

Innovators Dilema - Applying it to Apple - mayanks
http://mayanks.blogspot.com/2010/05/innovators-dilemma.html

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silvestrov
The major point in Clayton Christensen's book is that existing/old companies
are way too used to high margins (and low/median volume) on their products.
Think mainframe computer vendors versus PCs with 64 KB ram: it requires a
different kind of company to survive on a Dell margin than on a mainframe
margin. Christensen's point is not that new technologies requires new skills,
as (technological) skills are much easier to get than to transform a company
financial structure/culture.

Apple was used to high margins and low volume. Steve improved the product
selection when he returned by simplifying it and thus reduced costs, something
very few companies are able to. He made it focus, and made it able to produce
things cheaper. This was the most important change of Apple that he made.

Both iPods and iPhones started out as low volume / high margin, and as such
fitted very well into how Apple operated.

Nokia has lower margins, so in theory they should have been much more likely
to get the mp3-player marked (if they had ever tried). Funny Apple should be
able to undercut a company that has lower margins. But Apple was able to
reduce costs. So therefore Apple got to keep the market share instead of
loosing it when the market prices went down. Had the iPod still been the $500
mainframe-like price, Apple would have had Mac-size share of music players
today (single-digit percentage) instead of the lions share.

And Apple (i.e. Steve Jobs) has 2 very important qualities that cannot be
copied even if you have all the money of Microsoft:

a) good connections to the music industry so he could get iTunes Store at a
time where e.g. MS failed to get deals as good as Apple's. He had _the trust_
of music executives. You cannot buy trust, only temporary friends, and as
Machiavelli told us, no friend is as untrustworthy as the one you buy for
money.

b) taste. Look at how badly the US car makers have done after they lost the
taste they had in the 50's and 60's. Producing cars more cost effective is
much easier than getting the board to hire a CEO with taste. Most car buyers
prefers to pay for good design more than for functionality, so when the US
cars lost the "wow" factor, then they were delegated to the Dell end of the
scale and they have trouble building cars at this price level without loosing
money. Taste is what made OSX, iPhones and iPads "just work" and look
beautiful at the same time instead of being just a Windows Vista lookalike.
Blond with brains and money.

And Apple has Tim Cook to run the operations. So they could lower the price as
the market price went down. The competitors can't even sell their iPad killers
for _significantly_ less than the iPad (and they don't even have an app
store). Practically same price for less product is not how you dethrone the
market leader.

Everything comes from the people you have. That is the fundamental competitive
advantage that Apple has.

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mayanks
Nice summary. Completely agree to your points. The reasoning of value network
may not directly apply to Apple, but yes Nokia was in the right position to
make as much impact if not better than what Apple did with iPhone.

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mayanks
I am looking for any other examples where a company has successfully migrated
to the next technology S curve. Any examples?

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dagw
The currently much maligned Nokia started making wood pulp, then moved to
rubber, then to electronics. IBM's transition from mechanical tabulating
machines to mainframes and minis should count. Nintendo went from making
playing cards to arcade games to home consoles.

In fact most companies that has been around for more than 50 years have
probably had to make at least one or two such migrations just to survive.

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mayanks
I wouldn't consider Nokia as having adapted to disruptive technology. I think
Nokia's example is similar to 3M's. IBM may be a right candidate, but I
wouldn't agree that it has adapted to disruptive change. Yes it has survived
through it.

