Business Best Practices
In his book The Innovator’s Dilemma, Harvard Business School professor Clayton Christensen popularized the term “disruptive innovation.” Products that fall into this category bring different value propositions to the market than what is currently provided by existing market participants. Although disruptive technologies underperform existing products in mainstream markets, they possess other features that new customers value. In the near term, because a disruptive technology results in worse product performance, their initial sales volume is low.
This definition of a disruptive innovation is an apt description of Apple’s first iPhone. When it was launched in 2007, the iPhone underperformed against benchmarks that were standard in the smartphone industry. As a result, just 1.5 million units were sold in its first two quarters. Here is how the original iPhone stacked up against existing smartphone competitors, using measurements that were considered important at the time:
However, Steve Job’s creation was not just a cell phone; rather, it was the world’s first, handheld computer. Its data processing capabilities—not voice—are what disrupted the cell phone market. Although other smartphone manufacturers offered web browsers, they were clumsy and difficult to use. In contrast, Apple’s web browser made surfing the Internet easy. Compared to its rivals, the iPhone’s user interface was simple, intuitive and uncomplicated. At the swipe of a finger on touch sensitive glass, one could get access to e-mail, text messaging, video, photography, maps, books, music, games and mobile shopping. The iPhone was a game-changer, the industry’s Swiss Army knife.
After having introduced a product that was revolutionary in some respects, but lacking in others, Apple began a structured process of enhancing features—and adding functionality—that satisfied customer needs. This is the essence of continuous improvement. For example, in 2008, iTunes was introduced, which solidified the iPhone’s role as a multi-function device that could seamlessly provide music and video on demand.
Unveiled on September 12, 2012, the iPhone 5 is the current iteration of the iPhone. In his Wall Street Journal column All Things Digital, Walt Mossberg describes the differences between the iPhone 5 and its predecessor model, the 4S, which was introduced a year ago:
The incremental improvements described in the previous table are not radically new. In fact, some commentators have described the iPhone 5 as a catch-up device, adding features that are already resident on the leading Android and Windows phones. For example, many of the Android phones already feature larger screens.
In conclusion, Apple’s product development strategy does not involve releasing breakthrough technologies, year after year. Rather, disruptive innovations—such as the iPod, iTunes, iPad, and the iPhone—are unleashed, upending entrenched market competitors. Then, the worlds’ most innovative company improves upon its breakthrough product by implementing stable releases, adding features and functionality that delight its customers.
I need to bring this blog post to an end, because I have to go down my local store, and place my order for an iPhone 5. The current backlog is 4 weeks, and I don’t want to wait any longer than that!
Occasionally, a new technology is introduced that disrupts the natural order of things. Apple’s iPad represents just such an innovation. The touchscreen display and navigation options make this computer a radical departure from the PC. [In this context, I am broadly defining the PC as either a desktop or laptop computer.]
With the iPad, you don’t have to use a trackpad—or mouse—to move a cursor around a screen. Instead, you use your fingers to touch and swipe the screen. In addition, the iPad is very light, weighing only 1.5 lbs (680 grams), and has a battery life of 9-10 hours, which is far greater than the battery life of the typical laptop computer. Combined, all of these features provide the user with a more direct and immediate relationship to computing: all cables, mice and other devices are gone. The iPad facilitates a “magical” experience, according to Steve Jobs. Certainly, it makes life easier for the customer.
Ease-of-use is one of the many reasons that the iPad has caught on like wildfire, becoming the biggest selling device in Apple’s history. For the quarter ending Dec 31st2011, the Cupertino-based juggernaut sold 15.4 million tablets, accounting for $9.1 billion in revenues or about 20% of the company’s total revenue. Compared with last year’s holiday quarter, tablet sales doubled.
We are witnessing what Harvard Business School’s Clayton Christensen calls a disruptive innovation. Typically, inventions that fall into this category have characteristics that are radically different from existing products; however, initially, they offer lower performance in areas that are important to mainstream customers. For example, compared to a laptop or PC, the original iPad’s processor was slow; storage space was limited; and it wasn’t equipped with a keyboard. But over the past couple of years, Apple has significantly improved the performance of its tablet computer. Here are some of the features contained within the new IPad, which was released today:
- High resolution retina display–2048×1536 pixels more than on an HD TV
- A dual core CPU twice as powerful as the A5 found in the iPad 2
- A rear iSight camera with 5MP sensor and advanced optics, including IR filter, autofocus, face detection, and white balance
- HD video recording (1080p resolution)
- Voice dictation (there’s a new key on the keyboard for speaking into the iPad)
- 4G LTE support: HSPA+ for up to 21Mbps or dual-carrier HSDPA for up to 42Mbps or LTE for a max of 72Mbps connectivity
- Battery life is 10 hours (9 for the 4G models)
Regarding the future, Steve Jobs used the metaphor of the PC as a truck, and the iPad–or tablet–as a car. America was originally an agrarian economy. Then, the truck was used for all tasks done on the farm. But as we developed into an urban economy, the car replaced the truck for many jobs.
The tablet will be increasingly used for consuming digital data—viewing videos and photos; reading news websites, feeds, and books; checking on e-mail & social media; and listening to music. In contrast, the PC will be used for heavy-duty tasks. One of you said it well: “typing a large document or programming a 1,000 lines of code is much easier with a full size, qwerty keyboard.” A PC with a blazingly fast processor, which is hooked up to a large display—including multi-monitor arrangements—can facilitate multitasking and productivity. Developers, professional photographers, graphic artists and hardcore gamers will probably continue to use the PC, at least in the near future. But to quote Jobs once again, “as we move away from the farm, the car started taking over.”
And the data appear to substantiate Job’s prediction. During 2010, when the iPad was introduced, sales of PC’s outnumbered sales of tablet computers by a ratio of 20 to one. In 2011, PC’s outsold iPads by a ratio of only six to one. Horace Dediu, an analyst with Asymco in Finland, predicts that tablet sales will surpass PC sales in 2013.
In conclusion, the iPad symbolizes much more than just simply an incremental improvement in technology. It is evolving to become a PC replacement for many applications. The PC will survive, but its market share will continue to decline vis-à-vis tablet computers. This is no different than what occurred 60 years ago when televisions were invented. As a result, the audience of people who listened to radio shows declined greatly. Although the radio has endured, its share of the overall listening audience is small in comparison to TV’s market share.
Here are other instances where new technologies displaced existing technologies:
How do you weigh in on this issue? Will Apple’s improvement of features and functionality enable the tablet computer to become a PC replacement?
There is a glaring lack of ethics in terms of Apple’s supply chain management practices, as suggested by the New York Times. Many Asian suppliers are violating basic ethical principles. Here are some of the questionable practices cited:
- Horrendous occupational safety violations
- High suicide rates due to stressful working conditions
- Long working hours: repetitive 60-hour, 7-day weeks
- Employment of children as young as 15 years-old
Although Apple has responded to problems in its Asian supplier base by conducting supplier audits, the worlds’ largest company—in terms of stock market value—has been reluctant to put its foot down. The fate of a 22 year-old college graduate, Lai Xiaodong, is a case in point. He moved to Chengdu in southwest China to take a job at Foxconn, an electronics supplier that employs 1,000,000 people. He was quickly promoted to oversee a team that polished iPad cases. This process 
generated dust, which is a known safety hazard. Mr. Lai and 3 teammates died from a ghastly explosion, which also injured 14 other workers. After the accident, which seared 90% of Mr. Lai’s body, Apple contacted “the foremost safety experts in process safety,” and assembled a team to make recommendations to prevent future accidents. In December, 2011—7 months after Mr. Lai was killed—another iPad factory exploded due to aluminum dust. As a result, 59 workers were injured; and 23 hospitalized.
I was initially shocked after reading about the story of Mr. Lai, and Apple’s apparent lack of commitment to correcting poor worker-safety practices. Although allowing unnecessary accidents—resulting in worker injuries and deaths—cannot be condoned, we must take a more nuanced view regarding Apple’s predicament, from both a historical and cultural perspective.
In a supply chain management class that I recently taught, we discussed the ethics associated with the use of child labor in developing countries. One of my students grew up in India. He indicated that poverty in India is severe, and compulsory education is not mandated by law. To survive in this environment, some families require that their children work. Were we to impose our ethical values and prevent children from working in Indian factories, we would be depriving Indian families of sorely needed income. It is easy—but wrong-headed—to believe that our ethics and moral values are superior to the moral values held by other societies.
The reasons against using child labor are not moral as much as they are practical ones. It is bad business to permit children to build Apple’s products, if young people are simply being used as a means to an end. Consumers in the west will no longer think that it is “cool” to own i-Phones, if they have been built by Chinese teenagers. How many parents would want to be part of a 21st scene, taken from a 19th century Dicken’s novel?
In Viet Nam, Nike has implemented an innovative solution to this dilemma. Although some of Nike’s Vietnamese suppliers employ children, they also provide employees with a regular wage, free or subsided meals, free medical services and training and education. Nike, as well as western consumers, benefit from low labor costs. At the same time, the workers improve their standard of living and also receive access to education.
Regarding the various safety issues that were described by the New York Times, one has to put them into a cultural context. I recently interviewed an executive who lived in China for 13 years, setting up factories and growing American businesses. During the course of our conversation, he made the point that public safety is non-existent. When walking down the street, you have to always be on the lookout for possible hazards. There may be a big hole in front of you, which is not blocked off with barriers. Or, there could be an electrical wire dangling at eye-level. If unaware, you could walk right into it. If a lack of public safety is the norm in China, how can one expect the private sector to be any different? Would we be correct to impose our ethical standards—as relates to public safety—onto the Chinese? Specifically, should we preach that barriers should be placed in front of Shanghai’ s sinkholes?
Getting back to Apple, from a business perspective, the company must enforce strict, safety practices for all of its suppliers; otherwise, more articles—such as today’s scathing indictment in the New York Times—will appear, tarnishing Apple’s brand. Only by adding teeth to Apple’s supplier responsibility reports and recommendations, will the company avoid future, public relations disasters.
In conclusion, with global competition, superior supply chain management results in consumers receiving products at low prices. But our western ethical tastes are repulsed at stories of worker abuse. Apple must take strong, corrective measures against suppliers who use workers solely as the means to an end, namely, achieving low, production costs. In supply chain management, good ethics makes for good business.
“The dwarf sees farther than the giant, when he has the giant’s shoulder to mount on.”
—Samuel Taylor Coleridge, in The Friend (1828)
Every business executive and aspiring entrepreneur should read Steve Jobs, a biography by Walter Issacson. It provides a frank, unadulterated look at the career of the greatest business executive in our time. Consider this. Job’s founded Apple in 1976, which began as a 4-person operation in his father’s garage. By 2011, it became the world’s most valuable company by market capitalization. I agree with Isaacson’s contention that Jobs belongs right up there in the pantheon next to Ford and Edison.
There are many takeaways from this book. One of the “lessons learned” is that Jobs stood on the shoulders of others in order to achieve his phenomenal success. We all need mentors, and Steve Jobs needed them more than most. Given up for adoption by his biological parents, he spent much of his life looking for a father figure who he could emulate:
Personal Role Models
- Paul R. Jobs, his adoptive father, who enjoyed refurbishing and selling used cars after work. Steve spent hours by his father’s side, “eager to hangout with his dad.” Job’s dad was the first person to provide him with exposure to electronics. And the rest is history.
- Kobun Chino, a Soōtoō Zen master, who served as Steve Job’s spiritual guru. Job’s longtime teacher presided at Job’s wedding. For Jobs, Zen represented more than a philosophy of life; it also infused his thinking about design, which he felt ought to embrace beauty, minimalism and simplicity.
Business Role Models
- Arthur Rock, a venture capitalist and early Apple Board member, took Jobs under his wing. However, the relationship was about more than just business. “Arthur had been like a father to me,” said Jobs. Rock and his wife Toni hosted Jobs in Aspen and San Francisco. He also taught Jobs about opera.
- Mike Markkula, Jr., an angel investor and Board member of Apple, was the third employee of the company. Like Rock, he also became a father figure to Jobs. Markkula taught Jobs how to market, sell and package a product. Markkula oversaw Jobs growth and maturation. He served as Apple’s CEO from 1981 to 1983.
Ironically, Rock and Markkula eventually distanced themselves from Jobs. Here is the story. In 1983, Jobs recruited and hired John Sculley, President of PersiCo, to become Apple’s CEO. Two years later, Jobs had second thoughts. He and Sculley had a showdown before Apple’s Board of Directors. Both Rock and Markkula sided with Sculley. Years later, in recounting this event, Jobs broke down in tears. He felt betrayed by his business father-figures, much in the same way that he felt abandoned at birth by his biological father.
We all need shoulders to stand on, particularly during the formative phases of our careers. The poet John Donne said it best: “No man is an island.”
At the age of 16, I was inspired by Dr. Winters, a visiting minister who had a daytime job as a consultant to G.M. He was an outstanding speaker, and imparted numerous, fundamental life-lessons. He piqued my curiosity about business. Many years later, I worked with an external company consultant, A.K. His ideas brought about significant changes within the organization where I was employed. From him, I learned about the power of ideas, and how to present them well. As a result, my career direction changed from management to consulting.
What are your passions? Do you have a coach/mentor/boss/friend who you can learn from? Whose shoulders are you standing on in order to achieve the goals that you seek?
When a creative individual masters one field, and then uses what they know to think about another, often truly original ideas–or mind-bending products–are the result. The story of Steve Jobs is a case in point.
A Woman Reading an ebook on an Ipad 2
The Apple CEO dropped out of Reed College, but he hung around campus for 6 months, often sleeping on the floors in dorms where his friends lived. Jobs used the time to attend classes that interested him. During one term, he took a calligraphy seminar, a subject wherein Reed College excelled.
Years later, when Jobs oversaw the design of the first iMac computer, he commented that all of the calligraphy instruction came back to him, so much so that he incorporated it into the iMac’s software. The end result was the development of the first computer to contain a variety of typefaces and proportionately spaced fonts, a hallmark of the Apple brand. Because Windows PC manufacturers’ copied many of Apple’s designs, had Jobs not dropped in on that class, none of today’s computers would have all of the exciting multiple typefaces.
Job’s innovativeness is shown in the progression of breakthrough Apple products: iMac, iPod, iTunes, iPhone, and now, the iPad. The original iPad came to US stores on April 3, 2010. In less than a year, it has reached $1 billion in revenue, an achievement that few products have ever attained.
Not content with resting on his laurels, Job’s spearheaded the re-design of the iPad. The new version, known as the iPad 2, is being released in stores today. As described in the New York Times, the salient design improvements include more thinness, less weight, more integration, greater beauty—and over 65,000 apps.
In conclusion, technological companies like Apple do require engineers who are experts in science and math. But creativity in product innovation is not based on science and math alone. As described in the book The World is Flat, creativity is about making connections between history, art, politics and science.
Are you a creative manager, designer or executive? How do you connect the dots?
