Apple and the Innovator's Dilemma

Posted by simon.ly on March 20, 2012 05:56 am 6

This article originally posted on shoot&scribe

Apple's growth has been astronomical because Steve Jobs has, in effect, solved the Innovator's Dilemma. Apparently, during his hiatus at Next, he read the Innovator's Dilemma and cited it as one of the most important books he ever read.

Essentially it turns around Apple's complete willingness to destroy its own revenues. It built a phone that destroyed it's major source of revenue, the iPod. It built Macbook Airs that have now disrupted another major source of revenue, their Macbook Pros. It built the iPad, which is already beginning to disrupt the Macbook itself.

Of course not all is explained by disruptive innovation but it goes a lot of the way to explaining how the company has managed to do so well. Revolutionary innovation has also played a big part in the company's success (iPod, iPhone).

Also, generally startups created by technologists tend to focus around one technology, become really good at this particular technology, and then get hit with an antitrust suit. It has happened to Microsoft and Google and it will happen to Facebook if they're not more careful with Facebook Credits and other new products they introduce. Apple has neatly avoided this problem by never taking 100% of a market share even though they almost have 100% of the market's revenue share. Neat little difference here - Apple prices their items in a sweet spot and uses supply chain innovations to make sure their profit margins destroy those of their competitors. They might only have a quarter of a market for an item but they can take 90% of the profit being generated for that market.

Lastly, brand. Apple's brand is truly incredible and well managed from their items, retail store effort, right down to their boxing.

You can criticise lots of things about the company but their business internals are truly incredible. Expect their share price to skyrocket over the coming months as they offload a lot of their cash.

TL;DR

Apple are the world's largest company because their number one priority is to innovate and make things that amaze people. Profits are just a neat consequence of their success in doing so.