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How Apple Is Organized for Innovation

  • Joel M. Podolny
  • Morten T. Hansen

iphone innovation case study

When Steve Jobs returned to Apple, in 1997, it had a conventional structure for a company of its size and scope. It was divided into business units, each with its own P&L responsibilities. Believing that conventional management had stifled innovation, Jobs laid off the general managers of all the business units (in a single day), put the entire company under one P&L, and combined the disparate functional departments of the business units into one functional organization. Although such a structure is common for small entrepreneurial firms, Apple—remarkably—retains it today, even though the company is nearly 40 times as large in terms of revenue and far more complex than it was in 1997. In this article the authors discuss the innovation benefits and leadership challenges of Apple’s distinctive and ever-evolving organizational model in the belief that it may be useful for other companies competing in rapidly changing environments.

It’s about experts leading experts.

Idea in Brief

The challenge.

Major companies competing in many industries struggle to stay abreast of rapidly changing technologies.

One Major Cause

They are typically organized into business units, each with its own set of functions. Thus the key decision makers—the unit leaders—lack a deep understanding of all the domains that answer to them.

The Apple Model

The company is organized around functions, and expertise aligns with decision rights. Leaders are cross-functionally collaborative and deeply knowledgeable about details.

Apple is well-known for its innovations in hardware, software, and services. Thanks to them, it grew from some 8,000 employees and $7 billion in revenue in 1997, the year Steve Jobs returned, to 137,000 employees and $260 billion in revenue in 2019. Much less well-known are the organizational design and the associated leadership model that have played a crucial role in the company’s innovation success.

  • Joel M. Podolny is the dean and vice president of Apple University in Cupertino, California. The former dean of the Yale School of Management, Podolny was a professor at Harvard Business School and the Stanford Graduate School of Business.
  • MH Morten T. Hansen is a professor at the University of California, Berkeley, and a faculty member at Apple University, Apple. He is the author of Great at Work and Collaboration and coauthor of Great by Choice . He was named one of the top management thinkers in the world by the Thinkers50 in 2019. MortentHansen

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June 29, 2017

Understanding the Real Innovation behind the iPhone

A decade ago Apple didn’t just create a phone with some extra features, it introduced a full-fledged handheld computer that could also make calls and browse the internet

By Kalle Lyytinen & The Conversation US

The Conversation , an online publication covering the latest research.

When the iPhone emerged in 2007, it came with all the promise and pomp of a major Steve Jobs announcement, highlighting its user interface and slick design as key selling points. We know now that the iPhone transformed the mobile phone business, the internet economy and, in many ways, society as a whole. But technically speaking, the iPhone was not very innovative.

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Its software and the interface idea were based on the iPod, which was already reinventing the digital music industry . Touchscreens had appeared on earlier phone and tablet models, including Apple’s own Newton . And top-line Nokia phones had more memory, better cameras and faster mobile connectivity. What made the iPhone transformative was the shift in concept underpinning the entire iPhone project : Its designers did not create a telephone with some extra features, but rather a full-fledged hand-held computer that could also make calls and browse the internet.

As a scholar of management, design and innovation , I find it hard to predict what the next truly revolutionary technological development will be. In the 10 years since the launch of the iPhone, so much about modern life, commerce and culture has changed . In part that’s because the iPhone, and the smartphone boom it spurred, created a portable personal technology infrastructure that’s almost infinitely expandable. The iPhone changed the game not because of its initial technology and cool user interface but rather as a result of its creators’ imagination and courage.

Inventing mobile apps

As the iPhone took shape, its designers found themselves torn between making a phone or a computer . Engineers and marketing executives alike worried the new device would kill the iPod market that had driven Apple’s corporate resurgence for five years . Nokia, the biggest player in the cellphone market at the time , had similar technologies and prototypes, and also feared outcompeting its own successful mobile phone product lines that used a simpler and more old-fashioned software platform than that on which iPhone was built.

Apple took the leap, however, by installing a fully capable computer operating system on the iPhone, along with a few small application programs. Some were phone-related, including a program that handled making and receiving calls, as well as a new way to display voicemail messages , and a system that kept different contacts’ text messages separate. Others were more computer-like, including an email app and a web browser. Of course, the music-playing features from the iPod were included too, linking the phone with the emerging Apple music ecosystem.

Initially, that was about it for apps. But skilled computer engineers and hackers knew they were holding a palm-sized computer, and set to work writing their own software and getting it running on their iPhones . That was the dawn of the now-ubiquitous app. Within a year, these apps were so popular, and their potential so significant, that Apple’s second version of the iPhone operating system made it easy (and legal) for users to install apps on their phones .

Shifting priorities

The prospect of making a fully functional hand-held computer changed how users and manufacturers alike thought about mobile phones. For Apple and every other phone company, software became much more important than hardware . What apps a phone could run, and how quickly, mattered much more than whether it had a slightly better camera or could hold a few more photos; whether it flipped open, slid open or was a bar-style; or whether it had a large keyboard or a small one. The iPhone’s keyboard was on-screen and software-generated, making a function that had required dedicated hardware into one running on generic hardware and dedicated software.

At the time of the iPhone launch, Nokia offered about 200 different phone styles to meet all the different needs of its hundreds of millions of customers. There was just one iPhone model at the start, and in the ensuing decade there have been only 14 major styles – though today they come in different colors, not just white and black as the original did. This is the power of software functionality and related simplicity.

The heightened importance of software on a mobile phone shifted the industry’s economy as well. The money came now not just from selling devices and phone services, but also from marketing and selling apps and in-app advertisements. App developers must share revenue with the companies that control smartphones’ operating systems , providing serious earning power: Apple holds about 15 percent of the mobile phone market , but reaps 80 percent of global smartphone profits .

Whatever the next tech industry game-changer is, and whenever it arrives, it will likely have some connection to the smartphone and related infrastructure. Even today, exploring virtual reality requires only installing an app and connecting just a bit of additional hardware to an existing phone. Similarly, smartphone interfaces and cameras already monitor and control intelligent and automated homes . Even as devices are developed to operate all around us, and even in our clothes , many of them will be able to point to the iPhone as a conceptual ancestor and inspiration.

This article was originally published on The Conversation . Read the original article .

The iPhone 13 event was a case study in Tim Cook-era product refinement

Incremental innovation may reap rewards.

By Sean Hollister , a senior editor and founding member of The Verge who covers gadgets, games, and toys. He spent 15 years editing the likes of CNET, Gizmodo, and Engadget.

Share this story

iphone innovation case study

For the past ten years, Tim Cook’s greatest accomplishment as Apple CEO has been vastly more of the same . More iPhones, more iPhone accessories, more apps, and so much more money. While the Mac and iPad have occasionally fallen into disrepair, the company keeps coming back with new reasons to buy its greatest hits every year — and this year’s iPhone 13 event is a near-perfect case study in how far refinement can take you. 

As my colleague Jon Porter points out, the iPhone 13 is effectively the iPhone 12S , an iterative, incremental update to last year’s phones instead of something that feels brand new. 

  • Tim Cook’s Apple, ten years later

Almost everything got better

But oh, what an update. What company wouldn’t dream of being able to say they improved the processing power AND the battery life AND the cameras AND the displays AND the storage capacity AND the connectivity AND the design in the course of a single year, all without changing the price one bit? 

In 2021, the same $829 you’d pay last year now buys you twice the storage, a whopping 2.5 additional hours of quoted battery life, more 5G bands, and an additional 175 nits of brightness over the iPhone 12, plus the 47 percent larger sensor and sensor-shift stabilization system that was previously exclusively available in the $1,099-and-up iPhone 12 Pro Max. A new cinematic video mode isn’t exclusive to the Pros, either (though smooth 120Hz screens, a new macro photography mode and ProRes video will be.) And while the company doesn’t offer any real numbers to back it up, Apple claims even the iPhone 13 Mini will give you the fastest processor available in any smartphone on the market.

Also, you can’t say the design didn’t change at all. While the notch still exists, it’s smaller! (I like the iPhone 13 Pro’s blue an awful lot, too.) The only tradeoff I can find this year — ahead of our reviews, that is — is that the iPhone 13 lineup is oh-so-slightly thicker and heavier. You can find our comparison charts here .

This year’s iteration is so compelling that I’m vaguely tempted to upgrade my perfectly good iPhone 12 Mini to get that better camera with sensor-shift and an additional hour or so of battery life. (I probably won’t, since the announcement means the resale value of my existing phone has likely already tanked, but I do worry Apple might still cut off the Mini next year due to reportedly lackluster sales .) If I had an iPhone 11 or earlier, it’d be a no brainer — I’d definitely be preordering one on Friday .

  • Apple says it every year, but the iPhone 13 cameras do seem much improved
  • Goodbye and good riddance to Apple’s 64GB iPhones
  • The iPhone 13 is a pitch-perfect iPhone 12S

And while it might feel criminal that the new $329 10.2-inch iPad still uses a Lightning connector and first-gen Apple Pencil, Apple’s still issuing a decent upgrade there without asking for more money — doubling the base storage from 32GB to 64GB, moving from the A12 Bionic chip to A13 Bionic, and hopefully finally putting a decent front-facing camera (12MP, vs. just 1.2MP!) onto its entry-level tablet computer.

The new iPad Mini.

The story’s a little bit different with the 6th-gen iPad Mini , mind, since it starts $100 higher than before at $499. But the upgrade incentives are still strong: it’s a crystal-clear update over its predecessor with a larger and higher resolution 8.3-inch screen despite its slightly smaller and lighter frame, with a magnetic connector to dock a 2nd-gen Apple Pencil. It’s got the A15 Bionic chip from the new iPhone 13, but with the extra graphics core you’ll only otherwise fined on the iPhone 13 Pro. The camera’s bigger and faster at 12MP and f/1.8 (compared to 8MP and f/2.4), with 4K video for the first time, and both the Wi-Fi 6 and 5G support that the 2019 model lacked. Just don’t go looking for a headphone jack.

Apple is managing all of this during a pandemic and a global chip shortage , and so far there’s only been a single indication that Tim Cook’s giant manufacturing machine can’t keep up: The new Apple Watch Series 7 was rumored to be delayed due to production issues , and while it reportedly overcame them , we don’t have any release date for the new watch save “later this fall” and Apple’s being cagey about the details.

The Apple Watch Series 7.

A leaked spec sheet for the watch suggests it was supposed to ship in September alongside the new phones, but the fine print says even its specs are “subject to change without notice,” and Apple didn’t respond to a request for comment about the document.

The watch is why I say this year’s event is a nearly perfect case study: it’s not as clear why someone would buy the Series 7 over a discounted Series 6 , despite the larger and reportedly more durable screen. With the same battery life and no reason to believe there’s more processing power or functionality, plus a late start, it might be the one insufficient iteration this year.  

Correction September 20th, 6:08PM ET: The previous $329 iPad from 2020 came with the A12 Bionic chip, not the A10 Fusion as we originally described. The earlier chip featured in the 2019 model .

Sony’s PS5 Pro is up to three times faster, may arrive holiday 2024

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How to preorder the apple watch series 7, how to buy the iphone 13 and iphone 13 pro, how to preorder apple’s new ipad and ipad mini, the iphone’s notch: should it stay or should it go.

Designorate

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Design thinking, innovation, user experience and healthcare design

Design Thinking Case Study: Innovation at Apple

Apple is one of the leading companies that is renowned for its unique products and brand. A short talk with an Apple user reveals there is an emotional relation between consumers and Apple products , including every “i” product created in the past two decades.

Why are Apple products different from their competitors’ products? How does Apple manage to achieve innovation in its product families? Answering these questions provides interesting insight into Apple’s history and how it survived its most critical time between 1985 and 1997.

When Steve Jobs returned to Apple after being fired, the company share was only worth US $5 and its future was uncertain. Today, in 2016, Apple’s share price is around US $108 and the company achieved revenues of US $233.7 billion in 2015 with net income of US $53.39 billion.  This mini case study sheds light on the role that design thinking and innovation played in helping Steve Jobs rescue Apple with his consumer-driven strategy and vision for the company.

The Hard Times at Apple

The early days of Apple (which was cofounded by Steve Jobs on 1976) are characterized by its first personal computer that was delivered with Apple OS. During this time, Apple was dominating the market because there were no other manufacturers of this type of computer as computers were used only by governments or large companies. However, in 1985, Steve Jobs was forced to leave the company. This marked the start of a chaotic era in the company’s strategy and product development.

In the period 1985-1997, Apple struggled to achieve market success, especially after Jobs’s departure and increasing competition from other giants such as IBM, which decided to enter the PC computers market. During this period, Apple faced number of challenges including:

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  • Unstable strategy due to the change of executive teams
  • Unclear vision about Apple’s competitive strategy, especially after IBM entered the PC market
  • Unclear vision about selling OS licenses, which would put the company in competition with Windows operating system
  • Large number of failed products (such as Newton PDA) and few successful ones (such as PowerBook)
  • Products not unique in the market
  • Confusion and uncertainty among Apple consumers, resulting from this strategy

Apple Newton PDA

Design Thinking to Fuel Innovation

Apple is one of the leading companies in the field of innovation and this couldn’t have happened without the company adopting design thinking . Design thinking is a solution-oriented process that is used to achieve innovation with considerations about the consumer at the heart of all development stages. Tim Brown, president and CEO of IDEO, defines design thinking as follows: “ Design thinking is a human-centered approach to innovation that draws from the designer’s toolkit to integrate the needs of people, the possibilities of technology, and the requirements for business success. ”

“Most people make the mistake of thinking design is what it looks like. People think it’s this veneer — that the designers are handed this box and told, ‘Make it look good!’ That’s not what we think design is. It’s not just what it looks like and feels like. Design is how it works.” — Steve Jobs

In previous design thinking articles, we explored the different models of design thinking including the IDEO model, d.school model, and IBM design thinking  model. Most of these models share the target of achieving innovation through three main factors:

design thinking innovation

User Desirability . The product should satisfy the consumer’s needs by solving everyday problems through a user-centered process. This can be achieved through a deep understanding of the user and through an empathic design process, which can only be achieved by putting ourselves in the shoes of our consumers (using tools such as an empathic persona map ).

Market Viability . Successful products require an integrated marketing strategy that identifies the target segment and builds the product brand in accordance with this target segment. Tools such as the business model canvas can help our understanding of the project and create a business strategy for it. Also, tools such as the SWOT analysis allows us to understand the strengths, weaknesses, opportunities, and threats of the specified product.

Technology Possibility . Technology provides state-of-art tools for designers to innovate and build products that meet today’s needs. Technology should be adopted through the development process, including the prototyping stage where a visual presentation of the product is made to the team.

Think Different!

After Steve Jobs returned to Apple in 1997 (upon Apple’s acquisition NeXT), he started to apply the design thinking characteristics discussed above, which reflected his vision for Apple products. The vision discussed below was used to form Apple’s strategy from 1997 until today. Steve Jobs applied design thinking by focusing on:

  • People’s needs and desires, rather than only the needs of the business
  • Building empathy by helping people to love Apple products
  • The design rather than the engineering work; designers consider both the form and the function of the product
  • Building simple yet user-friendly products rather than complex hard-to-use products

The vision characterized above can be clearly identified in modern Apple products. Although other competitors focus on the features and product capabilities, Apple focuses on a holistic user experience.  For example, the iMac is renowned for being quiet, having a quick wake-up, better sound, and a high-quality display. This vision was formed in Apple’s development strategy that includes:

Apple iMac

Excellence in Execution

In this part, Steve tended to improve the execution process by closing 2 divisions, eliminating 70% of the new products and focusing on the higher potential products, reducing the product lines from 15 to just 3, and shutting facilities to move manufacturing outside the company. Apple also launched a website for direct sale of its products and started to take an interest in materials and how products are manufactured within a consumer-driven culture.

Platform Strategy

Apple streamlined their product portfolio to a family of products that can be produced  much more quickly while keeping the existing design elements. Also, the company targeted product that require less repair and maintenance.

Iterative Customer Involvement

The consumer experience should be integrated into the design and development stages through participating in usability testing. Also, the design for interfaces should focus on the user experience.

Beautiful Products

In addition to the function of the product, the form should beautiful, which can be achieved through continuous innovation and development. Apple also focused on the materials and manufacturing process and took a bold approach to trying new ideas rather than sticking with the ordinary design forms.

Apple’s history with innovation provides a clear lesson about how design and innovation can turn company failure to market success and a leading position in a competitive market. Design thinking helped Apple to innovate while placing their consumers at the heart of the process. The period that Steve Jobs was absent from Apple demonstrates that copying others and lacking a clear innovation strategy can lead companies directly from success to failure. On the other hand, innovation can definitely help build a successful business.

Dr Rafiq Elmansy

I'm an academic, author and design thinker, currently teaching design at the University of Leeds with a research focus on design thinking, design for health, interaction design and design for behaviour change. I developed and taught design programmes at Wrexham Glyndwr University, Northumbria University and The American University in Cairo. Additionally, I'm a published book author and founder of Designorate.com. I am a fellow for the Higher Education Academy (HEA), the Royal Society of Arts (FRSA), and an Adobe Education Leader. I write Adobe certification exams with Pearson Certiport. My design experience involves 20 years working with clients such as the UN, World Bank, Adobe, and Schneider. I worked with the Adobe team in developing many Adobe applications for more than 12 years.

iphone innovation case study

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iphone innovation case study

Understanding the real innovation behind the iPhone

iphone innovation case study

Iris S. Wolstein Professor of Management Design, Case Western Reserve University

Disclosure statement

Kalle Lyytinen receives funding from NSF

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When the iPhone emerged in 2007, it came with all the promise and pomp of a major Steve Jobs announcement, highlighting its user interface and slick design as key selling points. We know now that the iPhone transformed the mobile phone business, the internet economy and, in many ways, society as a whole. But technically speaking, the iPhone was not very innovative.

Its software and the interface idea were based on the iPod, which was already reinventing the digital music industry . Touchscreens had appeared on earlier phone and tablet models, including Apple’s own Newton . And top-line Nokia phones had more memory, better cameras and faster mobile connectivity. What made the iPhone transformative was the shift in concept underpinning the entire iPhone project : Its designers did not create a telephone with some extra features, but rather a full-fledged hand-held computer that could also make calls and browse the internet.

As a scholar of management, design and innovation , I find it hard to predict what the next truly revolutionary technological development will be. In the 10 years since the launch of the iPhone, so much about modern life, commerce and culture has changed . In part that’s because the iPhone, and the smartphone boom it spurred, created a portable personal technology infrastructure that’s almost infinitely expandable. The iPhone changed the game not because of its initial technology and cool user interface but rather as a result of its creators’ imagination and courage.

Inventing mobile apps

As the iPhone took shape, its designers found themselves torn between making a phone or a computer . Engineers and marketing executives alike worried the new device would kill the iPod market that had driven Apple’s corporate resurgence for five years . Nokia, the biggest player in the cellphone market at the time , had similar technologies and prototypes, and also feared outcompeting its own successful mobile phone product lines that used a simpler and more old-fashioned software platform than that on which iPhone was built.

Apple took the leap, however, by installing a fully capable computer operating system on the iPhone, along with a few small application programs. Some were phone-related, including a program that handled making and receiving calls, as well as a new way to display voicemail messages , and a system that kept different contacts’ text messages separate. Others were more computer-like, including an email app and a web browser. Of course, the music-playing features from the iPod were included too, linking the phone with the emerging Apple music ecosystem.

Initially, that was about it for apps. But skilled computer engineers and hackers knew they were holding a palm-sized computer, and set to work writing their own software and getting it running on their iPhones . That was the dawn of the now-ubiquitous app. Within a year, these apps were so popular, and their potential so significant, that Apple’s second version of the iPhone operating system made it easy (and legal) for users to install apps on their phones .

iphone innovation case study

Shifting priorities

The prospect of making a fully functional hand-held computer changed how users and manufacturers alike thought about mobile phones. For Apple and every other phone company, software became much more important than hardware . What apps a phone could run, and how quickly, mattered much more than whether it had a slightly better camera or could hold a few more photos; whether it flipped open, slid open or was a bar-style; or whether it had a large keyboard or a small one. The iPhone’s keyboard was on-screen and software-generated, making a function that had required dedicated hardware into one running on generic hardware and dedicated software.

At the time of the iPhone launch, Nokia offered about 200 different phone styles to meet all the different needs of its hundreds of millions of customers. There was just one iPhone model at the start, and in the ensuing decade there have been only 14 major styles – though today they come in different colors, not just white and black as the original did. This is the power of software functionality and related simplicity.

The heightened importance of software on a mobile phone shifted the industry’s economy as well. The money came now not just from selling devices and phone services, but also from marketing and selling apps and in-app advertisements. App developers must share revenue with the companies that control smartphones’ operating systems , providing serious earning power: Apple holds about 15 percent of the mobile phone market , but reaps 80 percent of global smartphone profits .

Whatever the next tech industry game-changer is, and whenever it arrives, it will likely have some connection to the smartphone and related infrastructure. Even today, exploring virtual reality requires only installing an app and connecting just a bit of additional hardware to an existing phone. Similarly, smartphone interfaces and cameras already monitor and control intelligent and automated homes . Even as devices are developed to operate all around us, and even in our clothes , many of them will be able to point to the iPhone as a conceptual ancestor and inspiration.

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Home » Management Case Studies » Case Study of Apple: Competitive Advantage Through Innovation

Case Study of Apple: Competitive Advantage Through Innovation

Apple Inc. is an American consumer electronic company which designs, develops manufactures and supports the well-known hardware products such as Macintosh computers, the iPod, the iPhone and the iPad. Most of Apple’s products seem to be a trigger of revolution in electronic market and this reason contribute Apple as a market leader . The main strategy to run its business is not only creating new innovation product but also incremental improvement . The strength of Apple is “think different” . With innovative ideas and aesthetic designs, Apple has changed how people listen to music and communicate . One of the success products of Apple is iPhone which is a revolutionary device. It combined the feature of music device (iPod) and mobile phone technology with the key feature on this product that is “multi-touch” and “multi-tasking” on the graphic user interface. The phone supports a camera, a multimedia player, a blue tooth, web browsing and internet connectivity. However, the price of iPhone is higher than other mobiles in the market and the aim is targeting a niche market. From this reason, iPhone faced with various challenge to get market share and compete with existing player in the mobile market. With innovation and unique features that is the selling point, iPhone sustains this competitive advantage by continue development and create the new innovation with its best.

Apple is one of the success innovation companies by the evidence with the first rank of ‘the 50 Most Innovative Companies’ in 2009. From the success innovation product with $9.87 billion profit for 2009, it seems to be motivator for other companies to aware of innovation factor. Moreover, Apple emphasizes its successful innovation device with “iPad” which is touch-screen device to use the Internet for research applications, listen to music, movies and games. A lot of buzz occurred and attract attention from consumer immediately when product launch in the first quarter 2010. This is another evident that shows the success innovative product of Apple. The question of how Apple success in innovation product be concerned from others.

Key Drivers for Innovation for Apple

The first key Apple’s innovation driver is consumers’ needs. It is not only to put new technology into its products, but also the great new design that focuses on needs of user. Introduce high technology within the products that easy to use is what Apple always successfully done. The Macintosh computer, one of the core products of Apple, comes with “mouse’ that is easy to navigate around the whole screen for user. The iPod introduces itself as a music player with the way to transfer and organize music is simple enough for anyone to use which is how the perfect product should be. Its click wheel simple the way user can make a quick scan through thousands of songs. As well as for the iPhone, even though it is not the first smartphone which integrated by music player, camera, web browser and email. It removes the tiny buttoned keyboards with the button-less touch screen and put almost everything in fingertips. Significantly, it ensures that the customer needs not to be smart to use a smartphone. The concepts of innovative user interface with easy to use is what Apple put as one of the most important features for its user. It is a key driver for innovation within electronic consumer. Moreover, Apple has own retail stores that is easier to access customer and get direct feedback. That is the Apple strategy to understand actual consumers’ needs and apply them for the new innovation product.

The next innovation driver that makes iPhone getting more attractive from user than others is the competitive environment. From the intense competitive environment in mobile market, it drives Apple to develop the better product continuously. Moreover, the high expectation of customer motivates Apple to create the next best thing in order to keep the customers’ loyalty that get from previous products and attract to the new customers. When iPhone launch to the market, it received the great response from customers with the average number of selling 20,000 units per days in the first 200 days. Furthermore, Apple got 19.5% of market share in the first quarter, RIM got the most.

Finally, economic is the key innovation driver. The performance of people in corporations is higher and productivities of products are quite similar. Economy factor pushes companies to have more innovation. For example, fast growth economy likes United State, there is the country where a half of companies in ‘the 50 most innovation companies ranking’, have the headquarters in. Companies try to hire employee who has more creativity and imagination that seem to be the core competency to generate high growth revenue. Business week said “Apple CEO Steve Jobs has turned Apple into the paragon of the creative corporation, and with the evolution of the economy toward creativity underway, companies throughout the world are de-constructing Apple’s success in design and innovation”. Moreover, capability of consumers’ purchasing in economy nowadays is higher. Consumers be able to accept on expensive innovative product that it is easier for company to invest money on R&D and apply higher technology for the innovation product with less concerned on cost.

Strategic Enablers within Apple

The first enabler is the leader, Steve Jobs who is CEO of Apple and co-founded in 1976. He said “Innovation distinguishes between a leader and a follower”. From this idea, he thought that the innovation is the key to get competitive advantage . Jobs said that the best work always come from the best people working. He realized that the only way to do great work is to love what you do. This human resources strategy forms the basis for innovation idea. Finding and fostering people who is the talent in innovation is one of the four principles that drives innovation. The CEO is the key involvement in determining direction and goal of company. In 1997, Jobs became CEO of Apple and bring technologies from NeXT that was purchased by Apple into Apple products especially NeXTSTEP technology that was evolved in Mac OS X. He was the first to see the potential of Graphical User Interface and apply graphic into computer interface. Since then, appealing designs and powerful branding have worked . After that, Apple has been operated by Jobs as CEO.

Jobs started his responsibility in CEO position by reorganizing company. He focused on small group of products such as desktop and portable Macintoshes and eliminated 15 from 19 company’s products (such as printer, scanner and portable digital assistants). Then, he laid off a thousand of worker, closed plant and receiving cash $150 million by exchange stock. He focused on creating popular computer that retailed with the price less than $2,000 and then iMac was created. iMac is unique style desktop computer. This became the first success of Jobs after moving back to the company. Jobs noted “during first 139 days, an iMac was sold every 15 seconds of every minute of every hour of every day and every week”. From this result, it effect to company to get a profit once again with number of selling 800,000 units in the first five months.

The organisation culture was changed within Apple, it geared towards more creativity. Apple’s success cannot be measured by revenue or award but that is company’s culture of innovation which exists as an incubator for a long term impact. Jobs said that his job is pull thing together from different part of company and get the great resource for the key project. Although Jobs configure the company direction, employee team in Apple is also important equally. They play in a role of delivering innovation successful and human resource department must ensure that workers are active and understand the company direction. Spurring employees to think different and motivating their idea by atmosphere can encourage more creativity. Technology Business Research (TBR) supported that culture innovation allows Apple to outstanding perform then lead to increase market share and stay profitable.

The second enabler is intangible resource base including process and structure in organization. That is one of the root causes why Apple’s products are differentiated from others competitors . The tangible resources of Apple are quite similar with general IT companies but apply it to new innovation such as raw material of product, office layout and company location. Apple does not build the first computer or the first phone but Apple try to create the best at all of those. It is seen to be copying but if spending more time to research and apply it with new innovation in design or combining technology, it can come out with strong products. It can be able to convince consumers that this is the best thing out there like what Apple did. The tangible resource of Apple is intellectual of development team who is the smartest people and the best talent. The main success of it is unlocking innovation and dreaming ability of R&D team. iSuppli disclosed that from analysis, the bill of material (BOM) cost of 3GS iPhone is estimated $178.96 for 16 GB. The price of this model in the market is more than twice ( £450 in UK.). The selling price need to be included the cost of intellectual and innovation from development team that is the reason why consumer are acceptable in this price. Another evidence, that reflect the Apple’s capability translating great idea to product, is return of equity (ROE) by 20.9%. However, capability of workforce in Apple is not specific only creating innovation computer but also break into entertainment product as iPod in 2001 and then communication product as iPhone in 2007.

Apple enables intangible and tangible resource to the products and services through an innovation process in order to develop capability.

Strategic Blockages within Apple

Obstacles to sustain innovation of Apple have been avoided except LISA project. Apple developed Local Integrated Software Architecture or “LISA” to be a personal computer in 1983. It was a more advanced and far more expensive system ($9,995 in 1983). It was created too complex that its inclusion of protected memory, sophisticated hard disk, cooperative multitasking and so on. From this reason, LISA turned to be a commercial failure. LISA is a mistake of Apple that LISA was complex product with unnecessary extras and without understanding actual consumers’ needs. However, Apple develops other products by avoiding this pitfall and avoids developing products which out of the line with core value. Its core products are iPod, iPhone, Mac laptop and Mac desktop and get its best-ever performance in last quarter with net quarterly profit of $3.38 billion. From enormous success of these core products, it may be the maturity phase in product life cycle (the highest selling period) especially iPhone because it launched the first model since 2007 and it was developed in many versions. From this reason, it seems to be obstacle if Apple will develop a new innovation model that better than iPhone and create by keeping the key concept of ‘easy to use’ and ‘customer needs’. If the new product is not success, it may impact on its financial because iPhone created big revenue with selling 8.7M units in the last year quarter. The next obstacle is core competency of resource. The intellectual of development teams do not focus and develop on high performance product. Therefore, target consumer is limited in niche market that satisfies in this kind of product. Another obstacle is product limitation. For instance, Mac laptop/desktop is less flexibility than other products in the market (with the same kind). Consumer cannot change hardware which is more suitable with their work. Moreover, consumers may have some problem with software that need compatible with Macintosh operation system.

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Design Thinking and Innovation at Apple

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iphone innovation case study

Stefan H. Thomke

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How Used Products Can Unlock New Markets: Lessons from Apple's Refurbished iPhones

Some of Apple’s most loyal customers think nothing of upgrading to the latest iPhone every time one comes out. But what about consumers who can’t splurge on a $1,000 iPhone 15 Pro? And what about the electronic waste that would accrue if people threw away functional phones?

Long before there were titanium phones with bionic chips, Marcelo Claure, then head of the telecom firm Brightstar, saw an opportunity. A few years after the iPhone’s launch, he reached out to Steve Jobs to convince him to take a big strategic risk: Build a system for refurbishing and reselling Apple’s own smartphones, and salvage recyclable materials to cut costs for commodities and parts for those that don’t make the cut.

“I found that story fascinating. We tend to think about very large companies as having a lot of inertia.”

Claure argued that building a secondhand market for iPhones would enable Apple to not only tap a new market—people who can’t afford the latest iPhone model—but also lower its manufacturing costs. Claure, who’s also the former CEO of Sprint and Softbank, reflected on that conversation to an audience at a Harvard Business School event last year.

“I found that story fascinating. We tend to think about very large companies as having a lot of inertia,” says Professor George Serafeim, who co-led the event. “But here, a very large company that everybody respects for innovation and design and its ability to bring real solutions to the needs of consumers found a way to create a circular economy with its products over time. And not only to expand this market as a cost center, but also make it a profit center.”

Serafeim recently authored a case study that explores how Apple created its own replacement market with the start of its trade-in program in 2013, and bested rivals in the secondary market it expanded. While new phone shipments still outstrip used phones, used shipments across the mobile phone industry rose 12 percent in 2022, according to International Data Corp., as new phones shipments dropped by 11 percent. And the market is forecast to grow by 10 percent a year through 2026.

The benefits of a ‘circular economy’

Many executives might have balked at the idea of creating a used alternative that might cannibalize a flagship product. After all, iPhones account for more than half of Apple’s sales.

However, this “circular economy” model has done the opposite by helping Apple use refurbished iPhones to reach customers in markets that tend to be dominated by lower-priced competitors, the case says. With each customer, Apple gains an opportunity to add subscribers to its music, news, and gaming services.

“Refurbished iPhones are increasingly going to lower-GDP per-capita regions that might not be able to afford a $1,200 iPhone, but they would be willing to buy a $600 iPhone,” says Serafeim, the Charles M. Williams Professor of Business Administration. “Then you also have a software-as-a-service, revenue-generating model because of Apple services, where many of those people are becoming subscribers. And as a result, you have another monetization strategy.”

You don’t need Apple’s unique advantages—but they help

To be clear, Apple’s distinctive innovations helped lay the groundwork for its circular economy success. Specifically:

  • A well-known brand that holds value . The Apple name gives its products higher “residual value,” making them easier to resell, Serafeim says.
  • An actively managed operating system. Apple updates the system its devices rely on often, helping the products stay relevant. “That’s really, really critical,” he says. “If Apple didn’t provide software updates for their older phones, then the phones lose value over time.”
  • Durable hardware . An iPhone is hard to break . The company has spent years making iPhone cases tougher, more water resistant, and easier to repair.
  • High-end recyclable components . iPhones are made with expensive “rare earth” metals that can be expensive to acquire the first time around.

Designing for environmental impact

Any circular economy relies on products designed with recycling and reusability in mind. That means that the product can be easily disassembled, and the recycled material must cost less than newly made components, Serafeim says.

“In the case of Apple, they have these robots named Dave and Daisy that disassemble phones,” Serafeim says. “That allows them to decrease the costs.”

Apple also worked closely with partner companies. From one metric ton of iPhone logic boards and flexible electronic and camera modules, Apple’s partners extracted gold and copper equal to raw material mined from more than 2,000 metric tons of rock, the case study notes.

“What footwear companies such as Nike are trying to do, they're trying to design products through ‘first principles’ to be fit for the purpose for disassembly and recycling.”

Ideally, the company should be able to trace where the materials came from and how they were processed, so they can be transparent to consumers, who will see the environmental impact of their purchase.

“Customers want recycled materials to go into the product, but they need some kind of answer to, ‘How do I know that is recycled material?’” Serafeim says.

Apple isn’t the only company trying to create more circular economy models. Serafeim points to Nike’s efforts designing new shoes that can be disassembled and recycled easily. IKEA is taking a similar approach to furniture. And batteries for electric vehicles have similar potential because of components such as lithium and rare-earth materials that can be expensive to mine, Serafeim says.

“What footwear companies such as Nike are trying to do, they're trying to design products through ‘first principles’ to be fit for the purpose for disassembly and recycling,” Serafeim says. “That makes a big difference. Because, if you don't do that, then it just becomes so hard. And it means cost. And once you have a high cost to recycle, then you're just not going to do it.”

What it takes to build a circular economy

Serafeim advises companies to think of the circular economy through different models: reuse/resell, recycle, and repair/maintenance. Then leaders can evaluate models based on what makes sense for the product, industry, and business strategy.

“Even if you're a small company, there might be some really significant opportunities either on the revenue-generating side or on the cost-mitigation side or risk-mitigation side that you could explore,” Serafeim says.

To guide their decision-making, leaders might consider asking themselves:

Will this model improve the customer experience? “What are the basic service or product characteristics that you're providing that might make certain products better? What are the options for a circular model?” Serafeim says.

Are your raw material costs likely to change? “Just take the example of plastic. If oil prices are really high, virgin plastic is really expensive. But if oil prices are really low, virgin plastic can be very cheap,” Serafeim says. “So, in an environment where oil prices are high, like the one that we have been living in the last few years, recycled materials may make a lot of sense.”

Could generative AI help identify opportunities? Artificial intelligence tools, like ChatGPT and Google’s Gemini, can serve as a “co-pilot for designing a different solution or identifying opportunities by better understanding and breaking down the needs that your customers might have,” Serafeim says. “In many ways, generative AI can be really transformational because it helps you break down status-quo thinking.”

Which products stand to benefit most? “You might have some products with higher residual value and some production with lower residual value,” Serafeim says. “You might have some products where use of recycled materials might be more cost competitive, and others that might be less cost competitive.”

In some cases, none of these models will apply. Some products don’t recycle or refurbish well—yet. Those include low-quality textiles, Serafeim notes.

“Especially for low-cost and fast-fashion types of textiles,” Serafeim says. “There's very low residual value to the product. You find enormous amounts of textiles that are basically in landfills because there's no residual value. So, it’s not worth it for reuse and you cannot cover the cost of recycling.”

Transparency is key for circular shifts

Ultimately, companies and policymakers can help expand the circular economy faster by setting disclosure rules and practices, Serafeim says. For example, in China, regulations require manufacturers to take back electric-vehicle batteries.

“Transparency creates accountability.”

A uniform set of rules serves customers, companies, and ultimately the planet, Serafeim says. Allowing regulators, companies, and consumers to trace material sources with ease can create trust, an invaluable competitive edge for any firm.

“Transparency creates accountability,” Serafeim says. “And you cannot have accountability without transparency.”

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Feedback or ideas to share? Email the Working Knowledge team at [email protected] .

Image: Designer's Note: Illustration created using images generated by artificial intelligence tool Midjourney and from AdobeStock/Tsvetina

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Technology, Society and Policy

Winning and Losing in Reinvention Race : keeps unfolding: --making America’s innovation bucket leaky, creating prosperity out of reinvention, and turning invention successes transitory

  • Innovation History

Apple’s Innovation – disruption from reinvention and details

Reinvention and release of successive better versions out of refinement have made apple a success story of disruptive innovation.

  • Rokon Zaman
  • Created: March 3, 2022
  • Last updated: December 1, 2023

Apple's innovation out of reinvention and refinement have made Apple a disruptive force

Innovation forks out more than 40 percent gross profit from close to $400 billion revenue in 2022. That is a great pinnacle of Apple’s success from innovation. Apple is known for its innovations like iPhone, iPod, and a few more. Due to innovation, Apple grew from the garage as the world’s most valuable company. Ironically, due to a lack of innovation, this company was on the verge of collapse. Interestingly, innovation has given a second life to this great company. Apple’s innovation history is a story of its rise as a disruptor. Its innovation success distills from reinvention and refinement, leading to disruptive force. Ironically, Steve Jobs’ innovation spark did not unfold in Apple’s first product, Apple I. However, soon after, innovation magic started unfolding with the debut of the Apple Macintosh. Notable examples of Apple’s innovation are personal computers like Macintosh, iMac, MacBook, Newton, iPod, iTunes, iPhone, Apple Watch, and Apple TV.

In the 1970s, the development of microprocessors triggered the inspiration among the youths to make, exhibit and tinker with personal computers. Steve Jobs and Steve Wozniak also got into this inventiveness exercise of making their personal computers and exhibiting at the Homebrew computer club in Menlo Park, California. Notably, while working at HP during the summer, Steve Wozniak got first-hand experience designing and making personal computers. Their such creative activity led to making Apple I in 1976, the first innovation of Apple. But both the inside and outside of the wooden box did not have much to claim as innovation.

However, this humble beginning is the first page of Apple’s innovation history, which led to unveiling a series of innovations, having disruptive effects. Examples of Apple’s disruptive innovations include MacIntosh, iPod, and iPhone .  However, evidence suggests Apple’s innovation successes are not entirely due to Steve Jobs’ art of mental model .

Apple innovation emerges from the reinvention of matured consumer products through the human centric more functional design and change of software centric technology core

Key takeaways from Apple’s innovation disruption

  • Not all of Apple’s innovations are disruptive –although Apple is known for disruptive innovations, products like Apple I, Apple II, Cube, and Newton were far from making any mark.
  • Disruption not from magical sparks –contrary to our common belief of the magical spark of Steve Jobs, Apple’s innovations causing disruption to competition have emerged from a systematic effort.
  • Disruption from reinvention and refinement –Apple’s disruption success of Macintosh, iPod, and iPhone has been due to reinvention and refinement of half-baked technologies.
  • Apple’s innovation strategy underpins innovation disruption –Steve Jobs’s personal traits of empathy, Passion for Perfection , and winning the race have led to Apple’s innovation strategy –powering Disruptive innovation .

Overview of the article:

The brief outline of the article is spelled out in the following table of contents:

  • It begins with a summary of Apple’s innovation history .
  • Apple’s first innovation—the debut of Macintosh in 1984 as the reinvention of Apple I and Apple 2
  • The emergence of the iPod as a disruptive innovation to portable music players to rescue Apple
  • To counter the impending invasion of smartphones in iPod’s terrain, the iPhone’s emergence as a disruptive force to smartphones and the iPod itself
  • Apple’s underlying strength to grow as a disruptive force
  • Apple’s innovation strategy systematically empowers the disruptive force

Summary of Apple’s innovation history:

Let’s begin our tour of reviewing Apple’s innovation by looking at the history of Apple’s innovation examples:

iphone innovation case study

  • 1976: Apple I, a populated circuit board with keyboard and interface of using TV as a display
  • 1977: Apple II, upgrade of predecessor as a typical personal computer
  • 1984: Macintosh, the debut of disruptive innovation as the reinvention of personal computer
  • 1985: laser writer; could not establish a footprint, losing the glare to HP
  • 1993: Apple Newton, a palmtop computer, failed to unleash disruptive power
  • 2001: iPod, reinvention of portable music, rescuing Apple from impending bankruptcy
  • 2001: iTunes, as a media player, media library, and mobile device management Utility , contributed to iPod and iPhone value proposition through network Externality Effect
  • 2007: iPhone, ultimate magical innovation, unleashing disruptive power out of reinvention
  • 2008: Apple App store; a solid contributing factor in creating network externality effect
  • 2010: iPad tablet, having a moderate effect in the innovation space
  • 2015: Apple watch, struggling to grow as a reinvention force to cause disruption  
  • 2023, Apple Vision Pro  is an upcoming  mixed-reality  headset. 

The debut of Apple’s innovation magic from the reinvention of Apple I:  Macintosh

For sure, Apple did not create innovation buzz with Apple I or Apple II. Steve’s innovation magic got the first show with the unveiling of Machintosh or Mac in 1984. Magical innovation power came out with the reinvention of the user interface of personal computers. Apple changed the text command-based user interface with graphical user interface technology core, comprising a mouse, menu, icon, folder, and point&clk. It created a considerable buzz, with the sale of 250,000 Macintosh computers in the first year.

However, Neither Steve Jobs nor did Apple develop the GUI technology core. The credit of the invention of this remarkable technology core goes to Xerox’s Palo Alto Parc facility. But Steve deserves his credit in seeing its potential for reinventing PC for easing the complexity of its operation. Furthermore, as opposed to just copying, Apple refined it over six years leading to its debut in 1984. In retrospect, Apple I & 2 were imitations, and Macintosh was Apple’s first innovation. It has succeeded as iMac and MacBook.

Besides, Macintosh’s birth history also gives us underlying repeatable patterns of how Apple innovates. The reinvention of existing products out of borrowed technology, coupled with Steve Jobs’ obsession with refinement, forms the underlying fabric of how Apple innovates. Steve was so obsessed with the refinement that continual suggestions for improvements led him to be kicked out from the project pursuing GUI based interface.

Tiny iPod rescued Apple from imminent collapse:  

Although Macintosh created a considerable buzz, its innovation luster kept fading away due to the departure of Steve and the rise of Microsoft Windows. Due to internal power struggles, Apple lost Steve Jobs in 1985. Furthermore, Apple could not introduce any new radical innovation. Even Apple Newton, released in 1993, could not show any magic. However, in 1996, upon acquiring NeXT for $400 million, Apple succeeded in bringing back Steve. Upon the return, Steve embarked on the mission of rescuing apple by turning around the dwindling financial health.  ow

His notable rescue project was iPod, with code name Dulcimer. Like the Macintosh, the strategy was reinvention. But as opposed to reinventing computers, Steve Jobs targeted the reinvention of portable music players. The targeted technology core was the internet and user interface. Through the refinement of these two technology cores, Apple reinvented portable music players, leading to the unveiling of the iPod in 2001. It emerged as a disruptive force to Sony’s Walkman and many other MP3 players . Soon after its release, Apple got back its innovation glory. Without iPod innovation, perhaps, Apple could have been history.

iPhone emerges as a disruptive innovation:

However, while iPod’s sales were ramping up, Steve Jobs envisioned an impending invasion threat from the smartphone. He felt that people would prefer enjoying music with their smartphones very soon instead of carrying a separate device, an iPod. Hence, he got into the mission, in 2004, to reinvent the iPod and also smartphone. His preferred technology core for reinvention was multi-touch. However, Apple did not have state-of-the-art technology. Hence, Apple acquired FingerWorks, a gesture recognition company. As usual, Steve was not happy with the delicate touch of the acquired technology. Therefore, he directed long research to refine it so that it could be the preferred technology core for reinventing the smartphone user interface. This journey led to the debut of the iPhone, a combination of phone, music player, and internet browser, in 2007.

Apple's innovation iPod revenue grew rapidly, giving the 2nd life to Apple, but gradually disappeared due to the rise of smartphones (iPhone) as a disruptive force

Within a few years, iPhone started unleashing its disruptive innovation power, resulting in the departure of major smartphone makers like Nokia, RIM, and Palm. The fineness of the technology and Apple’s success in releasing successive better versions grew as a strong disruptive force. Furthermore, Apple also created Economies of Scope and network externality effects . For example, the development of the iPhone around the common technology core contributed to economies of scope. Besides, the app store and iTunes started building the network externality effect. With the given disruptive impact on competitors, undoubtedly, iPhone is disruptive innovation.   In retrospect, Apple’s decision of reinventing the smartphone as iPhone, causing destruction to the iPod, was essential to avoid Kodak moment .

Apple’s disruptive innovation unfolds from reinvention and refinement:

Apple is known for disruptive innovation. Apple’s disruptive innovations have been unfolding out of reinvention and incremental advancement through a focus on details. For example, despite the remarkable performance, iPhone-I could not create a radical effect as a reinvention. It unleashed its disruptive innovation power through consistent refinement, leading to the release of successive better versions. Similarly, both Macintosh and iPod unleashed their disruptive innovation power from reinvention and refinement. For this reason, Apple is also known for radical innovation .  However, Apple’s successes from disruptive innovation, distilled from reinvention, raise a question: is Steve Jobs’ success of creative destruction replicable?

Apple’s incremental and sustaining innovation:

Despite the greatness, Apple’s innovations are not immune to competition response. Furthermore, the development of externalities like infrastructure and standards are in dynamics. Hence, to leverage externalities and fend off competition, Apple has been releasing successive better versions of its innovation, with a burst of incremental advancement. Such a sustaining innovation strategy has been at the root of the growing diffusion of Apple’s innovation.

For example, within one year of the release, the sale of iPhone 1 came down to near zero. However, the release of the next version with the 3G feature picked up the sale. Similarly, incremental advancement of camera resolution and jump in camera numbers have been contributing to the iPhone’s success as a disruptive innovation to both still and video cameras. Like the iPhone, incremental and sustaining innovation responses have been vital in all Apple’s innovation successes. Pieces of evidence emerging from Macintosh, iPod, and iPhone indicate that Apple has been disrupting the industry by reinventing existing products, pursuing refinement, and releasing successive better versions.

Apple’s innovation systematically unfolds from a strategy:

Although we praise Steve Jobs’ magical creativity , Apple’s disruptive innovation success reveals a few core strategy components. Apple’s innovation strategy comprises creating and leveraging technological Economies of Scale , scope, and network externality effects. For the implementation of the strategy, Apple maintains a strong technology portfolio. Despite having a solid internal R&D capacity, Apple often acquires technologies from the outside. For example, Apple acquired GUI from Xerox and multitouch from FingerWorks. To leverage them, Apple’s internal R&D team plays a vital role in refinement and integration within the broad architectural framework.  

With the given role of Macintosh, iPod, and iPhone, recreating respective industries out of destruction, Apple is known as a disruptor . In Apple’s innovations, the company is known for having attention to detail and offering fine touch to customer experiences. Apple disrupted the industry through reinvention and refinement . In the unfolding innovation history, Apple has emerged as a force of disruptive innovation . With the given role of Macintosh and iPod, innovation is at the core of Apple’s birth, second life, and continued prosperity. Apple has been disrupting the industry by capitalizing on the power of reinvention, refinement, and sustaining innovation.

You may find these articles relevant:

Apple’s Innovation Strategy – creating and monopolizing

Steve Jobs’ Innovation Secret: Reinvention from Refinement of Borrowed Ideas

Steve Jobs’ Creative Destructions–are they replicable?

iPhone Innovation from Refinement and Integration

Flow of Ideas –misleading business metric?

Innovation S-curve – episodic evolution

Evolution of iPhone as Seasonal Crop—why does Apple keep releasing better versions?

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How Apple Became the Top Non-Corporate Tech Brand

Table of contents.

Apple is a multinational technology company that designs, develops, and sells consumer electronics.

From the Mac, iPhone, and the iPad to the Apple Watch, AirPods, and AirTag, Apple’s products are well-known for their impeccable quality all around the world. 

The company kicked off with a single product and has expanded exponentially ever since then, though it has had its fair shares of ups and downs.

Key Statistics and Facts of 2021 Highlighting Apple’s Dominance 

  • Revenue of  $365.8 billion
  • Net Income of  $94.7 billion
  • Net Assets worth  $351.1 billion
  • Market Capitalization of  $2.9 trillion
  • Stock price of  $177.6  as of 31st December 2021
  • Largest technological company  by revenue
  • World’s  second most valuable company
  • One of the  Big Five American information technology companies

Let’s take a deeper look at Apple’s history to understand its list of remarkable accomplishments and its indispensable place in the technological market…

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Apple’s Innovative Beginnings In the 1970s

Apple is renowned as the most innovative company of all time - a company that disrupted the technological and consumer electronics industry as well as the lifestyle of billions of people worldwide.

Let’s understand how the company began and became a leading player in the market.

The Creation of Apple’s First Product

Apple was founded by Steve Jobs, Steve Wozniak, and Ronald Wayne in 1976, following Wozniak’s creation of the “Apple-I.” Jobs and Wozniak came to be known as “the two Steves” as the company climbed the charts and bewitched customers with its innovative products.

Jobs and Wozniak had known each other before they co-founded Apple. They were dynamic individuals and had a knack for creativity. Even their pranks were executed on a large scale!

Before Apple-I, they were working on "blue boxes" which would allow people to make long-distance phone calls for free.

Later, they dropped out of college, choosing to work instead. Jobs worked at Atari while Wozniak was hired at HP.

In 1975, the two individuals joined the Homebrew Computer Club. Drawing inspiration from the MITS Computer there, Wozniak began to work on his own computer design, known as “Apple-I.”

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Wozniak was the first individual to envision a computer which was a typewriter-television hybrid. The keyboard-screen model has been emulated by all computers since then.

Jobs recognized the potential of Apple-I and took it upon himself to pitch the business idea to both Wozniak and Ronald Wayne, who was his co-worker at Atari.

Wozniak and Wayne were both sold on the idea of a computer company, and together, the three men formed a partnership, naming the company “ Apple. ”

The name was proposed by Jobs who worked from time to time in orchards. People have postulated theories behind the curious name of the company, but Jobs admitted that he simply chose it because it sounded fun and spirited.

The partners secured their initial investment through the sale of personal assets. Job sold his VW Bus while Wozniak sold his HP-65 calculator. Both assets were quite expensive and brought a sufficient sum of money into the business.

Wozniak took on the tedious task of building each computer board by hand, while Jobs took over the marketing of the product. Wayne overlooked the administrative issues of the business.

One of the obstacles that came in the way was a lack of financial resources.

The partners direly needed to obtain the parts required for Apple-I. They had already struck a deal with  Byte Shop  which would buy the completed units of the product.

The issue was resolved because of Byte Shop’s order to  Cramer Electronics  for the parts, which would be sold on thirty-day credit.

Jobs had a role to play in this as he negotiated with the companies and insisted that they follow through with their transaction.

During the one-month period, the partners had to sell enough working computers to cover the cost.

During this time, Wayne left the company, selling his 10% shares to the other partners. He wasn’t ready to take the risk required to go forward, as he had already experienced a traumatic business loss five years prior.

How did Apple Improve and Develop its Products?

The production of Apple-I began in April 1976, and by September of the next year, Jobs and Wozniak were able to sell two hundred computers.

However, Apple’s first product wasn’t without its faults.

Apple-I was essentially a board that could be linked with a separate keyboard and television screen. You wouldn't be able to recognize the electronic board as a computer in today's time.

The board did not have any case, which meant that one could see the wires and batteries that powered it. That said, the aesthetics of Apple’s first product weren’t mind-blowing.

Another downside of buying an Apple-I was that the customers had to acquire a separate keyboard and television screen to run the computer.

This wasn't new at that time. Computers were conventionally sold in this manner, but Jobs had a different idea in mind.

Recognizing these faults, the Apple company launched Apple-II in 1977 which was encased and came with a built-in keyboard.

Apple’s products were finally taking on a more recognizable shape by today’s standards. Plus, Apple-II looked quite attractive.

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Aesthetics, however, weren’t enough. In terms of utility, Apple-II was not up to par and faced much competition from powerful companies such as IBM and DEC.

The only thing you could do with the product at its beginning stages was to write and run commands in the BASIC programming language.

Innovation came from within the company. Dan Bricklin became Apple-II’s knight in shining armor, with his development of the first spreadsheet program called  Visicalc.  This program was created specifically for Apple-II and proved to be quite useful for entrepreneurs.

Schools also recognized the potential of this new product and wanted to allow students to be exposed to Apple’s technology.

Sales for Apple-II exploded as both schools and businesses lined up to buy the highly useful product.

The Apple-II was also unique because it provided functional color graphics. This focus on the user experience would become part of its legacy for years to come.

Apple’s Incorporation and Initial Public Offering

While Apple was doing poorly in terms of financial resources during its first few months, its hard work soon paid off.

Apple had caught the eye of business tycoon Mike Markkula. Taking a personal interest in the Apple computers, Markkula advised Jobs and Wozniak to incorporate the company.

The two partners took the advice and became Apple Computers, Inc. in 1977.

Markkula personally invested $91,000 in the company and secured a line of credit worth $250,000 from the Bank of America, becoming Apple’s first “angel investor”.

The company had enough funds to continue with its production of Apple-II. By 1980, the company enjoyed such success that it decided to go public.

At the end of 1980, Apple sold around 4.6 million shares at $22 per share. The IPO generated a historical amount of capital – over $100 million – ever since that of  Ford Motor Company.

The high level of investment proved that Apple had just begun its journey and that it would continue to trailblaze through the next few decades.

Key Takeaway #1: Innovate By Offering A Never-Before-Seen Benefit

While Apple-I was a variation of the computers that had already existed before, Apple-II broke the market because of its ease of use and appealing outlook. 

Jobs was quick to identify the problem that most customers faced while operating their computers and used that problem to create a unique selling point for its new model. 

Previously, customers had to buy separate keyboards and screens for the “computer”, which looked more like an electronic board. Buying the separate items and connecting them with the computer device was too time-consuming, and sometimes, if things went awry, you had to be tech-savvy enough to fix the inconsistencies. 

With Apple-II, the problem was resolved, as the product came with a built-in keyboard and screen. No longer did users have to venture into the market in search of suitable input/output devices! What’s more, the product looked attractive and thus, appealed to large audiences. 

Apple’s Marketing Strategy and Innovation of Next Products

In 1984, Apple made history through its “1984” advertisement, successfully marketing the nascent Macintosh.

The journey to the Macintosh wasn’t easy – Apple struggled with the development of its next two products, though it learned important lessons along the way.

Before the Macintosh: Apple’s Next Products

Not all of Apple’s products were immediate successes. Before Macintosh’s triumph over the technological market, the company had released Apple-III.

Apple-III was specially catered to the needs of businesses. It provided the option to input lowercase characters on the keyboard and came with an advanced operating system called Apple SOS.

The product fell short of market needs. Immediately after its release, it suffered from stability issues that required the reproduction of the computers.

This incident blemished the reputation of the Apple-III. The leaders of Apple took a quick decision to incorporate Apple-III changes into Apple-II as much as possible, and sell it with the former name.

Following the Apple-III, Apple-Lisa was introduced. This was the first computer by Apple that made use of a graphical user interface.

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Jobs was inspired by  Xerox PARC’s  demonstration of computers with GUI, and he predicted that this interface would be the future of all computers.

Two Apple teams were working simultaneously on producing the first company computer featuring GUI. The first team was working on the Apple-Lisa model and the second one released the Macintosh model soon after.

Jobs introduced a one-button mouse that would go along with the Lisa model. The mouse shown by Xerox had three buttons – similar to mouse today – but it was more expensive compared to the Lisa mouse.

Jobs may have reduced the number of buttons on the mouse, but the Apple-Lisa was still too expensive! In the end, the model turned out to be a failure in the market.

What’s more, in his excitement to develop the Apple-Lisa, Jobs ignored the management structure in place. This led to scuffles in the Lisa team and Jobs was ultimately removed from it.

Ultimately, he turned to the Macintosh team, ready to direct his creative energy there.

Apple Releases the Macintosh

The Macintosh was the first in a line of computers that are sold to this day. The laptop version – MacBook Pro and MacBook Air – is owned by thousands of people all around the world.

What made Macintosh so special?

Apart from the fact that it had an interesting name, the new product provided many features that its predecessors didn’t. Plus, it was four times less expensive than the Apple-Lisa! The team working on Macintosh was led by Jeff Raskin, who named the product after his favorite type of apple – McIntosh.

Unfortunately, after Jobs joined the team, he and Raskin had a falling out which led the latter engineer to leave the team. The Macintosh was, therefore, released under Jobs’s discretion.

Under Jobs – and Bud Tribble – the Macintosh team was convinced to implement GUI which became the reason for its popularity.

iphone innovation case study

The product also had fewer chips and made smart use of hardware, allowing it to reduce costs drastically.

The Macintosh's visual language was also appealing. Susan Kare was the one who led this project, creating icons that are used up to this day.

The Macintosh also looked great, even when it was turned off! Like all of Apple’s products – save for the Apple-I – there was a special focus on aesthetics and outlook.

When the Macintosh was released in 1984, it blew the charts. Yet its features weren’t the only reason why sales exploded.

Apple’s Marketing Strategy: The “1984” Advertisement

One of the most famous landmarks in Apple’s history is its “1984” advertisement.

Making use of the famous dystopian novel by George Orwell, Apple created a narrative that allowed its brand image to be aligned with liberation and creativity.

The production of the advertisement wasn't cheap, especially considering that Apple planned to run the ad during the third-quarter break of the Super Bowl tournament.

The advertisement juxtaposed scenes of marching drones with those of a woman running with a sledgehammer. The woman wore a tank top that had an illustration of the Macintosh printed on it.

The drones sat down to listen to Big Brother talk from a huge screen. As they listened, the woman with the hammer kept running towards the screen and crashed her weapon into it, destroying Big Brother.

The slogan for the ad was – “On January 24th, Apple Computer will introduce Macintosh. And you’ll see why 1984 won’t be like Nineteen Eighty-Four.”

After its initial launch during the Super Bowl, the ad was played on different channels. Interestingly, there was some dispute within the marketing team over whether to run the ad or not, although they decided to take the risk in the end. The gamble sure did pay off!

Not only did the Macintosh sales explode, but the advertisement also remains popular to this day. It topped the  Advertising Age’s  list of the fifty best commercials ever made and was hailed as a masterpiece.

Funnily enough, the next year, Apple ran an advertisement during the Super Bowl again. Expectations were high, but people were let down when they saw “Lemmings.”

This ad depicted the same robot-like people, who were now blindfolded and were walking towards a cliff. Since they couldn’t see ahead of them, they were relying on the person in front of them to lead the way.

One by one, they fell off the cliff to their deaths. The last of these people, however, seemed to have an epiphany and it was at this point that the ad switched to The Macintosh Office, which was the product in question.

The advert seemed to portray that people who didn’t use the Macintosh were inferior. This wasn’t a particularly great strategy as it attacked the very customers it was supposed to appease.

Key Takeaway #2: Stand for Something Specific To Elicit Emotion 

Advertisements serve the purpose of creating associations between the product and its message.

Taking advantage of the celebrated dystopian novel “1984” and the current date, Apple chose to portray liberation and freedom through its product.

The message was relevant and evoked sentiment, especially for people who were aware of the haunting plot of the novel.

This backfired with “Lemmings,” but the association had already been created through the previous advert, and the Macintosh was enjoying high ratings.

There’s an important lesson in this! Along with being relevant, it is also important to ensure that your brand image doesn’t insult people who  aren’t  buying your product.

Apple’s Fight Against Competitors

Even back in the day, Apple was an expensive brand, which meant that competitors could easily eat up Apple’s sales with lower-cost products.

As predicted, Apple faced heavy competition from  Microsoft  due to its Windows software.

The latter company continued to accumulate a higher market share, which was concerning for the Apple leaders. Eventually, they deployed many tactics to ensure that their brand was still relevant.

Apple’s Changing Management

One of the issues that plagued Apple following the release of the 1984 advertisement was the tension between its leaders.

After Mark Markkula retired, Jobs hired John Sculley to take over the CEO position of Apple.

Jobs’s famous pitch to Sculley – “Do you want to sell sugared water for the rest of your life or do you want to come with me and change the world?” – won him over and in 1983, Sculley assumed the new leadership role.

Almost two years later, Jobs and Sculley were involved in a power struggle. Jobs wanted to cut down prices for the Macintosh while Sculley insisted on a price hike, given the current costs.

Sculley also wanted to focus on the Apple-II as it brought in a steady stream of revenue, while Jobs was averse to this idea, wanting to explore the potential of Macintosh further.

The power struggle reached its apotheosis when Jobs tried to arrange a board-room coup against Sculley. The plan failed, however, as Sculley was informed of the situation, and ultimately, Jobs was removed as head of computer design in 1985.

Sculley made Jobs the Apple Chairman, which meant that Jobs was little more than a figurehead. Vexed by the situation, Jobs resigned and founded another company called NeXT, taking several Apple employees on his turf.

Before Jobs left, one noteworthy development took place.

Apple Spearheads the Desktop Publishing Market

Just like VisiCalc had shaped Apple-II’s triumphant future, the Macintosh, too, needed a killer application to boost its sales.

Reinforcements came in the form of the LaserWriter, Apple’s debut laser printer.

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It was the first laser printer to use the Adobe PostScript control language, which would remain a tradition for the desktop publishing market to this day.

What was special about the LaserWriter was that it allowed thirty-one users to connect to it at once. In its own departments, Apple pushed that number up to 40, which was revolutionary for the printing market.

LaserWriter was the hardware required to spreadhead the desktop publishing market. Soon after, the PageMaker was created by Aldus specifically for the Macintosh, taking its position as the product’s killer application.

It's interesting that to give the Macintosh a competitive edge, Apple set off a new pathway for the whole desktop publishing industry!

Apple Employs “55 or above” Policy to Boost Revenue 

The main friction between Sculley and Jobs was due to their disagreements on product pricing. Sculley held that since costs were high, it was impossible to push back prices too much without compromising the profit margin.

Instead of selling Apple products at a consumer-friendly price, Sculley and the rest of the team decided that they would change their target audience.

Aiming for the high-end market, they sold all of their products at a fifty-five percent profit margin or above.

The expensive nature of Apple’s products was justified through the addition of valuable features. For example, in the mid-1980s, Apple introduced color displays in the Macintosh.

The policy worked in their favor in the 1980s, but it backfired as cheaper PC clones began to emerge in the market. During the Christmas of 1989, the company experienced declining sales, and its stock price dropped by 20%.

The competitors were at their throats and customers were jumping ship. What the company needed was a revision of its pricing policy or a product breakthrough to solidify its position in the market again.

Apple Releases Lower-Cost Products and Increases Market Share 

The Apple leaders were aware of the current market situation. Their immediate solution was to release lower-cost products.

These products included the Macintosh Classic, the Macintosh LC, and the Macintosh Ilsi, starting the "golden age" of the Macintosh from 1989 to 1991.

Apple went a step further and released the PowerBook in 1991, which would become the archetype for modern laptops.

iphone innovation case study

Apple had already built an excellent brand image over the past few years and customers were eager to get their hands on affordable products by the company. Despite the competition, Apple was back on its feet quickly.

Things still weren’t looking that great. The sale of lower-cost products had exploded, but that meant the higher-priced products were being ignored.

Apple’s solution was to introduce three different brands, each aimed at a different target audience. Each of these brands would sell somewhat identical products at different price points.

The Quadra, Centric, and Performa models emerged from this decision.

The Performa line of computers was catered specifically towards home users, with software like ClarisWorks and Grolier Encyclopedia. These computers would be available at department stores, allowing Apple to cash in on a new, wider market.

As it turned out, launching three different lines of computers wasn't a viable option, since it confused the customers.

As a result, Apple released a thirty-minute infomercial to educate its audience on the different brands. Even though the infomercial was up to par, the length meant that it required too much patience out of the customers!

On top of that, Microsoft had geared up to release Windows 3. While Windows 1 and 2 were not up to Apple's standards, Windows 3 took the technological market by storm.

Apple had to take quick action.

Apple vs Microsoft: The Famous Lawsuit

In 1988, in an attempt to retain its unique position in the market, Apple filed a lawsuit against Microsoft.

Apple argued that the generic “look and feel” of the Microsoft operating system was similar to its own and this should be subject to copyright protection. The court rejected the generic argument and entreated Apple to bring in more specific complaints.

iphone innovation case study

Apple came back with a shocking list of complaints, consisting of 189 items. The court didn’t buy most of them, rejecting all but ten.

The company lost the lawsuit in 1992. In the meantime, Xerox PARC had also taken it upon itself to file a case against Apple for using the graphical user interface.

This was an act of self-defense as it reasoned that since Apple had acquired the idea of the elements through its visit to PARC,  it  should be the one to win the rights over the graphical operating system.

Xerox PARC’s claims were also rejected in court.

Apple Joins Hands with Competitors IBM and Motorola

The AIM alliance, founded in 1991, was the joint project of Apple,  IBM , and  Motorola , to build a software-hardware combo called PReP or the PowerPC Reference Platform.

This was an ingenious move by Apple as it allowed it to take advantage of its competitors' expertise and to take some of the market share away from Microsoft.

While it was a great idea, the project failed due to the different dispositions of the companies. All three companies were giant corporations with their management structure in place, so it was inevitable that disagreements would arise.

In the end, PReP never happened, but the project hadn’t been completely futile. After all, Apple used the PowerPC processor for its next few products between 1994 to 2006, before the arrival of OS X.

Key Takeaway #3: Take Advantage Of New Opportunities But Adapt Fast When They Evaporate

Apple took the liberty to change its pricing policy according to its market situation.

When Microsoft was still behind with its operating system, the company adopted a high-pricing policy, aiming to collect higher profits through a smaller but solid customer base.

This allowed the company to take advantage of its loose monopoly over the market. Moreover, the costs of developing the products were already high.

Circumstances changed with Microsoft’s release of Windows 3. As customers jumped ship to cheaper options, Apple responded by introducing a series of lower-priced products.

The company also introduced the Performa line for home users and shipped the products to department stores, thus, making up for the lower profit margins by targeting a wider, more diverse audience.

Apple Narrows Product Line and Solidifies Brand Image

In the 1990s, as Apple fought against its competitors, it started diversifying its product range.

By 1997, Apple sold not just computers, but digital cameras, video game consoles, portable CD audio players, TV appliances, and so on.

These products weren’t exactly successful and only created additional issues as the management struggled to streamline its product range and brand image.

With Jobs’s return to Apple, the company began a new era, transforming into the company that we know so well today.

Apple Acquires NeXT

Apple wasn’t doing as well as it had hoped.

Its diverse product range was more or less a flop and its in-house operating system had seen better days. By 1996, the company leaders decided it was time to buy a new operating system.

Apple had two choices: BeOS and NeXTSTEP, both of which were created by former Apple executives. The company settled on NeXTSTEP, consequently bringing Jobs back to the Apple scene.

Apple didn’t just want a licensing deal - it ended up purchasing the entire company! In 1997, NeXT was acquired for $429 million, in addition to 1.5 million shares.

As soon as Jobs was back, he stirred trouble. He convinced the board that the current CEO wasn’t competent and the board decided to station Jobs as interim CEO.

Once again the captain of the Apple ship, Jobs set about making changes to Apple’s product range.

Apple Returns to Simplicity

Going back to Apple’s original brand image, Jobs narrowed the product range, transforming the company into the one we know today.

Under Jobs, Apple sold only four computers. Two of these were reserved for consumer purposes while the other two were frequently bought by businesses. 

Jobs also scrapped the diverse products that the company had been offering in the 1990s and got rid of most of its licensing deals.

The idea was to build a brand around a specialized set of goods and to focus on refining them for its customer base.

With the end of the licensing deals, the market share of Apple’s operating system dropped from ten to three percent. It seemed like streamlining the business would require some sacrifices.

Jobs wasn’t dispirited by this – he was too preoccupied with all his other plans. For example, he convinced Microsoft to invest a striking amount of $150 million in Apple, insisting that it continue to develop software for the company.

Jobs also hadn’t forgotten the success of “1984” in boosting Macintosh sales; he launched another marketing campaign called “Think Different.”

The “1984” ad had associated Apple with liberation and freedom of thought. The “Think Different” ad built on that brand image, linking the brand with the great thinkers of history such as Albert Einstein and Mahatma Gandhi.

The moment of truth arrived with the year-end financial report. In his first year as CEO, Jobs had managed to spike the profit to $309 million!

Riding the high tide of its success, Apple then released the iMac in 1998, which was swallowed up by its customers due to its economical pricing.

Apple’s Innovations in the First Decade of the 21st Century

Apple was back on its feet and was about to become even more legendary. In the 2000s, Apple released a series of products that would break the market with their user-friendly interface and their pleasant outlook.

Before that, Apple released its brand-new operating system called the Mac OS X.

The company's previous attempts hadn't been fortunate. The 2001 attempt, on the other hand, capitalized on the features of NeXTSTEP, OPENSTEP, and BSD Unix, combining stability, reliability, and an approachable user interface all in one operating system.

In the same year, Apple began releasing its new products. The first of these was the iPod music player. Its click-wheel interface was immensely satisfying, and consumers loved how well it worked with Apple’s iTunes.

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The next year, Apple developed GarageBand, which was an application created for music producers. In this way, the company expanded its market from listeners of music to its creators.

In 2003, Jobs got the iPod’s popularity cracking by convincing the “big five” recorders of the music industry to allow Apple to sell their music on iTunes.

Two years down the line, Apple made another important announcement. Its PowerPC days were coming to an end, and it was not transitioning to Intel processors.

The company scrapped previous models, replacing them with the Mac Pro, MacBook, and MacBook Pro.

Being a technological company, Apple understood the need to stay ahead of its time. Its new models were a success, and in 2006, the company went even further by helping users install Windows XP or Windows Vista on their Macs.

The long, dreary rivalry between Apple and Windows had finally been resolved.

The future of Apple was starting to become clear. In a keynote address in 2007, Jobs rebranded the company as “Apple Inc.” as opposed to “Apple Computers Inc.” marking its shift from computers to consumer electronics.

In the same event, the company introduced the iPhone, later followed by the release of the App Store. The iPhone, with its updated models, continues to be a success to this day while the App store generates average daily revenue of $1 million!

The company kept improving the iPhone experience by introducing new features. FaceTime was one of the well-received applications in 2010. Multitasking was another convenient feature that made the Apple experience seamless.

Apple also updated its lines of iPod by introducing the multi-touch iPod Nano, iPod Touch, and iPod Shuffle.

In the next year, Apple released the iPad which would become one of its key products. With a large screen and an accessible, user-friendly interface, the iPad was perfect for streaming videos, playing games, and reading.

Key Takeaway #4: A Great Strategy Is A Clear Point Of View With a Strong Focus

As Apple struggled to fight off its competitors, it made the mistake of over-diversification.

While diversification is generally beneficial because it diffuses the risk, too much diversification means that it becomes hard to define the company.

With Jobs's return to Apple, the company finally found its area of specialization and concentrated all its efforts on consumer electronics.

The move paid off – the products released in the 2000s continue till today, two decades later, and are well-loved by customers.

Apple’s Digital Transformation 

Jobs passed away in 2011, leaving the company to Tim Cook’s discretion.

In the years following Jobs’s death, Cook made many changes to the company’s operations. One of these was turning over the management strategy of the company.

Apple’s Management Strategy under Tim Cook

Since Apple had been Jobs’s and Wozniak’s brainchild, Jobs had been reluctant to delegate decision-making tasks to others. Cook, on the other hand, did not want all the decisions to flow through him directly which made the process quicker and more efficient.

In the following years, the company concentrated on updating existing products and adding new features to them.

2012 was the year the legendary “Siri” and “iCloud” were introduced, both of which enhanced the Apple experience.

The company also acquired a new taste for acquisitions under Cook. In 2014, Apple took over  Beats Electronics  which sold headphones and speaker products. These would now be sold in Apple stores.

Later, Apple also acquired  Shazam , which specialised in music, film, TV, and advertisements. It was suspected that this takeover would boost Apple music streaming services.

In 2014, the infamous Apple Watch was introduced. It started as a fashion accessory but over the years, it became the go-to product for keeping track of one’s health-and-fitness activities.

Later, with the integration of  Apple Pay  and the Wallet App into the product, the Apple Watch became even more indispensable.

Apple Ventures Into The World Of Finance

Apple is a leading name in digital transformation. It has not just transformed personal computer experiences but has also made groundbreaking changes in other fields, such as bank payments and business operations.

In 2012, Apple launched the “Passbook” app which was later renamed “Wallet” in 2015. This application served various functions and allowed users to store passes such as coupons, boarding passes, student ID cards, government ID cards, and even car keys.

Wallet was particularly useful with the launch of services such as Apple Pay and Apple Card, as it allowed the company to secure data on the app, while allowing customers to use the services to make contactless payments.

Apple Pay was introduced in 2014, followed by Apple Cash and Apple Card in the later years.

As the names suggest, Apple Pay was primarily focused on contactless payments while Apple Cash allowed cash transfers, which was particularly useful when wiring money to friends or family in the USA.

Apple Card, on the other hand, was a digital version of the credit card. No identifying information was available on the digital version, as all the details were stored and secured in the Wallet app.

This made Apple Card one of the safest options out there. What’s more, Apple partnered with several companies such as Uber, T-Mobile, Walgreens, and Nike, offering three percent cash back rewards on purchases made from any of its partners.

Apple also gave cash-back rewards for its own products, plus any third-party applications bought on the App store or products purchased from the iTunes store.

The rewards, in addition to the most reliable security system, made the Apple services desirable. The company had finally found a way to diversify its portfolio while at the same time, maintaining its simplicity through relying on its key products.

Apple Releases M1 and M2 Chips

Apple’s remarkable growth in the past forty years landed it the top position in the tech list of Fortune 500 in 2016. Overall, it occupied the third position, which was no lesser feat.

In 2020, Apple reached another milestone in its history, becoming the first country in the USA to reach a market capitalization of $2 trillion!

In that year, the company also decided to move away from Intel processors. This would prove to be a well-timed move, with the release of the M1 chip.

Previously, Apple had relied on multiple chips to power its products. With the release of M1, numerous technologies were smoothly integrated into a small but powerful chip.

M1 had the world’s best CPU performance per watt, so you could say it was quite the success! With that, Apple released its in-house processor dubbed the “ Apple-M1 .”

The shift from external processors to in-house ensured that Apple’s performance was more harmonious than ever.

Later, Apple also released the  M2 , which had a 18% faster CPU, a 35% more powerful GPU, and it delivered 50% more memory bandwidth compared to the M1! Needless to say, it was quite a leap and contributed greatly to the quality of products we see today.

Apple’s Digital Transformation

In the last decade, Apple has relied heavily on its services, along with its products, to bring in monumental amounts of profits.

Surprisingly, not all of these services are available to customers! Apple is quite secretive about its internal operations, yet it has been discovered that it has created exclusive apps for its in-house operation.

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For example, Apple has its own digital newspaper in the form of the “Daily Download” app.

“Inferno”, on the other hand, ensures that your phone doesn’t explode – quite literally – by shutting down the device if it reaches critical temperature. The application also keeps employees updated on the state of the software/hardware of their devices.

“Mobile Radar” is the app used by Apple employees to file notifications of any new bugs discovered by them. It’s the company’s “internal bug-tracking system”.

Similarly, “Receipts” is an app that keeps track of employees’ business expenses. So, if an Apple employee goes for dinner with a business partner, she can simply update it on the app!

Many other applications exist that allow employees to work in an integrated and well-organized manner. While these applications are not revealed to outsiders, they contribute greatly to the impeccable performance of Apple devices.

Key Takeaway #5: Consistency In Employee and Customer Experience Is A Competitive Advantage

In the last decade, Apple has brought both software and hardware engineering in-house, ensuring that customers have a consistent and smooth experience. The company relies completely on its own technology to develop its products. 

The coherent structure of the company’s products allows it to maintain tight control over the security of its services, such as those like Apple Pay. 

What’s more, Apple has also bought its digital transformation inside its office.

By giving exclusive access to its employees to its many useful applications, Apple has not just ensured a well-managed company, but has also kept employee motivation on the rise.

Why Is Apple So Successful?

Over the years, Apple has come out with remarkable and innovative products, coupled with a robust marketing strategy, to form the largest technological company in the world.

Apple’s Vision

Apple strives to bring unique products to the table and enrich the lives of its customers.

“To make the best products on earth, and to leave the world better than we found it.”

Apple’s Mission

Apple’s purpose is to make life easier for its consumers, including business owners and students, and to provide them with a smooth technological experience.

“To bring the best personal computing products and support to students, educators, designers, scientists, engineers, businesspersons, and consumers in over 140 countries around the world.”

Apple’s Growth by Numbers

Strategies to learn from apple’s journey.

Apple’s exciting journey offers many lessons for young, ambitious entrepreneurs.

Some of the key strategic takeaways are as follows:

  • Innovate Your Way to Success

Apple began with an electronic board that came without a keyboard or screen. This was by no means a 'new' invention considering that MITS computers had already existed.

What  was  new was the design of the computer. This was later enhanced with the release of Apple-II, which came with a built-in keyboard and was beautifully encased.

As a result, the Apple-II broke the market as people clustered to buy the convenient - and aesthetically-pleasing - model.

The company continued the tradition of innovation throughout its history. The Macintosh similarly flooded the market, and the iPod music player disappeared off shelves as customers placed orders to buy it.

Apple also developed software, applications, and operating systems, to go along with its products, which was a nod to its innovation strategy. All these things combined made Apple a successful company.

  • Be Creative With Your Advertisements

Apple’s “1984” advertisement is well-known even today.

Its commendable use of the renowned novel to mark the arrival of Macintosh won customers over. The brand was inevitably linked with ideas such as liberation, as Apple’s products stood in direct opposition to Orwell’s literary world.

Apple’s “Think Different” advertisement was produced with a similar sentiment in mind.

The company’s product represented a certain mindset, which was present in the great thinkers of history, such as Albert Einstein.

So, when customers went to buy Apple’s products, it triggered certain feelings and thoughts within them, inexorably increasing the company’s sales.

  • Offer Customers A Wholesome Experience

Apple-II’s sales were carried by the killer application that accompanied it. Visicalc - the first spreadsheet program - was the reason why both businesses and schools scampered to buy the company’s second product.

Similarly, the LaserWriter and the PageMaker became the reason for Macintosh's popularity.

Apple realized early on that it needed to create a complete experience for its customers. Taking this lesson to heart, the company kept improving its products and adding features to them to boost sales.

For example, the introduction of "Siri" and, later, multitasking in its products were meant to enhance the consumer experience.

  • Build a Consistent Brand Image

Apple built a robust brand image through its advertisements but struggled to articulate its primary purpose in the 1990s.

With Jobs’s arrival on the scene, the situation improved, as Jobs removed all unnecessary products from the company’s portfolio.

Narrowing the product range was necessary, as it allowed Apple to achieve specialization in its main field.

Plus, with a more manageable number of products, the company was able to rebrand itself as a consumer-electronics company. The brand image was now consistent, and its energies were directed in the right field.

Apple is five years short of hitting its 50th anniversary, yet it has a remarkable list of accomplishments attached to its name. Over the past years, the company has contributed greatly to the technological market by innovating user-friendly and aesthetically-pleasing products. The journey has been tumultuous, but Apple has shown its resilience, promising a bright future ahead.

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Knowledge at Wharton Podcast

The apple-samsung case: what it means for patents — and innovation, august 29, 2012 • 35 min listen.

A California jury awarded Apple what could be a decisive victory in the smartphone wars last week by ruling that Samsung infringed on a number of patents relating to the functionality and design of the iPhone. Samsung plans to appeal, but Apple is now calling for a ban on U.S. sales of some of the devices at issue in the case. Some observers believe the verdict might open the door for additional Apple lawsuits against other smartphone makers -- including Google. Wharton professors David Hsu and Andrea Matwyshyn discuss the key players, the future of smartphone design and the U.S. patent system. (Podcast with transcript)

iphone innovation case study

In what some are calling “the patent trial of the century,” a federal grand jury in California last week decided in favor of Apple in a patent infringement lawsuit against Samsung. In addition to awarding Apple more than $1 billion in damages, the jury found that Samsung violated several iPhone utility and design patents when it created phones such as the Galaxy S II and the Fascinate.

Following the verdict, Apple requested that eight Samsung phones be banned from sale in the U.S. A hearing on the matter has been scheduled for December. In the meantime, Samsung has said it will appeal the case. Many observers believe Friday’s verdict could open the door to Apple pursuing litigation against other companies — including Google, maker of the Android operating system used in Samsung phones and tablets.

To discuss the key issues of the case, Knowledge at Wharton turned to Wharton management professor David Hsu and Wharton legal studies and business ethics professor Andrea Matwyshyn .

Edited versions of both transcripts appear below.

In the first conversation, Hsu talked about the case’s impact on innovation as it relates to design and creativity.

Knowledge at Wharton: David, first of all, could you tell us some of the winners and losers as a result of the jury’s decision?

David Hsu: Apple is the clear winner here, and the device makers on the Android system are the ones that are going to be scrambling and trying to figure out in what areas they’re going to have to retrofit, or even redesign, their products. Of course, Google is kind of the company lurking in the background — it isn’t being attacked directly, but it’s getting closer [to being directly impacted]. My interpretation of why Apple leadership was so insistent on pursuing this case to the end is because they feel strongly that the design elements in conjunction with the functional elements of their products really make the user experience, and they want to protect that. As a result, the likes of Samsung, HTC, Motorola Mobility (owned by Google) and the other large handset makers on the Android platform are the ones that will be trying to figure out their next moves.

Knowledge at Wharton: Are there other winners besides Apple? I know there’s been some discussion that Microsoft, which makes the Windows mobile operating system used in Nokia devices, could get a boost from this decision because their product is so different from Apple/Android.

Hsu: I think that may be true in that this opens up the landscape of competition beyond just the functionality. Maybe it would be useful to take one step back and to analyze the patents that were under dispute here. A number of them were on the design side, so it’s not protecting the functionality of the innovation, but rather the packaging of it. And then a few of the others did not go to the core of the operating system, but were about some of the more design-oriented aspects, [such as] the [feature in which pages viewed on Apple’s iOS operating system “bounce back” into place when a user reaches the top or bottom] or the array of the icons on the grid.

I interpret it as a strengthening of design-related patents. Previously, it was the case that if you were a furniture designer and came up with an innovative design, that did not necessarily stop competitors from coming in and marketing say, an “Eames-like” chair, so long as they were clear that it was not the genuine product. [The Apple/Samsung case indicates] that there seems to be a broadening of the protection of design elements. And so this, I think, broadens the landscape for how companies — including electronics companies or fashion design companies — will seek protection of their creative efforts, their intellectual property.

For the direct competitors in the handset space, [the implications] will play out in terms of acquiring patents, as we’ve already seen over the last two years or so. There has been lots of interest in trying to acquire whole “patent portfolios” that surround smartphones. Obviously, the smartphone is going to be the Swiss Army knife of the 21st century — it already is, and is becoming more so. And as a result, there is almost a land grab for the various kinds of more elemental patents in intellectual property that undergird that platform.

So to summarize my answer, I think that this case will broaden the landscape of competition. It may open the landscape a little bit more. You mentioned Nokia and Microsoft, and clearly they have their own operating systems for the smartphone hardware, and they may be kind of waiting on the edges. But it is pretty clear that the dominant competition, at least right now, is the Android versus the Apple operating system. So this is why the case was billed “the [patent] trial of the century,” as a result of the two large manufacturers going head-to-head in this battle.

Knowledge at Wharton: So you don’t think that one impact will be Nokia and Microsoft immediately elbowing out Samsung, HTC, Google and the rest of the Android-based phones? It would be for the number one space, since Apple phones are really number two in the U.S. market.

Hsu: No, I don’t think that this is going to radically reconfigure the landscape because in this kind of platform-oriented competitive space, there tend to be tipping points. And there has to be enough of a critical mass of users, a developer community and support by the companies to really enable the critical mass because people are not necessarily just looking at today’s functionality: They’re trying to anticipate the functionality down the road as they decide to adopt one platform or another.

While I think that there’s going to have to be some redesign [as a result of this case] — not only in the smartphone market but also in the tablet market, where these operating systems naturally share a common code — what we’re going to see if anything, is perhaps more of a creative or innovative effort by the manufacturers of the Android platform to try to differentiate themselves.

But I do think that there’s a window now, a little bit of a window of opportunity for Microsoft and Nokia to take advantage of this particular event. Whether or not they’ll be able to successfully navigate that obviously remains to be seen.

Knowledge at Wharton: You just mentioned the potential that this case will encourage more innovation in smartphone design. Patents are intended to encourage innovation, but do you feel that cases like this — where some of the aspects Apple is trying claim as proprietary would seem to severely limit the design and functionality options for all of the other players in the market — can actually have the opposite effect? Have we reached a kind of inflexion point with this so-called “smartphone patent land grab” that’s been taking place?

Hsu: Let me try to lay out the arguments on both sides. On the one hand, you could certainly think about companies like Apple, which spent many years coming up with the perfect design that might appeal to the users, as just trying to protect that and trying to blockade any efforts [to copy that design]. It’s much more about the symbolic value of what Apple is doing, despite the judge urging the CEOs of Samsung and Apple to try to come to a private settlement. Apple wasn’t interested in that, of course, because they wanted to assert and send a signal to the broader market about trying to protect their efforts.

It is true, and I think the Samsung team tried to make these arguments of should it really be the case that the casing of the phone, the rounded corners on the rectangle and the spacing between icons on the grid need to be protected. And we have to keep in mind that there is this distinction between the design patents and the utility patents. The utility patents are much more about the functionality of the phone; the design patents are just about the non-functional elements. These things come together as a package to the consumer.

I think we are treading a line a bit in terms of how much protection should we as a society give to the innovators — and we should think about innovation very broadly, not just in the technical sense, but here broadened out to the design sense — balanced against a free market economy in which there is healthy competition that can observe market signals, try to build on top of what’s already been done and basically unlock more value for consumers.

As I said earlier, before now, design patents were thought to be fairly ineffective, not really enforceable. Utility patents have always been a domain where companies have really tried to be both offensive and defensive in the patent space. And so this judgment will give companies and managers a reason to start thinking about design as the basis of protection.

To your broader question of whether this is good or bad for society, I think it always has to be a balancing act. Whether or not these particular patents being enforced this way will send a chilling signal to the rest of the market remains to be seen because this is just the tip of the iceberg. This is one trial. Apple and Samsung have something like 19 or 20 trials around the world slated. Of course, this judgment will impact how Samsung will put forward their products, as well as others that use the Android system, but there remains in this case an appeal that’s looming, as well as many other jury trials that will be in different jurisdictions around the world. And so I think that this is not necessarily just the beginning, but it’s also not close to the end in terms of this patent war.

Knowledge at Wharton: I think I had read that Samsung has said they’re willing to take this case all the way to the Supreme Court if necessary.

Hsu: This will actually be an interesting test case for many creative industries, not just electronics or information technology. I alluded to design, fashion, product design, industrial design — all these things tend to be converging and increasingly are differentiated…. I think Apple has shown repeatedly that users care not just about the raw technical horsepower of the product, but also how they interact with it. And so my interpretation of this case is much more about the implications for the design community and protection of creative advances in thought very broadly, not just in the technical space.

Knowledge at Wharton: Apple is the winner in the court of law for now, at least, but what about the court of consumer perception? How do you see this affecting Apple in that space, and Samsung as well?

Hsu: That brings up a point that I should have probably mentioned earlier, which is that these product lifecycles tend to be fairly quick. We’re used to a new iPhone every year. And while [companies are] not completely abandoning some of the core design, it’s not like some other industries in which one design will rule for decades and decades. And so you wonder why Apple and Samsung took this case all the way to a final judgment … since it’s likely that the design a couple years from now will be obsolete.

In terms of public sentiment, Apple has to be a little bit careful. I think this can work both ways. On the one hand, there could be a little bit of a backlash from users saying, “Well, I actually prefer, for example, an Android platform and Apple is trying to assert these rights about how things are laid out, the physical form of the product, in ways that aren’t necessarily novel or that deserve patent protection.” And so [consumers] could be more willing to experiment with some of these other platforms, like Nokia, Microsoft, etc.

On the other hand, I could see perhaps some users acknowledging that Apple did spend quite a bit of effort and put a great deal of detail into the design, as well as the functionality, and they should be rewarded for that.

Apple has had a blockbuster set of years in terms of their performance on the stock market and the value of their company. There is this danger that maybe they’re going to be perceived as, in some sense, the next Microsoft, trying to come up with one innovation and then trying to blockade everyone, and not allowing competitors to come in and innovate. There is this double-edged sword phenomenon that could work here. Apple has to, as they’ve been doing, continue this pace of innovation, and as I said before, it is this delicate balancing act between trying to protect versus trying to innovate and allowing others to come in as well to try to push the envelope forward.

Knowledge at Wharton: Do you feel like this case represents a new strategy going forward for Apple? Apple has always been able to capitalize on this sort of cool aesthetic that’s attached to its devices. Is that put in danger if the company goes into more of a protectionist mode?

Hsu: That’s the danger of being the market leader: All of the sudden, they become the targets of all types of consumer sentiments. That was certainly true when Microsoft ruled the day. [Apple] is a company that obviously stresses industrial design, as well as functionality and obsessing over the details. I think consumers have clearly appreciated that. I’m sympathetic to this argument of, now that Apple has been so successful in the market, companies like Samsung coming in and just basically taking everything that it’s done after lot of experimentation doesn’t seem fair.

On the other hand, as these types of cases get sharper in the courts of law in terms of protectability versus not, I think what is allowable versus not will become clearer. Before now, it hasn’t been such a big, high-stakes type of enterprise. Now that landscape has shifted a bit.

But in terms of the overall corporate image, it’s clear that Apple’s brand and what it means as a brand to consumers is quite valuable. And so this litigation is an effort to try to, in accordance with its late founder, Steve Jobs, defend itself there. But as you allude to, there is this danger that if they become perceived as litigious, or if that part of the company crowds out the more innovative, creative, design-oriented side of things, then obviously it becomes problematic for Apple. They don’t want to lose what’s been at the core of their identity and what’s caused them to become the world’s most valuable company.

In a separate interview immediately following the interview with Hsu, Matwyshyn talked about the case’s implications for U.S. patent law and how patents are being employed by companies seeking to protect their inventions and technology.

Knowledge at Wharton: Andrea, I’ll start by asking you the same question we posed to David earlier: Who would you say are the key winners and losers from the court’s decision last week?

Andrea Matwyshyn: The winners and losers in this decision still remain to be determined. The commentary that’s been running in the press and in academic circles is, frankly, a little divided. On the one hand, the commentators and academics who are very supportive of patent holder rights view this as a strong win for Apple. However, of course, the decision is likely to be appealed. And so the ultimate outcome with respect to the damages award and the crafting of the decision itself may come under scrutiny at a higher level.

On the other hand, we have some commentators who are pointing to Samsung getting an indirect kind of market base win in this case with [the decision] highlighting a kind of de facto comparison of similarity between the products that Apple and Samsung are offering. Some consumers may view this in essence as a court saying, “Hey, these are functionally equivalent products.” And then the consumers look at the price point and recognize that one is significantly less expensive than the other.

However, I think the big-picture questions that are perhaps most interesting with respect to this case are the questions about the identity crisis that exists in the U.S. patent system and the conversation that we need to have as society about what it is that we’re trying to achieve in our models of innovation and in our intellectual property law. There were many different bases for Apple’s assertion that Samsung was infringing on its intellectual property rights: utility patent arguments, trade dress arguments, they really ran the gamut. And the way that these legal rights are constructed is somewhat problematic.

When we’re talking about patent reform — as we are these days in Congress and in society as a whole — this case really kind of brings to the fore and encapsulates some of these legal and policy discussions about different models of innovation and what we’re trying to achieve when we are affording certain individuals rights to enforce limited access to their creations. And, on the other hand, we have companies or individuals who are leveraging that existing knowledge — perhaps overly aggressively, but nevertheless leveraging that existing knowledge — to bring new products to market and potentially offering more choices to the consumer in the marketplace.

So this is a broader social conversation that needs to happen, and that’s the big take away here — that the law and social policy and innovation are confused. This is just the first round of this broader battle that’s going to be playing out over many years to come.

Knowledge at Wharton: Do you feel that patent law as it exists now is accomplishing what it was intended to achieve? Or has it become a hindrance to innovation?

Matwyshyn: That’s the big debate that we need to have as a society. On the one hand, certainly in some cases, affording a patent holder the right to defend their created product means that perhaps more research and development will happen in some cases because companies and individuals will be motivated by the desire for financial gain and to be able to control the creations that they’re making. However, we also know from creativity theory research that many people create not because they’re seeking financial rewards; they create for other reasons. So this bigger-picture question of what we’re trying to accomplish with our legal regimes and whether we’re accomplishing those goals, that’s what I’m really highlighting in this case.

The patent system has also evolved across time to include what some commentators view to be problematic players. For example, “patent trolls,” or people who aren’t really using the inventions for which they hold patents, but they nevertheless seek to enforce the rights that pertain in connection with their granted patents. So some commentators view these patent trolls as being part of the problem. And although they technically have the legal rights to enforce these patents, they’re not necessarily adding value to the business space because they’re not bringing new products to market; they’re not really actively using the rights that they hold to research and develop in new directions.

Knowledge at Wharton: The decision has prompted some outcry over Apple seeking to enforce patents that would seem to severely limit competitors, such as the shape of the phone or the way you move your fingers to zoom in. Do you feel like this is just another form of being a “patent troll”?

Matwyshyn: That’s the debate that I’m pointing to, that you have these different overlapping legal categories of potentially protectable interests. And it’s not clear which of these categories necessarily pertain in all cases. There’s a debate over whether the way that technology related patents are currently granted is simply not sustainable in the long term. There’s a debate over whether the types of patents that you’re pointing to, the utility and design patents, whether those should even be protectable through patent law. Maybe they’re better protectable through copyright…. It’s not clear that we have optimized the balance between giving innovators the right to defend their products and simultaneously offering the marketplace more product choice by allowing for building off of those products.

These two parties, Apple and Samsung, have approximately 50 rounds of litigation going on in various different forums throughout the world, so this battle is an epic one that spans continents, not merely the U.S. courts. Another interesting wrinkle in this particular relationship is that apart from the drama of the scope of this legal battle, there was a failed attempt to license some of these technologies that existed prior to the filing of some of the litigation.

So we have this discussion also in terms of should we be encouraging parties to collaborate more and to share their technologies? And are there ways to create incentives for licensing of technology, rather than having the result of tension in the technology space end up in the courts? It’s not always a socially or even individually efficient solution to have people going to court all the time. Lawyers are expensive. Judicial resolutions to these kinds of questions take time. Ultimately, that is time that maybe we should refocus toward more research and development, more innovation and the streamlining of the squabbles that exist between players in this space through encouraging licensing and sharing of research, rather than creating legal incentives for people to want to duke it out in courts of law.

Knowledge at Wharton: Do you feel that there is the will in the technology industry to do that? David had mentioned in our earlier conversation that the judge in this case had previously, unsuccessfully, urged Apple and Samsung to reach a private settlement.

Matwyshyn: This demonstrates the reality that when tensions run high, companies or individuals don’t necessarily see it to be in their best interest to be accommodating of each other and to want to resolve battles. Press reports indicate that Steve Jobs was very upset over the emergence of, for example, some Google [Android-based] products and viewed it as almost a personal betrayal, and that, by press accounts, he was “ready to go thermonuclear” on this situation.

When you have inventors’ emotions wrapped up in legal battles, or really in almost any business scenario, it’s not always the case that parties will act in their economic best interests. Humans are not always rational and predictable creatures. And so that has to be factored in when we are analyzing optimal regimes for incentivizing innovation.

The other moving piece in this litigation that many press accounts have highlighted, and in particular as jurors are being interviewed by the press [is that] it’s becoming evident that the jury deliberations that happened in this case — although perhaps they weren’t unusual in terms of the quality of deliberation that happens in various jury cases — were a bit rushed and that the jurors did not necessarily fully process the information at the high level of analytical specificity that certainly legal experts would have preferred.

Some of the comments that the jurors are sharing with the press indicate that perhaps there was a desire to punish Samsung rather than to obtain a redress for Apple for real economic harms that they had suffered. That, again, calls into question the broader structure of the way that we resolve intellectual property disputes, particularly in a technology context. The question of whether code, computer code, is even patentable subject matter is up for grabs right now in terms of the way the different courts are analyzing these questions. Legal commentators expect to see more action in this space, potentially resulting in the Supreme Court ultimately accepting the case for resolution.

Knowledge at Wharton: Moving away from the patent question a little, how do you think the case will affect consumer perception of the companies involved?

Matwyshyn: That’s a great question. As I mentioned in the beginning of my comments, there is some discussion of whether this legal process has highlighted the similarity between the Apple and the Samsung products, and maybe some consumers will, in fact, consider a Samsung product now when they would not have in the past.

Other consumers might perceive Apple to be acting as a bit of a bully by using courts rather than research and development labs to continue to innovate. Consumers might argue that even if there is recognition [that Apple was behind] a particularly useful mechanism, such as the pinch and zoom method, that they want to have other companies model that winning development, and to build on each other’s knowledge and bring more products into the market. So I think consumer reaction will be mixed.

Now of course, there’s a very strong “Apple fan boy” dynamic in the consumer marketplace as well, so Apple supporters will undoubtedly be very pleased with this result. I think it’s a mixed bag all around, and we will have to take a look, again, and revisit these questions in about two or three years to see how the big picture has evolved in this space.

Knowledge at Wharton: This case is just one of a number of patent-related lawsuits and moves that have taken place in the smartphone and tablet market. For example, Google’s purchase of Motorola Mobility was widely believed to be motivated by acquiring patents. What do you think this “patent land grad” means for the future of smartphone and tablet design?

Matwyshyn: There’s speculation that exists in the press, in part because of what has been reported to be personal animosity that existed between Steve Jobs and Google, that the ultimate target or goal of Apple’s aggressive litigation posture is to ultimately go after Google Android, which has been building market share very aggressively. Attacking or highlighting the manufacturers of the physical hardware upon which Android runs is a way to undercut or slow down Android adoption throughout the marketplace. So the exact outcome of that strategy and Apple’s future relationship to Google are certainly two of the most interesting moving pieces in this broader conversation.

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A generative AI reset: Rewiring to turn potential into value in 2024

It’s time for a generative AI (gen AI) reset. The initial enthusiasm and flurry of activity in 2023 is giving way to second thoughts and recalibrations as companies realize that capturing gen AI’s enormous potential value is harder than expected .

With 2024 shaping up to be the year for gen AI to prove its value, companies should keep in mind the hard lessons learned with digital and AI transformations: competitive advantage comes from building organizational and technological capabilities to broadly innovate, deploy, and improve solutions at scale—in effect, rewiring the business  for distributed digital and AI innovation.

About QuantumBlack, AI by McKinsey

QuantumBlack, McKinsey’s AI arm, helps companies transform using the power of technology, technical expertise, and industry experts. With thousands of practitioners at QuantumBlack (data engineers, data scientists, product managers, designers, and software engineers) and McKinsey (industry and domain experts), we are working to solve the world’s most important AI challenges. QuantumBlack Labs is our center of technology development and client innovation, which has been driving cutting-edge advancements and developments in AI through locations across the globe.

Companies looking to score early wins with gen AI should move quickly. But those hoping that gen AI offers a shortcut past the tough—and necessary—organizational surgery are likely to meet with disappointing results. Launching pilots is (relatively) easy; getting pilots to scale and create meaningful value is hard because they require a broad set of changes to the way work actually gets done.

Let’s briefly look at what this has meant for one Pacific region telecommunications company. The company hired a chief data and AI officer with a mandate to “enable the organization to create value with data and AI.” The chief data and AI officer worked with the business to develop the strategic vision and implement the road map for the use cases. After a scan of domains (that is, customer journeys or functions) and use case opportunities across the enterprise, leadership prioritized the home-servicing/maintenance domain to pilot and then scale as part of a larger sequencing of initiatives. They targeted, in particular, the development of a gen AI tool to help dispatchers and service operators better predict the types of calls and parts needed when servicing homes.

Leadership put in place cross-functional product teams with shared objectives and incentives to build the gen AI tool. As part of an effort to upskill the entire enterprise to better work with data and gen AI tools, they also set up a data and AI academy, which the dispatchers and service operators enrolled in as part of their training. To provide the technology and data underpinnings for gen AI, the chief data and AI officer also selected a large language model (LLM) and cloud provider that could meet the needs of the domain as well as serve other parts of the enterprise. The chief data and AI officer also oversaw the implementation of a data architecture so that the clean and reliable data (including service histories and inventory databases) needed to build the gen AI tool could be delivered quickly and responsibly.

Our book Rewired: The McKinsey Guide to Outcompeting in the Age of Digital and AI (Wiley, June 2023) provides a detailed manual on the six capabilities needed to deliver the kind of broad change that harnesses digital and AI technology. In this article, we will explore how to extend each of those capabilities to implement a successful gen AI program at scale. While recognizing that these are still early days and that there is much more to learn, our experience has shown that breaking open the gen AI opportunity requires companies to rewire how they work in the following ways.

Figure out where gen AI copilots can give you a real competitive advantage

The broad excitement around gen AI and its relative ease of use has led to a burst of experimentation across organizations. Most of these initiatives, however, won’t generate a competitive advantage. One bank, for example, bought tens of thousands of GitHub Copilot licenses, but since it didn’t have a clear sense of how to work with the technology, progress was slow. Another unfocused effort we often see is when companies move to incorporate gen AI into their customer service capabilities. Customer service is a commodity capability, not part of the core business, for most companies. While gen AI might help with productivity in such cases, it won’t create a competitive advantage.

To create competitive advantage, companies should first understand the difference between being a “taker” (a user of available tools, often via APIs and subscription services), a “shaper” (an integrator of available models with proprietary data), and a “maker” (a builder of LLMs). For now, the maker approach is too expensive for most companies, so the sweet spot for businesses is implementing a taker model for productivity improvements while building shaper applications for competitive advantage.

Much of gen AI’s near-term value is closely tied to its ability to help people do their current jobs better. In this way, gen AI tools act as copilots that work side by side with an employee, creating an initial block of code that a developer can adapt, for example, or drafting a requisition order for a new part that a maintenance worker in the field can review and submit (see sidebar “Copilot examples across three generative AI archetypes”). This means companies should be focusing on where copilot technology can have the biggest impact on their priority programs.

Copilot examples across three generative AI archetypes

  • “Taker” copilots help real estate customers sift through property options and find the most promising one, write code for a developer, and summarize investor transcripts.
  • “Shaper” copilots provide recommendations to sales reps for upselling customers by connecting generative AI tools to customer relationship management systems, financial systems, and customer behavior histories; create virtual assistants to personalize treatments for patients; and recommend solutions for maintenance workers based on historical data.
  • “Maker” copilots are foundation models that lab scientists at pharmaceutical companies can use to find and test new and better drugs more quickly.

Some industrial companies, for example, have identified maintenance as a critical domain for their business. Reviewing maintenance reports and spending time with workers on the front lines can help determine where a gen AI copilot could make a big difference, such as in identifying issues with equipment failures quickly and early on. A gen AI copilot can also help identify root causes of truck breakdowns and recommend resolutions much more quickly than usual, as well as act as an ongoing source for best practices or standard operating procedures.

The challenge with copilots is figuring out how to generate revenue from increased productivity. In the case of customer service centers, for example, companies can stop recruiting new agents and use attrition to potentially achieve real financial gains. Defining the plans for how to generate revenue from the increased productivity up front, therefore, is crucial to capturing the value.

Upskill the talent you have but be clear about the gen-AI-specific skills you need

By now, most companies have a decent understanding of the technical gen AI skills they need, such as model fine-tuning, vector database administration, prompt engineering, and context engineering. In many cases, these are skills that you can train your existing workforce to develop. Those with existing AI and machine learning (ML) capabilities have a strong head start. Data engineers, for example, can learn multimodal processing and vector database management, MLOps (ML operations) engineers can extend their skills to LLMOps (LLM operations), and data scientists can develop prompt engineering, bias detection, and fine-tuning skills.

A sample of new generative AI skills needed

The following are examples of new skills needed for the successful deployment of generative AI tools:

  • data scientist:
  • prompt engineering
  • in-context learning
  • bias detection
  • pattern identification
  • reinforcement learning from human feedback
  • hyperparameter/large language model fine-tuning; transfer learning
  • data engineer:
  • data wrangling and data warehousing
  • data pipeline construction
  • multimodal processing
  • vector database management

The learning process can take two to three months to get to a decent level of competence because of the complexities in learning what various LLMs can and can’t do and how best to use them. The coders need to gain experience building software, testing, and validating answers, for example. It took one financial-services company three months to train its best data scientists to a high level of competence. While courses and documentation are available—many LLM providers have boot camps for developers—we have found that the most effective way to build capabilities at scale is through apprenticeship, training people to then train others, and building communities of practitioners. Rotating experts through teams to train others, scheduling regular sessions for people to share learnings, and hosting biweekly documentation review sessions are practices that have proven successful in building communities of practitioners (see sidebar “A sample of new generative AI skills needed”).

It’s important to bear in mind that successful gen AI skills are about more than coding proficiency. Our experience in developing our own gen AI platform, Lilli , showed us that the best gen AI technical talent has design skills to uncover where to focus solutions, contextual understanding to ensure the most relevant and high-quality answers are generated, collaboration skills to work well with knowledge experts (to test and validate answers and develop an appropriate curation approach), strong forensic skills to figure out causes of breakdowns (is the issue the data, the interpretation of the user’s intent, the quality of metadata on embeddings, or something else?), and anticipation skills to conceive of and plan for possible outcomes and to put the right kind of tracking into their code. A pure coder who doesn’t intrinsically have these skills may not be as useful a team member.

While current upskilling is largely based on a “learn on the job” approach, we see a rapid market emerging for people who have learned these skills over the past year. That skill growth is moving quickly. GitHub reported that developers were working on gen AI projects “in big numbers,” and that 65,000 public gen AI projects were created on its platform in 2023—a jump of almost 250 percent over the previous year. If your company is just starting its gen AI journey, you could consider hiring two or three senior engineers who have built a gen AI shaper product for their companies. This could greatly accelerate your efforts.

Form a centralized team to establish standards that enable responsible scaling

To ensure that all parts of the business can scale gen AI capabilities, centralizing competencies is a natural first move. The critical focus for this central team will be to develop and put in place protocols and standards to support scale, ensuring that teams can access models while also minimizing risk and containing costs. The team’s work could include, for example, procuring models and prescribing ways to access them, developing standards for data readiness, setting up approved prompt libraries, and allocating resources.

While developing Lilli, our team had its mind on scale when it created an open plug-in architecture and setting standards for how APIs should function and be built.  They developed standardized tooling and infrastructure where teams could securely experiment and access a GPT LLM , a gateway with preapproved APIs that teams could access, and a self-serve developer portal. Our goal is that this approach, over time, can help shift “Lilli as a product” (that a handful of teams use to build specific solutions) to “Lilli as a platform” (that teams across the enterprise can access to build other products).

For teams developing gen AI solutions, squad composition will be similar to AI teams but with data engineers and data scientists with gen AI experience and more contributors from risk management, compliance, and legal functions. The general idea of staffing squads with resources that are federated from the different expertise areas will not change, but the skill composition of a gen-AI-intensive squad will.

Set up the technology architecture to scale

Building a gen AI model is often relatively straightforward, but making it fully operational at scale is a different matter entirely. We’ve seen engineers build a basic chatbot in a week, but releasing a stable, accurate, and compliant version that scales can take four months. That’s why, our experience shows, the actual model costs may be less than 10 to 15 percent of the total costs of the solution.

Building for scale doesn’t mean building a new technology architecture. But it does mean focusing on a few core decisions that simplify and speed up processes without breaking the bank. Three such decisions stand out:

  • Focus on reusing your technology. Reusing code can increase the development speed of gen AI use cases by 30 to 50 percent. One good approach is simply creating a source for approved tools, code, and components. A financial-services company, for example, created a library of production-grade tools, which had been approved by both the security and legal teams, and made them available in a library for teams to use. More important is taking the time to identify and build those capabilities that are common across the most priority use cases. The same financial-services company, for example, identified three components that could be reused for more than 100 identified use cases. By building those first, they were able to generate a significant portion of the code base for all the identified use cases—essentially giving every application a big head start.
  • Focus the architecture on enabling efficient connections between gen AI models and internal systems. For gen AI models to work effectively in the shaper archetype, they need access to a business’s data and applications. Advances in integration and orchestration frameworks have significantly reduced the effort required to make those connections. But laying out what those integrations are and how to enable them is critical to ensure these models work efficiently and to avoid the complexity that creates technical debt  (the “tax” a company pays in terms of time and resources needed to redress existing technology issues). Chief information officers and chief technology officers can define reference architectures and integration standards for their organizations. Key elements should include a model hub, which contains trained and approved models that can be provisioned on demand; standard APIs that act as bridges connecting gen AI models to applications or data; and context management and caching, which speed up processing by providing models with relevant information from enterprise data sources.
  • Build up your testing and quality assurance capabilities. Our own experience building Lilli taught us to prioritize testing over development. Our team invested in not only developing testing protocols for each stage of development but also aligning the entire team so that, for example, it was clear who specifically needed to sign off on each stage of the process. This slowed down initial development but sped up the overall delivery pace and quality by cutting back on errors and the time needed to fix mistakes.

Ensure data quality and focus on unstructured data to fuel your models

The ability of a business to generate and scale value from gen AI models will depend on how well it takes advantage of its own data. As with technology, targeted upgrades to existing data architecture  are needed to maximize the future strategic benefits of gen AI:

  • Be targeted in ramping up your data quality and data augmentation efforts. While data quality has always been an important issue, the scale and scope of data that gen AI models can use—especially unstructured data—has made this issue much more consequential. For this reason, it’s critical to get the data foundations right, from clarifying decision rights to defining clear data processes to establishing taxonomies so models can access the data they need. The companies that do this well tie their data quality and augmentation efforts to the specific AI/gen AI application and use case—you don’t need this data foundation to extend to every corner of the enterprise. This could mean, for example, developing a new data repository for all equipment specifications and reported issues to better support maintenance copilot applications.
  • Understand what value is locked into your unstructured data. Most organizations have traditionally focused their data efforts on structured data (values that can be organized in tables, such as prices and features). But the real value from LLMs comes from their ability to work with unstructured data (for example, PowerPoint slides, videos, and text). Companies can map out which unstructured data sources are most valuable and establish metadata tagging standards so models can process the data and teams can find what they need (tagging is particularly important to help companies remove data from models as well, if necessary). Be creative in thinking about data opportunities. Some companies, for example, are interviewing senior employees as they retire and feeding that captured institutional knowledge into an LLM to help improve their copilot performance.
  • Optimize to lower costs at scale. There is often as much as a tenfold difference between what companies pay for data and what they could be paying if they optimized their data infrastructure and underlying costs. This issue often stems from companies scaling their proofs of concept without optimizing their data approach. Two costs generally stand out. One is storage costs arising from companies uploading terabytes of data into the cloud and wanting that data available 24/7. In practice, companies rarely need more than 10 percent of their data to have that level of availability, and accessing the rest over a 24- or 48-hour period is a much cheaper option. The other costs relate to computation with models that require on-call access to thousands of processors to run. This is especially the case when companies are building their own models (the maker archetype) but also when they are using pretrained models and running them with their own data and use cases (the shaper archetype). Companies could take a close look at how they can optimize computation costs on cloud platforms—for instance, putting some models in a queue to run when processors aren’t being used (such as when Americans go to bed and consumption of computing services like Netflix decreases) is a much cheaper option.

Build trust and reusability to drive adoption and scale

Because many people have concerns about gen AI, the bar on explaining how these tools work is much higher than for most solutions. People who use the tools want to know how they work, not just what they do. So it’s important to invest extra time and money to build trust by ensuring model accuracy and making it easy to check answers.

One insurance company, for example, created a gen AI tool to help manage claims. As part of the tool, it listed all the guardrails that had been put in place, and for each answer provided a link to the sentence or page of the relevant policy documents. The company also used an LLM to generate many variations of the same question to ensure answer consistency. These steps, among others, were critical to helping end users build trust in the tool.

Part of the training for maintenance teams using a gen AI tool should be to help them understand the limitations of models and how best to get the right answers. That includes teaching workers strategies to get to the best answer as fast as possible by starting with broad questions then narrowing them down. This provides the model with more context, and it also helps remove any bias of the people who might think they know the answer already. Having model interfaces that look and feel the same as existing tools also helps users feel less pressured to learn something new each time a new application is introduced.

Getting to scale means that businesses will need to stop building one-off solutions that are hard to use for other similar use cases. One global energy and materials company, for example, has established ease of reuse as a key requirement for all gen AI models, and has found in early iterations that 50 to 60 percent of its components can be reused. This means setting standards for developing gen AI assets (for example, prompts and context) that can be easily reused for other cases.

While many of the risk issues relating to gen AI are evolutions of discussions that were already brewing—for instance, data privacy, security, bias risk, job displacement, and intellectual property protection—gen AI has greatly expanded that risk landscape. Just 21 percent of companies reporting AI adoption say they have established policies governing employees’ use of gen AI technologies.

Similarly, a set of tests for AI/gen AI solutions should be established to demonstrate that data privacy, debiasing, and intellectual property protection are respected. Some organizations, in fact, are proposing to release models accompanied with documentation that details their performance characteristics. Documenting your decisions and rationales can be particularly helpful in conversations with regulators.

In some ways, this article is premature—so much is changing that we’ll likely have a profoundly different understanding of gen AI and its capabilities in a year’s time. But the core truths of finding value and driving change will still apply. How well companies have learned those lessons may largely determine how successful they’ll be in capturing that value.

Eric Lamarre

The authors wish to thank Michael Chui, Juan Couto, Ben Ellencweig, Josh Gartner, Bryce Hall, Holger Harreis, Phil Hudelson, Suzana Iacob, Sid Kamath, Neerav Kingsland, Kitti Lakner, Robert Levin, Matej Macak, Lapo Mori, Alex Peluffo, Aldo Rosales, Erik Roth, Abdul Wahab Shaikh, and Stephen Xu for their contributions to this article.

This article was edited by Barr Seitz, an editorial director in the New York office.

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The theory that can help businesses better understand market disruptions.

Redefining disr…

Redefining disruptive innovation: challenging decades of management strategy

The article at a glance.

Disruptive innovation theory has been pivotal to management strategy for 3 decades, but Professor Shahzad (Shaz) Ansari of Cambridge Judge Business School outlines a new way of thinking.

Category: Entrepreneurship and innovation Insight

Shahzad Ansari.

Disruptive innovation theory (DIT) has been central to the thinking about how organisations operate in a competitive economy for nearly 30 years.

Yet despite many academic papers on DIT and its considerable effect on business thinking – including how newcomers challenge established markets and how incumbents react – there has also been a lot of controversy over DIT’s applicability and how it has evolved since the watershed 1995 book “Disruptive Technologies: Catching the Wave”, by prominent academics Clayton Christensen and Joseph Bower.

The debates and controversies surrounding DIT is the topic of extensive research by Shaz Ansari, Professor of Strategy & Innovation at Cambridge Judge Business School, along with colleagues at the Institute for Manufacturing (IfM) at the University of Cambridge: IfM Doctoral Student Stephen Lile, who is an Executive MBA graduate of Cambridge Judge (EMBA 2016) and current Fellow at the School’s Strategy and International Business subject group, and Dr Florian Urmetzer, Associate Teaching Professor at the IfM.

How the research aims to help firms respond to market disturbances

Their research (“Rethinking disruptive innovation: unravelling theoretical controversies and charting new research frontiers”) has dissected the application of DIT and academic papers on the topic, including some co-authored by Shaz over the past 15 years, to develop a new approach to looking at DIT.

Our research will help […] provide businesses with a more flexible guide to market disruptions and a better understanding of the factors at play.

“It became clear that the discussion around DIT was focused too narrowly and that a broader and more nuanced approach was needed,” says Shaz. “We think our research will help to focus thinking on DIT in a way that will help provide businesses with a more flexible guide to market disruptions and a better understanding of the factors at play.

“Our research on DIT is also a terrific example of cross-departmental collaboration at the University of Cambridge, in this case between Cambridge Judge Business School and the Institute of Manufacturing, and the topic of disruptive innovation is one that I frequently teach in EMBA and Executive Education programmes at Cambridge Judge.

Why it’s important to challenge assumptions about disruptive innovation theory

The research by Shaz and his IfM colleagues has developed a novel ‘challenger-incumbent’ perspective that shifts the focus beyond the traditional battle between dominant players and disruptors to instead consider a broader DIT ecosystem that also encompasses many other stakeholders and subtler ways in which innovation causes disruption.

In so doing, the research sheds new light on issues such as outcome bias in DIT, which tends to emphasise the benefits of disruption while glorifying challengers, arguing that such preconceptions can distort broader issues surrounding innovation and disruption.

“Our work in this area was designed not only to synthesise other research on the topic, as valuable as such synthesis can be, but also to revise some of the thinking around DIT to the point of challenging some well-established assumptions about one of the most pivotal business theories in the past quarter-century,” says Shaz.

“We don’t pretend to be the last word on this topic, and we strongly invite further research to better understand the use, limitations and subtle nature of disruptive innovation theory.”

Successful business strategies for dealing with disruption

Previous research by Shaz had found that incumbents can survive and even prosper when faced by disruptive innovation by forging effective partnerships with challenger firms, adapting their structure, acquiring promising challengers, or having complementary assets important for the new technology’s effective deployment and commercialisation.

In a study about the auto industry, done with co-authors Eden Yin, Associate Professor in Marketing at Cambridge Judge, and a senior executive of Jaguar Land Rover (JLR), Shaz identified 8 key issues facing incumbents in such a sector faced with multiple disruptive changes:

  • how to disrupt themselves when faced with challenges
  • coping with multiple radical innovations and challengers
  • cooperating with competitors new and old
  • identifying key factors to navigate change; better predicting and preparing for the most likely future scenario
  • organisational capability
  • developing a platform strategy (car as a platform)
  • obtaining a different set of organisational competences or radically transforming existing ones

A study Shaz co-authored on digital video recorder (DVR) company TiVo demonstrated how TiVo was initially seen as a disruptive threat to the incumbent television industry, but the firm then effectively navigated and reframed itself as a ‘connector’ instead of a ‘disruptor’ to win the support over time of the TV ecosystem – to TiVo’s advantage.

This study looked at the ‘disruptor’s dilemma’ in which the challenger needs to consider how it can pitch its innovation to attract new customers while reducing the threat felt by the broader ecosystem that it might ultimately benefit from, and also how the innovation might be modified to fit into the existing ecosystem.

Six controversies about disruptive innovation theory

Regarding disruptive innovation theory, Shaz’s research identifies 6 key controversies surrounding DIT that deserve further academic research in order to address some of the challenges surrounding the theory to build a better understand DIT:

Definitions

Scholars have differed on precisely what disruptive innovation means (and in fact Clayton Christensen later questioned his decision to prefix ‘innovation’ with ‘disruptive’). Is DIT an innovation or a way to measure success in meeting organisational goals? And is DIT only ‘disruptive’ in the sense of a short and sharp shock that upends existing arrangements, or does it also need to be sustaining and transformational?

“A similar lack of clear definition has affected scientific scholarship regarding the term ‘sustainability’”, says Shaz, “and this has carried over into how governments and companies implement such initiatives given that there is no single accepted definition of the word.”

Case studies

Critics of DIT believe that the initial work on the theory was too reliant on historical case studies, which can pose a challenge for developing theories that are generalisable. While initial DIT theory suggested that new challengers usually topple incumbents, more recent research contests such an assertion – finding that many market leaders may wobble but don’t fall in the face of disruptive competition, and then recover to a prominent position. For example, generative AI may even favour incumbents as they can bundle AI into their large installed customer bases. Thus, rather than being toppled by challengers, incumbents may even be able to even extend their dominance.

“This is an area full of ambiguities,” says Shaz. “Newcomers can gain a foothold in a market that weakens an incumbent’s market dominance, but that doesn’t mean that the incumbent disappears or fails to remain a potent force in that market.”

Generalisability

If the case studies anchoring a theory are too narrow, that theory may not apply properly to other types of cases, so this has prompted critiques of DIT.

For example, how does Apple’s hugely successful introduction of the iPhone fit the theory of DIT? Disruptive innovation usually is seen as involving a cheaper and initially inferior technology finding a foothold in an under-served market, but the iPhone was more expensive and superior to existing products. In this case, a premium product made people’s lives easier and proved to be a big hit, disrupting dominant incumbents like Nokia and Blackberry, and prompting rivals to develop similar smartphones.

“DIT is not alone in attracting challenges regarding generalisability, as well-established research in behavioural economics and other fields have also been questioned in the same way,” says Shaz.

Unit of measure

Establishing what should be the unit of measure regarding DIT is another area that has divided opinion – as even Clayton Christensen’s work has appeared to shift between different units of measure including the market, the company, and the business model.

The research by Shaz suggests that the difficulty in establishing a clear unit of measurement reflects the evolutionary nature of DIT and how it intersects with other debates among scholars in this area – which is why it’s important to have an integrated approach in analysing this area.

Outcome bias

Theories can be skewed if scholars evaluate them based on outcomes rather than core rationale – and in the case of DIT this can take the form of ‘incumbent survivor bias’ (which over-emphasises cases where incumbents fall to disruptors) and ‘pro-innovation bias’ (which assumes that new and more innovative is better).

DIT research has often focused on how incumbents can dodge or parry innovative challengers, usually through only 2 prisms: does the disruption represent an existential threat or something the incumbent can use itself to further its dominance? Previous research by Shaz urged a more multiplexed framework in looking at disruptive innovation more broadly and less dichotomously as  existential threats or opportunities.

The disruption-is-always-good bias assumes that innovation creates positive changes in society, which not everyone agrees with – for example, technological advancement has made ‘fake news’ widespread. Other scholars have argued that the key issue is not whether innovation is good or bad, but whether it stimulates useful shifts in thinking or modelling.

“We’re seeing this debate play out in real time over ChatGPT and other generative artificial intelligence,” says Shaz. “Generative AI is surely innovative and disruptive, and there is plenty of debate over whether risks outweigh opportunities – but the technology has certainly prompted lots of serious thought which can only be beneficial.”

The nature of DIT theory

Critics of DIT believe that it focuses too much on why businesses fail rather than seeking to explain more nuanced change in markets and the firms that comprise them. Some scholars have argued that DIT only really works in hindsight, while others seek to maximise its predictive potential, so this has been a controversial area. In an earlier work on “perspectives on disruptive innovation”, Shaz conceptualises the prescriptive application of DIT as ‘performativity’, where managerial actions and decisions are not strictly about making accurate predictions but rather serve as actionable blueprints to jumpstart the innovation journey. Shaz describes performativity as a prescription converted into managerial discourse and action with anticipated outcomes. ‘Language and framing’ such as a business-model pitch doesn’t just describe but also constitutes and actualises the realities that they envision through the actions they entail.

There has been discussion about the role of consumers in helping to identify opportunities for disruptive innovation. Shaz and his colleagues argue in their research that it’s important to identify “negative sentiments as adverse antecedents to disruption, characterised as disillusionment, distrust, or dissatisfaction with conventional offerings from incumbents or the overall marketplace in a given sector”.

Why findings can help strategic decision-making in organisations

The introduction of a new challenger-incumbent template for understanding disruption is designed to expand the focus of DIT by advocating a subtler approach that also highlights “the dynamic interplay between disruptors and incumbents,” says the research by Shaz.

“Our approach responds to the call for a broader, more inclusive, understanding of disruptive processes. By identifying and recalibrating key controversies within DIT, we aim to refine management theories where there is a lack of consensus, as exemplified in the case of DIT.

“In strategic decision-making, organisations across sectors can harness the power of the challenger-incumbent template to inform their approaches,” the research says. “With this new understanding, incumbent companies are better positioned to recognise potential disruptors early on. This awareness can cultivate agility in their response to emerging innovations. In contrast, challengers can strategically identify and exploit vulnerabilities within established markets.

“Acknowledging the dual nature of disruptive innovations – their capacity to drive progress alongside potential societal and economic consequences – also broadens the application of DIT. We call upon businesses and policymakers to consider these 2 facets of innovation in tandem. A more balanced approach will help to foster sustainable and ethical innovation practices, ensuring that advancements in one area do not have unintended negative impacts on others.”

Going forward, Shaz recommends that scholars approach DIT “with an appreciation of its dynamic nature, recognising that its development reflects an ongoing process rather than a fixed set of principles”.

Featured academics

Shahzad ansari.

Professor of Strategy & Innovation

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Stephen Lile

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Featured research

Lile, S., Ansari, S. and Urmetzer, F. (2024) “Rethinking disruptive innovation: unravelling theoretical controversies and charting new research frontiers.” Innovation

Fraser, J. and Ansari, S. (2021) “Pluralist perspectives and diverse responses: exploring multiplexed framing in incumbent responses to digital disruption.” Long Range Planning

Kumaraswamy, A., Garud, R. and Ansari, S. (2018) “Perspectives on disruptive innovations.” Journal of Management Studies

Yin, E., Ansari, S. and Akhtar, N. (2017) “Radical innovation, paradigm shift and incumbent’s dilemma: the case of the auto industry.” Future Studies Research Journal

Ansari, S., Garud, R. and Kumaraswamy, A. (2016) “The disruptor’s dilemma: TiVo and the U.S. television ecosystem.” Strategic Management Journal

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New study reveals breakthrough in understanding brain stimulation therapies

For the first time, researchers show how the brain can precisely adapt to external stimulation.

MINNEAPOLIS/ST. PAUL (03/14/2024) — For the first time, researchers at the University of Minnesota Twin Cities showed that non-invasive brain stimulation can change a specific brain mechanism that is directly related to human behavior. This is a major step forward for discovering new therapies to treat  brain disorders such as schizophrenia, depression, Alzheimer’s disease, and Parkinson’s disease.

The study was recently published in  Nature Communications , a peer-reviewed, open access, scientific journal.  

Researchers used what is called “transcranial alternating current stimulation” to modulate brain activity. This technique is also known as neuromodulation. By applying a small electrical current to the brain, the timing of when brain cells are active is shifted. This modulation of neural timing is related to neuroplasticity, which is a change in the connections between brain cells that is needed for human behavior, learning, and cognition. 

“Previous research showed that brain activity was time-locked to stimulation. What we found in this new study is that this relationship slowly changed and the brain adapted over time as we added in external stimulation,” said Alexander Opitz, University of Minnesota biomedical engineering associate professor. “This showed brain activity shifting in a way we didn’t expect.” 

This result is called “neural phase precession.” This is when the brain activity gradually changes over time in relation to a repeating pattern, like an external event or in this case non-invasive stimulation. In this research, all three investigated methods (computational models, humans, and animals) showed that the external stimulation could shift brain activity over time.

“The timing of this repeating pattern has a direct impact on brain processes, for example, how we navigate space, learn, and remember,” Opitz said.

The discovery of this new technique shows how the brain adapts to external stimulation. This technique can increase or decrease brain activity, but is most powerful when it targets specific brain functions that affect behaviors. This way, long-term memory as well as learning can be improved. The long-term goal is to use this technique in the treatment of psychiatric and neurological disorders.

Opitz hopes that this discovery will help bring improved knowledge and technology to clinical applications, which could lead to more personalized therapies for schizophrenia, depression, Alzheimer’s disease, and Parkinson’s disease.

In addition to Opitz, the research team included co-first authors Miles Wischnewski and Harry Tran. Other team members from the University of Minnesota Biomedical Engineering Department include Zhihe Zhao, Zachary Haigh, Nipun Perera, Ivan Alekseichuk, Sina Shirinpour and Jonna Rotteveel. This study was in collaboration with Dr. Jan Zimmermann, associate professor in the University of Minnesota Medical School.

This work was supported primarily by the National Institute of Health (NIH) along with the  Behavior and Brain Research Foundation and the University of Minnesota’s Minnesota’s Discovery, Research, and InnoVation Economy (MnDRIVE) Initiative. Computational resources were provided by the Minnesota Supercomputing Institute (MSI).

To read the entire research paper titled, “Induced neural phase precession through exogenous electric fields”, visit the  Nature Communications website .

Researchers using external stimulation during experiment

Rhonda Zurn, College of Science and Engineering,  [email protected]

University Public Relations,  [email protected]

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