle Polytechnic, now
Northumbria University, where he still returns fre-
quently to give guest lectures. Ive emphasises the
teamwork involved in producing products such as
the iMac, the candy-coloured computer that
relaunched Apple on the path to success, or the iPad.
Ive and his team do not just design the products that
Apple makes. The ideas are often so different that,
frequently, they have to design the entire production
process that the factories will use to make them.
In interviews, Ive has said that, We dont really
talk about design, we talk about developing ideas
and making products. The simplicity that is found in
the hardware has not always been matched in the
software, which since the rise of iOS the operating
system for iPad, iPhone and iPod touch has been
marked by something known as skeuomorphism, a
tendency for new designs to retain ornamental fea-
tures of the old design.
There have also been unsuccessful products (see
Table 1.9). But Ive says that most of the companys
failures are kept far behind the scenes. He goes on:
And there have been times when weve been work-
ing on a program and when we are at a very mature
stage and we do have solutions and you have that
sinking feeling because youre trying to articulate the
values to yourself and to others just a little bit too
loudly. This is probably indicative of the fact that
actually its not good enough. On a number of occa-
sions weve actually all been honest with ourselves
and said you know, this isnt good enough, we need
to stop. And thats very difficult. Knowing when to
call a halt to a project is an important part of his role.
There is, within Apple, a strong belief in people
focusing on their area of expertise, says Ive, but when
a product is being developed, the process can be
quite fluid. He says: As were sitting together to
develop a product, you would struggle to identify
Table 1.10 Steve Jobs and Apple
Year Event Year Event
1976 Co-founds Apple with Steve Wozniak 2001 Launches iPod
1976 Apple launches first computer 2003 iTunes launched
1984 Launch of Apple Mac 2007 iPhone lauched
1985 Jobs ousted in Boardroom battle 2010 iPad launched
1986 Co-founds Pixar 2010 Apple overtakes Microsoft
1997 Returns to Apple 2011 iCloud launched
1998 Launch of iMac 2011 Steve Jobs dies
2001 First Apple store opens
39
who the electrical engineer is, whos the mechanical
engineer, whos the industrial designer. Teamwork is
an important part of the process.
One of the things that is particularly precious
about working at Apple is that many of us on the
design team have worked together for 15-plus years
and theres a wonderful thing about learning as a
group. A fundamental part of that is making mistakes
together. Theres no learning without trying lots of
ideas and failing lots of times.
In interviews, Ive has said that the absence of Jobs
has not affected the way Apple develops products. He
says they will do it in exactly the same way because
there is a large group of people that work in the same
way. That team is the reason that Ive believes Apple
will continue to succeed. We have become rather
addicted to learning as a group of people and trying to
solve very difficult problems as a team. And we get
enormous satisfaction from doing that. In 2012, and
very unusually, Apple flew in its entire design team
from San Francisco in recognition of the importance of
the Design & Art Direction Awards all 16 of them
accompanied Sir Jonathan Ive on stage to collect the
award for best design studio.
Troubles ahead?
An area of criticism levelled against Apple Inc. that has
also received considerable media coverage is the
issue of excessive secrecy and obsessive control
exerted by Apple on its suppliers. One of these suppli-
ers is Foxconn, the worlds biggest contract maker of
IT goods, including the iPhone. It is far less well known
than the brands it assembles, but it is one of Taiwans
largest companies. Reuters news agency reported in
2010 that Apple goes to extreme lengths to protect
even the smallest details of its new products under
development (Pomfret and Soh, 2010). At Foxconns
assembly plant in Longhua, South China, workers
swipe security cards at the gate and guards check the
occupants of each vehicle with fingerprint recognition
scanners. It resembles a fortress so much for open
innovation! Many of Apples finished gadgets, from
iPods to iPads, are assembled at industrial com-
pounds like the one in Longhua. Many of Apples tac-
tics seem like they have emerged from a James Bond
film: information is assiduously guarded and handed
out only on a need-to-know basis; employees sus-
pected of leaks may be investigated by the contractor;
and the company makes it clear that it will not hesitate
to sue if secrets are spilled. To try to control informa-
tion, Apple will give contract manufacturers different
products, just to try them out. That way, the source of
any leaks becomes immediately obvious. Apples
obsession with secrecy is the stuff of legend in Silicon
Valley. Over the years, it has fired executives over
leaks and sued bloggers to stop trade secrets from
being exposed. Apple also helps keep its components
out of the mainstream by insisting on custom designs
rather than off-the-shelf parts a practice that leaves
many suppliers frustrated. Not surprisingly, landing a
contract with Apple will always include a confidential-
ity clause. And they usually come with stiff penalties in
the event that a breach is discovered. Such agree-
ments often come on top of unannounced checks by
Apple officials to maintain standards. However, the
difficulty lies in proving the source of a leak. In the
absence of solid evidence, the most Apple can do is to
switch suppliers once the contract runs out. At times,
all of this secrecy seems to run out of control. In a case
that made global headlines, an employee in China for
Foxconn was believed to have jumped to his death
after being interrogated by his employer. According to
local press reports, he was under suspicion of taking
an iPhone prototype to which he had access out of
the factory (Watts, 2010).
Outsourcing and the danger of creating
acompetitor
The benefits of outsourcing seem to have been
demonstrated clearly by Apple, as it has masterfully
used its supply chain to deliver low cost compo-
nents and thereby enabling it to create large mar-
gins for itself. Table 1.11 shows the key components
that go into the iPhone. One of the ongoing chal-
lenges when a firm outsources is the ever present
threat that one of your partners decides that it can
make for itself what it makes for you. This has been
demonstrated time and again across a variety of
industries. Acer is a good example. For Apple,
Samsung has turned from partner to competitor as it
learnt from Apple and then developed further the
technologies it was supplying.
The way forward?
The best way for the company to prove it is not past its
prime would be for it to disrupt another big market.
Since Jobs death in 2011, Apple has concentrated on
sprucing up its existing products. Now investors want
Case study
Chapter 1 Innovation management: an introduction
40
to see it conjure up entirely new ones. All eyes are on
television. Tim Cook, CEO of Apple, has said that he
feels like he has gone backwards in time by 20 or 30
years when he switches on his TV at home. This could
suggest that Apple will launch an iTV. The iTV, which
may be controlled via iPads and iPhones, could be a
digital hub for the home. It would let people check
whether their washing machine has finished its cycle
whilst they gossip on Facebook and watch their
favourite soap. It should also boost purchases of iPads
and other Apple gear, as more people get sucked into
the firms ecosystem of linked devices and software.
Apple will also, as usual, face stiff competition
from Samsung. The South Korean firm is one of sev-
eral that already sell smart TVs. Indeed, Samsung
seems to be churning out more and more ground-
breaking devices whilst Apple has produced only
incremental innovations of late. Apples court battles
with Samsung over smartphone patents have rein-
forced the impression that it is on the defensive.
It is worthy of note that Apples capital expendi-
ture has soared in recent quarters, reaching levels
typically seen at firms with huge manufacturing oper-
ations, such as Intel. Some of this money is going
into data centres to support cloud services like
iTunes. But where is the rest of the investment going?
One area clearly in need of substantial investment
is the retail operation. The Apple stores have been
experiencing very long queues as people bring in
faulty iPhones, iPads and laptops. The so-called Apple
genius experts offer technical help to customers. But
there are too few of them. This is because Apple has
relatively few shops but increasing numbers of people
have Apple products. The London Regent Street store
employs 120 geniuses, each sees about 30 customers
a day, but demand is so great that it is not possible to
book an appointment. One solution would be to
reduce numbers of customers. Take the product more
upmarket and make it more expensive so it is able to
serve fewer customers. Alternatively, investments
could be made into effective operations (see Chapter
5) or improved service delivery (see Chapter 15). The
Apple Watch and a move into wearable technology
could see the Apple stores become more like clothing
stores, such as Gap or Abercromby & Fitch. This could
present a whole host of new problems.
Conclusions
The iPod was not the first digital music player, nor was
the iPhone the first smartphone or the iPad the first
tablet. Apple imitated other products, but they appeal
Table 1.11 Key components that go into the iPhone
Component part Supplier*
Touch screen Japan Display Inc. or LG
Flash memory disk SanDisk or SK Hynix, Samsung, Toshiba
Processor Samsung Semiconductors
Processor Qualcomm
Camera module Qualcomm
Phone casing Qualcomm
Battery Sony
Touchscreen controller Texas Instruments
Duplexer Avago
*Has been a supplier in the past and is a likely supplier, but suppliers are reluctant to reveal contracts.
Source: Images by Morgana/Alamy Images
41
Chapter summary
to us on a human level because they are so aestheti-
cally pleasing and intuitive to use. One of the reasons
that Apple is so revered by designers is because it is
not obsessed by technology for technologys sake.
Apple, once best known for its Macintosh com-
puters, and now known for its iPod, iPhone and its
iTune online music store, is at last making up for its
lack of market gains in the highly competitive PC
market. It is necessary to remind business students
that, ultimately, this is about money and Apple was
twice the size of Microsoft in 1992 and, for 10 years,
it failed to deliver growth for its shareholders. It is
only in the last 10 years that Apple has started to
repay investors, reaching an equivalent market value
of Microsoft in 2010. Fortunes change quickly in
technology intensive industries, but they change
even more quickly in the world of fashion.
One of Jobs greatest skills was being able to
decide which projects the firm should not under-
take. For example, it is said that engineers at Apple
were urging its boss to create a tablet computer in
early 2000/2. But Jobs turned a deaf ear to their
entreaties and, instead, insisted that the company
focus on producing a smartphone. The result was
the iPhone, which transformed yet another market
and is still minting money. In a creative cauldron like
Apple, ideas are rarely in short supply. But the skill
of choosing the right ones to focus on at the right
time is rare.
Yet, even if it produces a cheaper iPhone, pushes
deep into China and wows the world with a smart TV
and Apple Watch, competition is now tougher in its
core markets. Rivals will not let it disrupt new ones so
easily. Has the firms great innovation engine stalled?
Chapter summary
This initial chapter has sought to introduce the subject of innovation management and
place it in context with the theory of economic growth. One can quickly become
ensnarled in stale academic debates of semantics if innovation is viewed as a single
event, hence the importance of viewing it as a process. The chapter has also stressed
the importance of understanding how firms manage innovation and how this can be
better achieved by adopting a management perspective.
The level of understanding of the subject of innovation has improved significantly over
the past half century and, during that time, a variety of models of innovation have
emerged. The strengths and weaknesses of these were examined and a conceptual
framework was presented that stressed the linkages and overlaps between internal
departments and external organisations.
Questions
1 The return on investment delivered by Apple has fallen considerably. Explain why.
2 Steve Jobs impact on Apple is without question. Surely a company of over 100,000 employees is not
reliant on one person? How did his death affect Apple?
3 Apples fortunes have ebbed and flowed over the past 40 years. The past few have seen growth; in your
assessment will the next few years see decline?
4 Explain how Jonathan Ive may be responsible for much of Apples past success and future fortune.
5 Discuss whether Apple has shunned open innovation and adopted a very closed innovation model.
6 Samsung seems to be nibbling away at Apples market share. Has Apple mismanaged its outsourcing?
7 How might Apple be able to capture value from the rise of Apple as a lifestyle brand?
8 Discuss how, on the one hand, Apple seems to very good at disruptive innovation, yet it is also accused
of copying others.
9 How do you solve the Apple stores problem?
Part One Innovation management
1 Innovation management: an introduction
Case study: Has the Apple innovation machine stalled?
Chapter summary