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Sunday, August 14, 2011

Apple's way to success!

Most of Apple’s money comes from very recent new device types. More than two-thirds of Apple’s rev enue comes from prod uct types that didn’t even exist five years ago. And 78% of Apple’s income comes from prod ucts unimag in able just ten years ago.

That means, in order to stay on the same growth curve in the cur rent decade, Apple will have to invent new prod uct cat e gories as new as the iPod, iPhone and iPad were, right?

Wrong.

The new prod ucts were part of a killer strat e gy Apple came up with in 1997. Apple will dom i nate the future by stick ing to the strat e gy, not by try ing to invent more prod uct cat­e gories.


 

Apple became the most valu able com pa ny in the world twice this week, trad ing places briefly with Exxon Mobile. But Apple and Exxon aren’t even in the same league in terms of cool ness, great ness or any other ness you want to throw at it. One com pa ny sells flam­ma ble muck sucked out of the ground to be con vert ed into air pol lu tion, and the other makes the Mac Book Air, the most per fect com put er every built.

Apple used to be a big loser. Some 14 years ago, Apple had been los ing money year after year, and its stock price was in the toi let. The con ven tion al wis dom was that it’s glory days were in the past.

The PCs wars were over. Microsoft had won. Attempts to invent new plat forms, most espe cial ly the New ton plat form, had failed. The com pa ny was in a pick le. If it tried to be unique, it would remain a shrink ing, minor fringe com pa ny. If it sold out and tried to be more con ven tion al, it would be destroyed by more effi cient con ven tion al com peti tors.

Not only was Apple a loser, it seemed that there was no way to win.

The low est point in the com pa ny’s his to ry came in 1997. Out of des per a tion, Apple forged a new part ner ship with Microsoft in which that com pa ny invest ed $150 mil lion dol lars in Apple in exchange for a promise by Apple to offer the Inter net Explor er as the default brows er on Macs, and other promis es. Apple need ed the money. And the part­ner ship.

Apple had sunk so low in 1997 that they were will ing to try any thing. So out of sheer des­per a tion, they pro mot ed Steve Jobs from “advi sor” to “inter im CEO.”

Jobs, no longer just a vision ary loose can non, had become a skill ful leader. He had learned to be the vision ary dic ta tor he was born to be.

Jobs packed the board with loy al ists, uncer e mo ni ous ly delet ed entire prod uct lines, and re-structured the entire com pa ny around a breath tak ing, new, long-term vision.

The new vision was to trans form Apple from a com put er com pa ny to a con tent appli ance com pa ny. No, THE con tent appli ance com pa ny. No other com pa ny had or cur rent ly has the same strat e gy.

Apple clear ly devised this strat e gy in 1997. That’s when the “Think Dif fer ent” adver tis­ing cam paign launched. That cam paign broke all the rules for posi tion ing com put ing prod ucts. Instead of “buy this, it’s faster, cheap er, runs more software,” the pitch was: “aspire to genius, we’ll give you the tools to create.”

So while Microsoft sees itself as a com pa ny that makes soft ware, Dell a com pa ny that makes hard ware, Google a com pa ny that sells adver tis ing and HP a com pa ny that pro­vides turn-key busi ness solu tions, Apple would obsess over con tent — big prod ucts for cre at ing it; all prod ucts for con sum ing it.

Of course, Apple prod ucts are multi-purpose devices, use ful for com mu ni ca tion, busi­ness, doing taxes and other pur pos es. But the con tent cre ation and con sump tion would be the com pa ny’s laser beam focus and the cen ter piece of the Moth er of All Win ning Strate gies.

Appar ent ly Apple noticed in 1997 that near ly all the ways that peo ple con sumed con tent sucked. Hard.

Peo ple were pay ing $12 to $18 per CD for music, then car ry ing around mas sive CD play­ers to lis ten. Tele vi sion was always hor ri ble. Cable TV ser vices were (and are) clunky, non-intuitive and expen sive. Car radio never had any thing good on. Books and mag a­zines were expen sive and waste ful.

Apple could see that new dig i tal tech nolo gies, com bined with the Inter net, could fix what was bro ken in con tent con sump tion. But Apple could also see that the var i ous con tent indus tries would fight to pre vent need ed change.

Peo ple talk about the inven tion of the iPod, iPhone and iPad new gad gets that Apple invent ed, which suc ceed ed because they were good gad gets. But you can’t real ly under­stand why they were all so incred i bly suc cess ful unless you view them in the con text of the con tent strat e gy.

The iPod was cre at ed to use dig i tal media and the Inter net to fix what was bro ken about audio con tent. Like wise with the iPhone, the iPad and Apple TV.

The theme with all Apple’s new prod ucts in the last decade has been to use dig i tal tech­nol o gy plus the Inter net to fix what’s bro ken about how peo ple con sume con tent. And like wise with Macs and Mac Books — Apple has improved those prod ucts by fix ing what was bro ken about both the con sump tion and cre ation of con tent.

And that’s why Apple is done cre at ing whole new plat forms. There will be noth ing in the com ing decade equiv a lent in new ness to the iPod, iPhone and iPad.

Apple’s full line enables the com pa ny to fix what’s bro ken about all the major ways peo­ple con sume and cre ate con tent.

I do believe Apple will offer a TV set at some point. But they can’t claim to have invent ed the TV set. It’s not a new gad get plat form in the same way as, say, the iPad is. A bet ter TV is not the same as invent ing the TV.

The impor tant point is that Apple absolute ly does not need to keep invent ing new gad get plat forms in order to con tin ue grow ing and dom i nat ing.

The iPod, iPhone and iPad didn’t make Apple bil lions because they were new, high-quality gad gets. They were that, but they enabled the com pa ny to improve con tent con­sump tion in places where peo ple would be con sum ing con tent any way.

Apple needs only to con tin ue to per fect the plat forms it already offers. For exam ple, Apple will con tin ue to add touch-friendliness to Macs. Look for all-touch iMacs and all-screen Mac Books (where the key board is a screen) in the next five years. Yes, Apple will con tin ue to inno vate bril liant ly. But those inno va tions will be improve ments to exist ing lines, rather than the cre ation of all-new lines as rep re sent ed by the iPod, iPhone and iPad.

Apple’s con tin ued growth will come from grow ing mar ket share, new mar kets and new rev enue mod els. The iOS plat form, in fact, is the like ly model for all future busi ness.

On the iOS plat form, Apple makes money from sales of the inte grat ed hardware/software appli ance. Then it takes a huge cut of all third-party app sales. Then it takes a cut of all con tent down loaded to the device. It makes money sell ing adver tis ing that will be dis­played on the device. It will make licens ing rev enue from des per ate com peti tors who copy the device.

Apple will con tin ue to grow rev enue by rolling out this model more com plete ly to desk­top and lap top devices, and also tele vi sion.

And Apple will be happy to leave the low-margin, high-maintenance busi ness es to suck­er… I mean com peti tors. The PC clone ven dors, the Chi nese tablet mak ers, the Kore an cell phone mak ers — Apple will let them claw at each other for near zero-margin hard­ware sales.

Apple is the most suc cess ful com pa ny in the world because Apple has the great est busi­ness strat e gy ever devised: Fix what’s bro ken about cre at ing and con sum ing con tent.

Apple invent ed three rad i cal ly new gad get plat forms in a sin gle decade. But those inven­tions were only means to an end. Those inven tions insert ed Apple into all the major ways peo ple con sume con tent.

Now that Apple has prod uct lines that offer the best expe ri ence for cre at ing and con sum­ing con tent, both on the desk and on the go, no fur ther prod uct lines need to be added.

The inven tion of whole new gad get cat e gories at this point would mean Apple was try ing hard er for small er mar kets, for the fringe, for the periph ery.

And that’s some thing Apple hasn’t done since 1997.

By mike algen.