How can successful business models be generated? The Apple case

There are products and business models that are especially successful; from the moment they burst into the market they are accepted by consumers, they produce addiction and they ‘set an example’ by leading their sectors and becoming their reference point. Apple and most of the products it launches reflect this model; each new reference turns out to be more and more astonishing. The successful launch of the iPad is a clear sign of this and for the first time Apple is referred to as a leader company in market capitalization, as Sandro Pozzi points out in his article Apple has overtaken Microsoft”.

A lot has been written about the success of some Cupertino brand products, in some cases focusing on design and easy use, in others stressing its technological provisions. I particularly believe that the constant and sustainable success of the company does not lie in any of these two factors; Apple is a clear example of absolute success in the business model and its formulation, beyond novelty and technical provisions.

There are many methodologies that facilitate creativity and there are processes that ensure the structuring and development of the organizations’ knowledge as ideas; on the contrary, there is little practice and method in the essential aspect of business, which guarantees a continuous process of response and success in the market. How can opportunities be detected and generated in a proactive way regarding the specific needs of a company? Something that guarantees a continuous process of response and success in the market.

This is Apple’s great excellence and, in my opinion, it is not the result of technological or creative excellence but of its capacity of creating business ecosystems.
As I have mentioned in the post: Why do products/services/people lose their value?, business models are very fragile ecosystems that are based on the trinomial: product, service and consumable. Everything is not billable but it contributes to constructing the value of what we bill for. But beyond this trinomial, how are business opportunities detected? How does Apple succeed in doing that in such a sustainable and disruptive way in the markets where it operates?
I shall try to explain it by taking the philosophy we use to develop business models in Loop as the starting point. By describing an astronomical simile, we could say that human knowledge forms an ecosystem made up of three planets; namely, the planet of the scientific and technological knowledge, the planet of the social and cultural knowledge and finally, the planet of the economic knowledge. Business models have been traditionally based on the predominance of one of these planets. Defining business models through the creation of ecosystems involves using knowledge from the three previous spheres in a balanced way and focusing on solving a single problem or meeting a single need.
Like planets in knowledge orbits, we could predefine the orbit of each of them and on the basis of their path and speed ‘prospects’, we could define the point at which the three planets converge in a triple eclipse of opportunity: We have a technology (new or old) ready to be used, a social group who understands it and assimilates it for its exploitation and finally, we have a sufficient economic model to be exploited.
In my opinion, Apple builds its business model by distinguishing two fundamental aspects for the success of its introductions: speed and time. This is the main competitive value of the apple’s brand; the control of the ‘tempo’ with the appropriate cadence. This concept was learnt as a result of a long experience, on the basis of success and failure.
These are, from my viewpoint, some of Apple’s learning factors:
1-There is no point in having the best product of the market if my clients base is very small.
In 1986 it launched Macintosh Plus, which became the germ of Windows-setting ‘dissident’ consumers, and this is the structure of fans that today makes up its base of supporters.
2-If you imitate the industry codes in order to get a larger base of clients, your competitive edge disappears.
In 1991 it introduced the Powerbook, a laptop with the same architecture as the rest of the industry, trivializing the Apple product without succeeding in increasing its base of clients.
3-If the client does not have the need or does not understand it, you’d better not enter the market.
In 1993 it found out how a great concept was ignored by the market as a result of being launched too soon, when consumers were not aware of its need; it launched the Newton personal digital assistance causing the beginning of the company’s change with its market failure. Some years later, Palm profited from the user’s higher level of culture, the improvement of graph technology and the price reduction of screens as a result of an enhancement in the economies of scale (the eclipse of opportunity we have already mentioned).
4-Design by design itself does not constitute a sustainable competitive edge and it cannibalizes the remaining products.
In 1999 it launched the Power Mac G3 and the iBook; in 2000, the Power Macintosh Cube and in 2001, the iMac. Apple cannot increase its base of clients and it wears out as a result of the excessive number of new and continuous launches. Its products are conceived as a trend and they can only attract a base of clients who are focused on aesthetics.
5-The Conception of ecosystems of product/service makes it possible to create sustainable and differential competitive edges, as well as to wrap up developers who guarantee their updating.
At the end of 2001, a transcendental event took place within the field of Apple products after the launch of iPod 1st gen and iMac. They both sublimate the learning experience of the conception of products regarding them as a platform for an ecosystem of services and applications. In 2004 it launched the iPod Mini, which was the germ of the iTunes platform, iPhone and iPad. In Roberto Briones’ blog, we can find a wonderful graphic history to follow these comments; (product referents are not exhaustive).
Nowadays, Apple conceives its products as a key to enter an exclusive world of services developed (in my opinion) under the following concepts:
1-Collaboration mentality 2.0: Apple leads and mobilizes a great industry of developers who guarantee the constant updating and surprise of its products, generating at the same time a parallel source of income and reducing development costs (like the Nespresso model in which we participated as Loop).
2-Universal, plain and lasting design: Its products and services are unified under a plain and minimalist design (the 1999 iMac DV antithesis) managed by some use interfaces always in the latest state of the art, giving place to a self-learning process based on advancing to the user’s need and way of thinking.
3-In search of the opportunity, beyond its industry. Retailer Mentality: A few teenagers today, loyal Apple consumers, know that it was one of the pioneers of computer manufacture; Apple has been able to overcome its manufacturer mentality (and its factories) in order to become imbued with a Retailer mentality, constantly taking its clients’ need into account and remaining loyal to its philosophy of understanding life. It has created a universe of lasting solutions searching for the best partners for its development in the appropriate place and sector. Thus, following Steve Jobs’ guidance, it has been able to overtake the legendary Macintosh to the iTunes service platforms.
4-The value for the user is contained in the business model, and not in the technique: The old searchers of technological excellence are now searchers of innovation excellence; they have learnt that, with a good business model, they can increase the value of technology exponentially, regardless of its novelty. The iPod series, coexisting in time with MP3 products, constitute an example of this.
5-Memorable experiences, control of the means: The best way to enhance client loyalty and create a solid competitive edge in time is by constantly surprising them. Apple is master of surprise and expectative; the way of communicating its new launches (with Steve Jobs as its master of ceremonies), the introduction being always at a lower level than the demand for new products, the surprise of unpacking, the self learning process of products and the generation of a sense of belonging as a consumer provide clear evidence for this.
6-Experts in the Tempo of the opportunity, leadership capacity: Not always is Apple the technological pioneer in a new sector, a work of art in the management of the launching tempo is the new iPad, this platform comprises the whole learning process from the electronic personal digital assistance, mobile telephone, tablets pc, e-books, videogame consoles, iTunes platform, etc. The iPad constitutes a continuous surprise and a memorable experience made up of already known topics, which has achieved the market success that many others have contributed to build, as Manuel Álvarez de la Gala clearly describes in its article ‘iPad will take your hours of sleep’.
To sum up, Apple represents a clear example of success in the creation of business models, the application of strategic innovation, the transverse vision of the market and the persistence in a philosophy of understanding the use of products and the employment of technology in daily life.

 

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Mª Luisa Vives – Jaime Gross

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