Innovation Strategy of Apple

Ribleza, Michael Jaye P.

Doctor of Business Administration
DBA505 Strategic Marketing

Provide a Case Study of a Company/Firm Presenting the 10 Types of Innovation Strategy in terms
of:

1. Profit Mode: How Apple make money

Apple Inc. (AAPL) is a global technology company that designs, manufactures, and sells
smartphones, personal computers, tablets, wearables, and accessories. Some of its main products
that make money include the iPhone, the Mac line of personal computers and laptops, the iPad,
Apple Watch, and Apple TV. The company also has a fast-growing services business that includes its
iCloud cloud service and its digital content streaming services such as Apple Music and Apple TV+,
the latter launched in November 2019. Apple faces numerous competitors, including smartphone
manufacturers Samsung Electronics Co. Ltd. and LG Electronics Inc., computer manufacturers
Lenovo Group Ltd. and Dell Technologies Inc., streaming-content providers Spotify Technology S.A.
and Netflix Inc., and other technology companies like Microsoft Corp., Alphabet Inc., and
Amazon.com Inc. Even though Apple's fiscal year 2019 was characterized by a series of ups and
downs, it successfully boosted its revenue from its different services division. But earnings from its
most popular products, such as iPhones and MacBook laptops, fell somewhat below 2018 levels.

2. Network: How Apple connects with others to create value

Apple has been in the business of delighting its customers since the introduction of the iMac after
the legendary return of Steve Jobs in 1997. While most analysts examine the company based on its
financial statements, market rates of growth, projections of market share, etc., to track the health of
the company, Apple’s management team has made it a point to frame its focus on customer
satisfaction rates for its products. And for good reason, because customer satisfaction rates drive
retention and free, viral word-of-mouth marketing when it comes to consumer products. That has
been the causal driver of the measurable financial reports that analysts focus on to gauge the
success of Apple’s business model over time. Apple built its reputation by breaking the rules and
flaunting conventions of how they were “supposed” to handle marketing and business. Even though
all the other tech companies were expanding aggressively into social media, Apple refused to be
swayed by the latest hot trend. That’s why their March 2016 announcement, when they finally
revealed they were launching an official Apple Support Twitter account, came as such a shock. This
wasn’t a lightly made decision. After all this time, Apple recognized the value of giving their
customers what they had grown to expect: a social media channel to discuss customer support
issues. For instance, Apple builds lasting relationships to its customers by considering the
following: (1) Posting a Tip a Day – A pillar of Apple’s Twitter strategy is to post one tip each day.
These tips make customers appreciate their Apple products even more because they help them
discover features they might not have known about. They also get people in the habit of engaging
with the Twitter account regularly. Apple often presents these tips with images or short videos,
which are easy for people to consume and share across their own social media networks. These tips
help anyone who owns Apple products—even if they aren’t proactively looking for help. Apple
shows that they aren’t just concerned with making the sale. They’re interested in helping customers
tap into their products’ full potential…and hopefully becoming Apple fans for life; (2) Constantly
answering customer questions - While the Apple Support account posts tips and tricks, most of
their effort is spent helping customers sort out issues with their Apple products and services.
Simply answering customer questions makes up the vast majority of their tweets. Combining these
two things is a smart way to do outbound marketing without neglecting the most important thing:
relationships with customers. The support account also opens up a convenient communication
channel for customers. Instead of calling or visiting an Apple store, they can get things handled just
by firing off a tweet; Valuing every kind of feedback - The Apple Support account embraces all kinds
of feedback: good, bad, and everything in between. By acknowledging people who compliment them
and working quickly to solve any gripes, they make everyone feel valued. This helps encourage

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valuable feedback and builds lasting relationships with customers; Managing expectation - With all
the customers Apple has, their support account must get thousands of tweets a day. It would take a
team working 24/7 just to keep up and they’d still probably fall behind on the international
customers. Apple doesn’t want angry customers getting even angrier when they have to wait 12
hours for a response. That’s why their Twitter account is careful about managing expectations. This
simple language (5am to 8pm operating hours) is all it takes. Now anyone who messages the
account understands exactly why their question might not be answered right away. You can do this
too; Communicating in a positive and upbeat way - When Apple finally started a Twitter account,
they channeled the same helpful voice you’d expect to find if you stopped by the Genius Bar or
called their customer support. In this way their reputation for outstanding customer support
expanded seamlessly into a new channel. Every customer response tweet acknowledges the
problem, expresses a desire to help, and quickly points people in the right direction. Apple doesn’t
use generic responses. They vary, and you can always tell they’re written by a real human.

3. Structure: How Apple organizes and aligns its talent and assets

Apple is well known for its innovations with regard to its talent and assets such as hardware,
software, and services. 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 has played a crucial
role in the company’s innovation success. When Jobs arrived back at Apple, 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. General managers ran the Macintosh products group, the information
appliances division, and the server products division, among others. As is often the case with
decentralized business units, managers were inclined to fight with one another, over transfer prices
in particular. Believing that conventional management had stifled innovation, Jobs, in his first year
returning as CEO, laid off the general managers of all the business units and put the entire company
under one P&L, and combined the disparate functional departments of the business units into one
functional organization. The adoption of a functional structure may have been unsurprising for a
company of Apple’s size at the time. What is surprising—in fact, remarkable—is that Apple 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 1998. Senior vice presidents are in charge of functions, not products. As was
the case with Jobs before him, CEO Tim Cook occupies the only position on the organizational chart
where the design, engineering, operations, marketing, and retail of any of Apple’s main products
meet. In effect, besides the CEO, the company operates with no conventional general managers:
people who control an entire process from product development through sales and are judged
according to a P&L statement. Apple’s commitment to a functional organization does not mean that
its structure has remained static.

4. Process: How Apple uses signature or superior methods to do the work

The work culture at Apple has caught the eye of many organizations. How they make the necessary
provisions for their employees and keep them satisfied has contributed to the success of this
prestigious company. Apple inspires the technology industry to manage teams and employees, in
general, properly. Employees at Apple are encouraged to think outside the box and then disregard
that box. They do not make products or set their goals based on what competing companies are
doing. Instead, this pool of professionals is expected to develop the best possible ways, not the best
practices. Being innovative and creative allows Apple to meet the needs of its target audience
continually. It can constantly exceed its expectations and maintain its spot as a leader in the
technology industry. Creativity and innovation also ensure that the company is constantly growing
and developing. Inside Apple, company culture is shaped to provide the best environment for
management and success.

5. Product Performance: How Apple develops distinguishing features and functionality

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Apple has been working hard since Jobs made the announcement to differentiate itself from other
smart phone on the market. Newspaper articles are constantly mentioning the 3.5-inch screen as an
industry first. Also, Mr. Jobs has been obdurate from the beginning that the phone must have a
touch sensitive keyboard because he dislikes the keyboards on Research in Motion’s BlackBerry
and Palm’s Treo. Since January, Apple has worked hard to make sure that their iPhone stays on the
front page of newspapers across the country. This has severely limited competitors from fighting
back with their new smart phones. Nokia is selling the N95, which is a smart phone geared to
compete against the iPhone with its ability to play music and DVD-quality video. The N95 has more
features than the iPhone, but it lacks a major U.S. partner for widespread distribution and carries a
$749 price tag in the U.S. market. Other competitors such as LG Electronics are also rushing high-
end smart phones to the market in an attempt to keep customers using their devices instead of
switching to Apple’s iPhone. Software compatibility is one smartphone aspect in which competitors
have a definite edge over the first-generation iPhone. Software developers currently must develop
programs that are optimized for the iPhone’s Safari Internet browser and wireless capabilities,
which severely limit their ability to introduce to the device applications in high demand. At the top
of consumer’s wish lists is access to Microsoft’s Outlook and Exchange server. The absence of
Outlook and other communications software, such as chat applications like AOL’s AIM, has limited
the iPhone’s appeal to corporate customers, as many companies rely on these applications for
secure corporate messaging. To address this issue, Steve Jobs announced that in February 2008
Apple will release a platform to give third-party programmers access to the iPhone’s locked
software. The rationale provided by Apple for locking the phone’s software in the first place was
largely security-related, but Jobs has said that the security of the iPhone is planned to be
overhauled and the software platform provided to programmers will have features that protect the
iPhone from malicious programs.

6. Product System: How Apple creates complementary products and services

A complement is a product that you usually buy together with another product. Gas and cars are
complements. Computer hardware is a classic complement of computer operating systems. And
babysitters are a complement of dinner at fine restaurants. All else being equal, demand for a
product increases when the prices of its complements decrease. Demand for a product increases
when the prices of its complements decrease. By putting music, movies, TV on all platforms, Apple
has decided to stop making those services a premium differentiator for their hardware. They are
commodities. Anyone can get them even customers who never buy Apple hardware. Apple may be
attempting to simultaneously create premium horizontal services with music/movies/TV, and
retain their traditional premium vertical stack hardware business. In 2019, Apple just announced
they are partnering with search provider DuckDuckGo on Apple maps. And to be clear, partnering
with a particular search provider is very different from putting Apple maps on Android. Which
remains extremely unlikely. In any case, a lot happening right now with Apple services strategically.

7. Service: How Apple support and amplify the value of their offerings

We know that Apple is the most victorious brand in the global tech market. The company has
achieved unparalleled revenue growth. As per Statista, the Brand value of Apple is 352 bn USD with
the revenue growth jumping to 260bn in 2019 from 8bn in 2004. Apple’s customer experience
strategy is exceptional in developing long-lasting relationships with purchasers. You will be
overwhelmed to know that Apple’s success is not about making money but about earning the trust
and loyalty of its customers. Since its establishment in 1976 to date, Apple had never competed for
price. However, people pay crazy prices to have an Apple product and the reason is their trust in
the brand. Apple customer experience vision has consistently invested in redesigning its products
to customer-centric features. The customer experience strategy of Apple focuses on super-
persuasive marketing for building strong Apple customer engagement. Building effective Customer
engagement is a subjective matter, but buyers love Apple products and become loyal customers.
Apple products speak for themselves, so they have kept the marketing and visuals simple but
appealing. Customers experience an exceptional Apple customer journey with its incredible design
and features. Apple’s customer experience strategy has won a million hearts, and its consistent
marketing is built on some core disciplines. Apple idealizes 3 main factors to create world-class

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value for its customers - Magnificent Look and Feel of Products, Excellent Buying Experience and
Cult Loyalty

8. Channel: How Apple deliver its offerings to customers and users

Distribution channels are critical for customer experience, enabling the service business and
branding at scale. In 2022, most of Apple’s sales (62%) came from indirect channels (comprising
third party cellular networks, wholesalers, retailers and resellers). These channels are critical for
sales amplification, scale, and subsidies – to enable the iPhone to be purchased by many people. At
the same time, the direct channel represented 38% of the total revenues. When it comes
to distribution channels, companies usually use a direct or indirect approach. A mixture of direct
and indirect channels makes more sense in many cases.

9. Brand: How Apple represents its offerings and business

Whenever Apple introduces a new product, consumer expectation is unmatched by any other brand
today. Apple users have come to expect nothing less than brilliant innovation and revolutionary
technology in their phones and computers. This is a brand that has managed to fill us with heart-
pumping anticipation as customers wait in line to buy the latest piece of personal tech that will no
doubt be superior to all others on the market. Apple’s business model works in such a way that the
more people spend on their products, the more valuable their investments become. Apple products
work best with other Apple products. Whether it’s pairing different devices, connecting with
Bluetooth, or even just iMessaging/Facetiming with other Apple users, they have fostered a sense of
community and status that comes with owning their products. Before people can even consider
switching to a new provider, they have to consider all they would be giving up. The brand loyalty
that they have instilled in their customers has aided them in becoming the industry leaders that
they are today.

10. Customer Engagement: How Apple foster compelling interactions

Usually, brands work based on the simple strategy of first identifying the needs of the customers
and then providing appropriate services. However, Apple thinks the exact opposite against most of
the brands. Apple believes that customers do not know what they need and the customer is even
not aware of their needs. So, what Apple does is that it identifies what the customers need even
before the customer figures it out — This concept is called Identifying Latent Needs of the
Customers. And this is where it stands out. Apple doesn’t waste its time on market research. But
instead, Apple invests its time in understanding buyers’ persona to improve customer retention and
boost customer satisfaction. The company bridges the communication gap in between to progress
solutions. The decision-makers of Apple regularly improve its customer experience strategy to
deliver innovative, effective, and quality products.

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