Tuesday, December 28, 2010

Apple Case Study 2006

Apple Computer 2006, Case study
I believe many of us are using Apple’s products these days. Personally, I have an iPod touch and iPod Nano, and currently I am thinking of getting a MacBook. To be honest, I did not really like Apple’s products till 6 years ago when they released the iPod Nano. I remember my very first computer  being an Apple PC. It was around 20 years ago and I was so disappointed with the PC. I threw the Apple PC a year later and brought an IBM PC. Why? Simply because I could not play most of the games on the Apple PC and exchange files with my other friends who used IBM PCs. The worst of all, I paid premium price for the Apple PC. It was like spending a lot of money to buy a digital prison for myself. Therefore, my impression of Apple’s products was very poor. I would use “the producer of premium rubbish” to describe Apple in the past.
So, how did  Apple turn-around from producing “premium rubbish” to “premium wonder”? A Harvard Business School case study  titled “Apple Computer, 2006” written by David B. Yoffie and Micheal Slind describes the amazing transformation of Apple. This case study offers a very good insight as to why entrepreneurs should learn and progress from both their successes and failures.

1)      Solid founding teams are far more important than solid business ideas.

The founding team of Apple Computer was very powerful, because each founder contributed to the business in various ways  . This powerful team consisted of three people:

 Steve Jobs had amazing ability to understand and reframe the PC industry. This allowed him to set the unique vision and mission for the company.  He was also responsible in keeping the company  on track with the ir vision and mission. 

Steve Wozniak was a technical genius. He and Steve Jobs managed to invent a computer circuit board named “Apple I” at the Job’s family garage in Los Altos, California. His talent helped Apple produce state of the art hardware and software throughout the years.

Makkula, Jr. was a millionaire and experienced IT businessman. He had retired from Intel at the age of 33 and joined Apple. His experience in Intel and ability to attract venture capital provided invaluable knowledge and resources for company at the beginning.

These founders had specific skill sets, and most importantly these skills complemented each other very well.  Steve Jobs provided a direction for the company, and then supported Steve Wozniak and Makkula Jr. technically and financially. This powerful team dynamic allowed Apple to achieve success within  the first 4 years.

2)      Clear and insightful mission statements empower start-up companies to achieve impossible

Apple Computer was a classic example of a company which truly believed, understood and acted on their mission statement. Mission statements are essential for any successful businesses, because they provide reference points for owners to make decisions, and they also provide guidelines for employees to define what are productive and non productive behaviors. Therefore, clear and insightful mission statements help entrepreneurs to manage their limited resources more effectively and efficiently. On the other hand, if mission statements were misinterpreted, it would cause much devastation in companies.  (One sentence to point out the contrary?)

The Apple’s mission statement is “to bring an easy-to-use computer to every man, woman and child”. This played a crucial role in the history of the company. It helped Apple achieve early success between 1976 and 1980. Until a powerful alliance appeared in 1981, IBM, Microsoft and Intel worked together and invented open operating system computers. It allowed thousands of programmers to write applications for the PCs. This added enormous value for end users. Most importantly, the PCs’ users could exchange files with other users regardless of brands, excepted Apple’s computers.  It changed Apple’s strategic position from offering easy-to-use computers to offering state-the-art expensive non user -friendly machines. It drove the company into crisis for almost 17 years.

Why that long? During the crisis period, a number of CEOs (including Steve Jobs) tried many different approaches to turn the company around. However they all seemed to overlook onone very important problem. Apple was no long be true to their mission statement anymore. Losing the identity of its own caused the company to lose 1.6 billion in 1997.

In 1997, the co-founder who wrote the mission statement, Steve Jobs came back to rescue Apple from the crisis. This time he successfully reallocated all the resources and effort to deliver their mission statement.  He reinterpreted and broke down the mission statement into piece and made sure the company could deliver what it said.

The first part of the statement was “to bring their products to their customers”. Steve Jobs launched an online store and Apple retail chain stores around the world. It allowed Apple to control and manage their sales, catering  to multiple customer groups directly.

The second part was “easy-to-use computer”, he reinterpreted computers as digital devices in the new era of the PC industry. This created a lot of space for Apple to step into many industries and inspired them to invent innovative products.

The last part of the mission statement was “every man, woman and child will use their products”, he realized that people chased after technology era was long gone. In the new era, PC companies had to create technology which was suitable to people. Therefore, he made sure every product (hardware and software) does eventually solve end users’ problems and improve their life experiences. In other words, he focused on delivering value propositions to customers, and avoided developing state-of-the-art technology which had little use for end-users like the old Apple did.          
3)      Avoiding direct competitions and reframing playing fields are the secrets for success

In 2000, as most the PC makers focused on cost cutting and offering competive prices  , Apple refused to engage in the  intense price war within industry. They continued charging premium prices for their products, and their revenue and growth outpaced/ surpassed the industry average. The secret was that Steve Jobs reframed the industry from a traditional PC’s manufacturing paradigm to one off digital entertainment. This allowed Apple to step outside the competition zone and attackfrom the fringe. As a writer noted, “Mr. Jobs has created a fusion of fashion, brand, and industrial design and computing. If he is to successfully revamp Apple, he will ultimately win not by taking on PC rivals directly, but by changing the rules of the game.”

Another writer also commented on Apple’s operations, “Stop and look at Apple for a second, since its odd company… Apple makes its own hardware (iBooks and iMacs), it makes the operating system… It also makes the consumer-electronics devices that connect all those things (the rapidly multiplying iPod family), and it runs the online service that furnishes content to those devices (the iTunes Music Store). If you smooshed together Microsoft, Dell and Sony into one big company, you would have something somewhat  the diversity of the Apple technological biosphere… Apple is essentially operating its within own closed miniature techno-economy.”

The lesson  of this  story is that companies who fight against direct competitions have a good chance to lose it all. Mostly because of their often predictable actions . However, when companies can change the rules of the competition, everything will become unpredictable. Thus, the chance of winning increases drastically.

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