Apple’s innovation-powered growth: the real story
I thought the following graph of Apple's sales and profit margins was pretty cool. It illustrates well how innovation has driven the company's hyper-growth, turning Apple into the world's most valuable brand in Milward Brown's BrandZ survey.
The white bar at the bottom is Mac computers. The blue is iPod, red is iPhone and light blue at top iPad. Estimated revenue for 2011 is 10 times what it was in 2003.
1. Genuine added value
In each of the markets Apple as entered it has created true added value, through design and ease of use. It has never been first to market. Microsoft had a tablet years before Apple. Nokia were earlier into smartphones. And there were several brands of MP3 player prior to the iPod. But in each case, Apple was able to create a distinctive and highly relevant value proposition that helped them create a leading position.
2. Wave after wave of upgrades
I've posted before about Apple's incredible capacity to continue upgrading and refreshing its product line, whether it be the iPod (see the iPod Nano's evolution below), iPhone, iPad or Mac line. This constant stream of renovation makes it almost impossible for competitors to keep up.
A key driver in Apple's growth has been the dramatic increase in physical availability. Part of this has been the network of over 300 Apple Retail Stores. No other technology brand in the world has such an amazing retail presence where product merchandising, communication and training can be perfectly orchestrated and controlled.
But Apple has also driven its distribution in a number of other channels. There is the online store. Distribution in department stores, high street electrical stores and duty free airport stores. And in each of these the brand's distinctive visual identity is used to create a separate space where the products are displayed.
4. Creating ecosystems
I posted before on Apple's "ecosystem". This is the network of suppliers and partners that Apple builds up around it to offer a superior customer experience that is hard to match. In the case of the iPad this includes the 65,000 apps specially designed for it and the wide range of accessories.
5. Manufacturing magic
You see lots of posts about Apple's advertising. You see much less on their manufacturing and sourcing, even though these have been much more important growth drivers. They allow Apple to create amazing products and helped product a c. 10pt increase in gross profit margins over the last 6 years.
6. Growing the core
But my favourite bit of Apple's innovation story is the one which is often over-looked: the dramatic growth of the Mac computer business. In the last quarter alone, Mac sales were up a staggering 28%, when many PC makers were suffering sharp declines.
Apple is one of the rare cases where you can say a core product has benefited from brand stretching into new markets. But this is not to do with the often quoted concept of "halo effects", where seeing a new product, like the iPhone, makes you go and buy a core product, like the Mac computer. Instead, Apple have pro-actively used products like the iPhone and iPod to drive the core.
First, they use the Apple Stores. Here, people come to buy an iPod or iPhone and get to see a Mac, and try one for the first time. Many of these people like what they see and end up buying one. Most brands who stretch lack this sort of super-charged cross-selling system. Second, Apple have taken technology from the iPhone, such as "pinching" (using your fingers to expand or contract photos and images), and used to upgrade the Mac line of products. Third, they have continued to upgrade the core PC line, rather than neglect it like many companies do when launching new products. On the brand's homepage today there's lots of new on the iPad and iPhone, but also an upgraded iMac line.
In conlusion, be inspired by the innovation that has helped transform Apple. But in doing so, dig below the surface to understand what is really behind their success. Because this has much more to do with logistics, manufacturing and engineering than it has to do with the advertising and communication which is often used to explain the brand's growth.