Innovation guru Clayton Christensen writes that "Jobs made Apple great by ignoring profit", and beyond the headline he actually makes the point that a tunnel vision on profits has been the downfall of many previous industry leaders. He thinks that acceptance, and even pursuit of "disruption", is the core of Apple's sustainability as a highly successful business. But I think there's more to it, especially in the case of Apple.
I agree with (almost) everything Christensen says. And the aspect of Apple he describes is evident in their public comments about the cannibalisation of Mac sales by the iPad.
It's Apple's view of the bigger picture which drives them forward, knowing that Mac sales in some segments will be cannibalized, but in other segments new markets for Mac will open up because of the iPhone and iPad.
I never cease to be appalled at the number of senior executives I meet who say something like "our strategy is very simple - it's to make a profit". Christensen's post is a good reference for them to understand why this may not be in their firm's best interest (that's not to say that the individual's interest and the firm's long-term interest are necessarily aligned!).
Of course there are always certain times when a focus on cash-flow and profitability is paramount. But that's a tactic, or perhaps a short-term strategy, and not a sustaining goal.
The iPod wasn't a device with no existing market
I disagree with one single part of Christensens' analysis, and that points to the big part which I think his post is missing - the role of continuous business improvement.
The one part I don't agree with is his comment that the iPod was a device for which "a market did not even exist yet".
That's factually wrong. The iPod used a whole lot of technology from others who were already in the market with these devices. Just as with the app store, commercially launched by DoCoMo in Japan in 1999, and "iTunes" launched by KDDI in Japan in 2000 in response to DoCoMo's app store, Apple took the best of a lot of existing ideas and improved them.
The improvements were often small - but they add up.
And sometimes they are innovative enough to be patentable. In fact Apple's patents tell the story - if they invented everything that people commonly attributed to them then Apple would own the patents - and they don't. There is so much fluff and gushing in the blog-sphere and paid media about Apple's inventiveness around the iPhone, for example, which just isn't true.
Continuous improvement is a key to Apple's success
What they do brilliantly is what Christensen describes, plus their approach to ingrained continuous improvement, as with the iPod and the iPhone (and some might say the iPad - a reinvented "tablet").
Most companies neglect this "ingrained continuous improvement". It's seen as too boring, or too trivial, or tainted by "quality control" or "being too Japanese" or any other reason that suits their desire to do something more spectacular. They go for "creativity" and "innovation departments".
That's why you see many of the most lifeless entities with big investments in Innovation VPs and Departments and creativity training etc - think banks, governments, metro transportation companies. These types of entities have zero continuous improvement and a big bet on "creativity" but are usually sustained, in fact, by some kind of monopolistic or oligopolistic structural position.
In these organisations, the main innovation is "the event". Here's what Cyril Bouquet concludes after a 5 year study of corporate innovation:
Paradoxically, innovation events can even prove damaging if the company does not have a system for acknowledging, assessing, and developing the bright ideas that emerge from them.
Continuous improvement does not exist in a vacuum
If a firm is truly after game-changing innovation, then a different set of rules and pre-conditions apply. But the reality is that 99% of firms can't execute even "incremental innovation" well and that's where the focus, for them, needs to be. There's no doubt that part of Apple, including Steve Jobs, applied game-changing innovation (see below) yet at the same time the bulk of the organisation is focused on continuous improvement.
But wait! There is a twist. That "bulk of the organisation" is not just a hapless bunch of micro-improvers. Well, they could be, but there is a difference in a highly successful organisation - they have a purpose. Not only a purpose but a clarity of purpose, and a consistency of actions.
Where there is strategic clarity and a compelling purpose in an organisation and the entire organization is aligned on achieving something of great social value beyond the tactical, people become incredibly committed to being successful and tend to ignore boundaries and "not invented here" limitations in order to achieve the purpose.
That is part of Apple's secret source in making continuous improvement deliver so much value, and why some say Why Apple Doesn't Need Steve Jobs. Without that secret source continuous improvements are diluted. It's that simple.
It's also true that the secret sauce does need some healthy additives from the leadership team. Not all that bubbles up from below is going to make business sense at the time, nor can it all be funded. The skill is in how the leadership team can provide a "focus", how they guide risk assessment to avoid irrelevant innovation, and how they decide what needs to be discontinued (since companies can't do it all). The HOW of those is critical to sustaining the motivation and momentum.
iPhone more about continuous improvement and little about invention
I think ingrained continuous improvement is mostly overlooked, yet it is far a more powerful and sustaining organisational force than "invention". And Apple is a leader in applying it.
For example the iPhone was mostly a result of continuous improvement. It bought together things which others had done, commercially, and reshaped them nicely into a smooth ecosystem. It was "smoother" than those from which it learnt. It didn't even have any exceptional new goals, compared to the DoCoMo app store or the KDDI music service - but it executed better and in the right market.
For example DoCoMo's i-mode (1999) was totally focused on the end-to-end experience and the user interface and they even tuned their network to ensure the handsets performed to delight the users. And they gave content providers 90% of the revenue because they wanted the content providers and their ecosystem to be as economically successful as possible.
The really remarkable innovations with the iPhone, for example, were that (1) it broke out from under the dead hand of the telcos - that was a revolution (a game-changing business model innovation), and (2) the extent of the media deals (or perhaps that was a continuous innovation from the iPod). The hard yards and the strength of the final whole offer were a product of a relentless focus and ingrained culture of continuous improvement. This spans the whole organisation, not just the Innovation Department.
I believe that much of Apple's success can be attributed to this attitude towards continuous improvement across the entire firm, plus the leadership's lack of fear of cannibalization as Christensen says (combined with their other assets and ability to execute).
Continuous improvement as an ingrained culture is old fashioned and unfashionable but Dr. Deming had it right - as Apple proves.
How important is continuous improvement to Apple's success, compared to say "invention"?
Why do so many firms find continuous improvement so hard to ingrain?
Please comment below.
Walter @adamson
http://xeesm.com/walter
PS If you are interested in Cloud, and Clayton Christensen, read What Clayton Christensen Can Teach Us by Cloud expert @bernardgolden
Recent Comments