That success has, in turn, driven an increase in revenue of 1,116% and net income of $14 billion in 2010 compared to a loss of $25 million in 2000. (Apple)
In fact, the iPodʼs long run at the top seemed, well, impossible. That was the word used by Gene Munster, a Piper Jaffray analyst. “Nobody can sustain an 80 percent market share in a consumer electronics business for more than two or three years. It’s pretty much impossible.”
In that model of low end disruption, there are several disparate factors at play (Figure 2).
- The initial differentiation
- The product trajectory
- Customer needs
Third, the fact that the app store is also housed in iTunes means the payment system is remarkably easy; more importantly, it means that most potential customers have already put in their credit card number, a significant hurdle for any other competing platform (iTunes currently has 160 million credit card numbers)
This creates a fascinating dynamic vis a vis the competition. The reason Apple can successfully launch products that lack seemingly critical features is because of the intense focus on the user experience; however, competitors usually view the lack of features as an opportunity and quickly launch products that seem similar but with better features.
"In well-managed companies, the processes used to identify customer needs, forecast technology trends, assess profitability, allocate resources across competing proposals for investment, and take new products to market are focused — for all the right reasons — on current customers and markets. These processes are designed to week out proposed products and technologies that do not address customersʼ needs" (Christensen)
products are never “good enough” with regard to the user experience.
A central tenet is that Apple “need[s] to own and control the primary technologies behind the products [it] make[s].”
If there is ever a choice between enhancing the user experience of a product or improving its profitability, Apple, unlike nearly any other company, chooses the former, cementing the strategic advantages conferred by a focus on the user experience.
“We participate only in markets where we can make a significant contribution.” (Tim Cook)
“When you do everything to make the very best product, it also means you’re very focused on just a few products.” (Jonathan Ive)
Escaping the Innovatorʼs Dilemma is about escaping the operational mindset that is the current ideal in much of business. In short, there are few other companies like Apple because no one dares or is allowed to think different, not because it is impossible.
However, the biggest risk in my mind is forgetting the lessons of the 90s when Apple was disrupted. In many respects it seems that nearly going bankrupt drove many of the strategic decisions recounted here, and other companies ought to better understand and emulate Apple now before Apple itself forgets how it got here.
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