Innovation : A Case Study of Apple Inc.


Abstract

This analysis examines Apple’s approach to innovation and design thinking.  The paper examines the success of its products and the strategy employed by Apple which has cemented the company’s role as a legend in innovation circles. This includes a brief overview of the company, an exploration of innovation concept and the company’s innovative strategy.

 

Introduction

Apple Inc. is undeniably the world’s most innovative company. In 2008 alone, Apple ranked among the top of world’s 50 most innovative companies (Mittan 2010). Not only has the company been consistently hailed for its innovative strategy, but it is also the most admired company globally. Apple holds the number one spot in the fortune’s annual list of the most admired companies.

This begs the question: what lies behind the success of Apple? What is Apple’s approach to innovation and design thinking? What makes Apple Inc to stand out among a number of similar companies? These are some of the questions that are addressed in this analysis. The report explores on Apple’s strategy to innovation.

Company overview

Apple Inc, an American corporation which was formerly known Apple Computer Inc, was first established back in the 1976 by Steve Jobs, Ronald Wayne and Steve Wozniak (Apple annual report 2005). The company is headquartered in Cupertino, California. Although Apple was initially started as a computer company specializing in hardware manufacture, it has over the past decade expanded into the manufacture of other consumer electronics including mobile communication devices, portable digital music players, Peripherals, services, softwares and networking solutions (Apple  annual report 2010).

Apple is best known for its innovative products which sell worldwide through its online and retail stores; and also through third-party wholesalers, direct sales force and resellers. The success of its products especially the iPod, iPad, iTunes and the MackBook; has cemented its role as a legend in innovation circles (Apple annual report 2010).

Before we examine Apple’s approach to innovation and design thinking, it is important to first define “innovation” as a concept.

What is innovation?

Innovation can simply be defined as the process of development of creative ideas or translation of ideas to meet inarticulate needs (Ball et al. 2006). That is, innovation involves increasing value through solutions that meet market needs in value adding ways. It is the fuel that drives economy and is increasingly being recognized as the new competitive frontier.

Although many companies in the world have tons of great engineers, the innovative capacity of the workforce remain relatively low in many respects. Such companies require some kind of a gravitational force that pulls it all together. Steve Jobs, the co-founder of Apple, has been that gravitational force at Apple Inc. His passion for building innovative products with elegant and minimalist design such as the iPhone, iPad and iPhone and his emphasis on a product oriented culture had made Apple an icon for innovation (Datamonitor 2006).

Apple’s innovation strategy

There is no doubt that Apple’s success is attributed to its customer centric strategy. A huge amount of time at Apple is spent on observing customers through ‘usability testing’. This enables Apple to better understand their customers and to integrate customer’s experiences into their designs (Al-Rubaie 2010). The company is committed to bringing the best personal computing, mobile communication and portable digital music experience to its many customers which comprise of businesses, educators, students and even government agencies (Annual report 2005).

Key to Apple’s business strategy is the relentless pursuit for product improvement and development. Apple’s strategy leverages its unique ability to design and develop its own hardware, operating system and application software (Maldar & Rathore 2008). A prime example of Apple’s product innovation can be seen through its iPod which was hailed as a success due to its sophisticated user-friendly design and its compatibility to both Mac and Windows operating systems.

Apple has capitalized on the convergence of personal computer, digital consumer electronic and mobile communications which is evident through the creation and enhancement of innovations such as the iPhone, iPad, iTunes store, iPod and Apple TV (Palmer & Kaplan 2007). The company also ensures a work environment that drives innovation. The company espouses a free-spirit of innovation among its workforce. The focus of the company is on providing great breakthrough and user-friendly products and solutions to its many customers (Palmer & Kaplan 2007).

In order to achieve this objective, Apple maintains a climate in which employees are encouraged to continuously innovate and generate new ideas as evident through its business philosophy. The company has also continued to invest in its research and development (R&D) department which it believes is key to continuously innovating and maintaining their competitive edge.

Apple’s success is undoubtedly a result of its innovative strategy. Not only has the company innovated in a consistent manner, but it has also increased the pace of its innovation as evident in fig 1 below (Anon 2012). While the debut of its iPod and iPhone product had a time difference of 6 years, the launch of iPhone and iPad had a time difference of merely 3 years, indicating an increase in the pace of innovation.

Surprisingly, however, Apple’s spending in research and development as a percentage of revenue (R & D) has been on the decline over the recent years (Dignan 2011). While there has been an increase in Apple’s R&D spending, the increase has not kept pace with the skyrocketing revenue. According to estimates, Apple spends less than 3% of its total revenues in R & D (Dignan 2011). For example, in the first quarter of 2012, the company spent $758 million on research, a figure way below that of Microsoft, Google, Nokia and Samsung, its main competitors. With a decline in R&D spending as a percentage of revenue, will Apple continue to innovate and maintain its competitive advantage in the market?

 

Additionally, many other companies have realigned themselves to meet the needs of their customers through constant innovation (Allworth 2012). For example, Samsung’s Android technology is posing a major to threat to the dominance of Apple in the mobile market. This has led to the two giant companies engaging in a series of legal battles. Developers have, however, pointed out that Apple’s iOS still remains the best choice than the Android technology due to many issues such as software fragmentation, high percentage of malware and many other security issues associated with Android which hinders its widespread success (Allworth 2012).

As noted above, Apple’s success is attributed to Steve Jobs, the chief innovator who was primarily the main gravitational force behind the company’s innovativeness. He indeed left an unparalleled legacy in corporate innovation. With Steve gone, can the company continue to maintain its reputation and position as the leader in cutting-edge of corporate technology? Can the company continue to develop breakthrough innovations and solutions to its customers? These are some of the questions which need to be addressed by future research.

Conclusion

Apple Inc. is undeniably the world’s most innovative company. Not only is the company hailed for its innovative strategy, but it is also the most admired company globally.  The company’s success is attributed to its customer centric business strategy and its focus on product development. Innovation undeniably plays a major role in the company’s success. The success of its products: iPod, iPad, iTunes and the MackBook; has cemented its role as a legend in innovation circles.

However, Apple has over the years experienced a decline in its spending in R & D as a percentage of revenue. Additionally, the company faces increased competition from many other companies such as Samsung which have realigned themselves to meet the needs of their customers through constant innovation. Nonetheless, Apple remains one of the most innovative companies in the world.