Boldness, Supply chains and lead times: The lifeblood of the consumer electronics industry
We're all guilty of it at some time or another; why doesn't "X" company have "Y" feature or "Y" hardware when other, occasionally less well-known companies do. Unfortunately, by the time a product has hit the market, it's often much too late to remedy the shortfall(s).
As the title of this post intimates, the significance of lead times, supply chains and bold (not risky) decision making are probably the most significant aspects of a successful consumer electronics company.
Nowhere is this more apparent than the meteoric rise of Apple in the past decade, all facilitated by the aforementioned puzzle pieces. At the start of 2001, Apple's stock price was at $8.20 and Steve Jobs had been back for 4 years; the winds of fate were finally beginning to turn in Apple's direction yet again after years spent in the doldrums. Their products were by and large now desirable by a greater audience and innovation was finally returning to Cupertino, OS X (10.1 specifically) was gaining popularity and then came the iPod.
The story goes that Jon Rubinstein, on a trip to Japan for Macworld being held in Tokyo, was shown a miniature hard drive(1.8") by Toshiba execs in order to gauge his response and possibly Apple's need or desire for such a components. Much smaller than existing drives in portable media players, more power efficient and fitting into a vision that Rubinstein, Jobs and the entire team at Apple had for PMP's, this single drive would be the wave of the future and a catalyst for Apple's climb back into the public consciousness.
"Apple began the year 2005 with a stock price of $34.625 an increase of over 420% from 2001; in essence increasing the stock price by 2001 value every single year."
Though the details of the deal struck with Toshiba is far from public knowledge, it's fair to say that Apple (as is customary) would have snapped up the lion's share of Toshiba's 1.8" drive manufacturing capacity, forcing any and all competitors to seek alternate technologies or suppliers. Given the nascent nature of the drives, it would be years before others were able to put together a cohesive, functional and similarly sized product with the same capacity as the iPod (almost 3 years to be exact). Coupled with the launch in 2003 of the iTunes store and the growth of the digital music age, Apple began the year 2005 with a stock price of $34.625 an increase of over 420% from 2001; in essence increasing stock price by the 2001 value every single year.
By getting the jump on other manufacturers, being bold in their decision making and locking down the supply of a key piece of technology, they managed to not only pioneer but almost monopolize an entire market segment; creating a platform on which they could build future success. This was also very, very far from the last time that Apple would use such a tactic.
Probably the best demonstrator of the significance of these 3 tenets was the iPhone. Having been rumored for almost 2 years, Apple announced the iPhone in January of 2007 with a hardware and software design that completely eschewed what was widely seen as the best way to do smartphones. Featuring a large (by 2007 standards) capacitive touchscreen and an operating system completely geared towards the touchscreen experience, it was a disruptive product, supposedly prompting RIM executives to proclaim the device "technically impossible".
"It would be nearly 2 years before another OEM implemented a capacitive screen, and almost 3 years before a competent touch optimized operating system came to the fore (Android 2.0)."
Apple locked down the glass manufacturing capacity and in all likelihood the supply of touchscreen controllers required to produce such a fluid user experience. It would be nearly 2 years before another OEM implemented a capacitive screen, and almost 3 years before a competent touch optimized operating system came to the fore (Android 2.0).This advantage allowed Apple to capture significant mindshare in a burgeoning market. Mindshare that has now led to Apple becoming the single largest seller of smartphones in Q4 2011.
To further the significance of building out supply chains, Eldar Murtazin over at Mobile Review intimates that the struggles of PC manufacturers to create slim, lightweight, stylish and above all solid devices is down to their inability to create aluminum or other metal chassis because of Apple's purchasing of the majority share of the manufacturing capacity of companies like Catcher Technology. Ever wonder how Apple can make the Macbook Air at the entry level price of $999? There's your answer.
Of course it's not just in the realm of production capacity and component manufacturing that Apple behaves in this fashion. Apple's acquisition history with companies possessing significant IP, innovative software and hardware enabling technologies like Intrinsity, Anobit, P.A. Semi and C3 Technologies is quite telling. Mind you, acquisitions and mass-production capacity purchasing is not an Apple-only proposition but they are, in all honesty, the best at it. Nokia acquiring Navteq was a similarly significant play on Nokia's part, immediately pressuring the market to either pay up or find alternatives for their mapping data.
"The worrying thing for Apple's competitors in the consumer electronics space is that Apple now have the clout, brand loyalty, recognition, reputation and above all else nearly 100 billion dollars of cash reserves..."
Of course the difference being that most companies don't pursue supply chains and technologies with the level of ruthlessness that Apple routinely displays and the man that has been responsible for this ruthlessness is none other than current CEO and former COO, Tim Cook.
The worrying thing for Apple's competitors in the consumer electronics space is that Apple now have the clout, brand loyalty, recognition, reputation and above all else nearly 100 billion dollars of cash reserves that they can use to acquire, lease or license upcoming technologies and/or saturate the component supply lines to the point of completely and utterly stifling non-Apple innovations.
It's patently obvious now that boldness, supply chains and lead times make and break dynasties. RIM, Nokia, Microsoft and even Apple have at one time or other been victims of failure to capitalize on supply chains or given up possible lead times as a result of their nature as incumbents. The key takeaway from this is that if a product has already made it market lacking "X" software feature or "Y" hardware, they've already given up ground to the competition. If a manufacturer is behind and doesn't work twice as hard as their competitors, they're doomed to fail. Above all else though, future failings are almost a result of current actions (or inaction), a message we should all take heed of.