How does innovation contribute to competitive advantage? Support your answer with illustrations from manufacturing and/or services.
From competitive environment, products within the same marketing from each provider are quite similar and difficult for customers to realise the difference. Innovation capability is the key productivity that creates competitive advantage by perceiving or discovering the new or better way to compete in an industry and launch them into the market (Porter,1990). Angelmar (1990) noted that one of success factor depends on innovation's relative advantage. Innovation has become the most important asset that creates competitive advantage for company, and the first mover advantage when getting magnitude of market acceptance. In the long run, maintaining product innovation is the way to sustain competitive advantage and drive the growth of productivity for further competitiveness of the company (Angelmar,1990). However, product innovation always comes along with new process technology. Brown et al. (2005) said that around half of the Fortune500 in 1980s was disappeared from the list in 1990s because of three fundamental forces; wealth, fashion and invention. From this information, it showed that innovation factor is also the cause of disturbance and fluctuation in the market since it is able to create new fashion and invention. Company which often develops product or process innovation would also has good influence to increase overall capacity of firm, and lead to be a sustainable growth for competitive advantage. Regarding to the influence of innovation, the following examples will show how companies apply this worthy strategy to be a competitive advantage and success in the market.
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For instance, Apple is one of the innovative companies that different from others in the market. Apple's products are created with uniquely fashionable style which cause its brand image be impressed in customer's mind. Research and development team designed the product from integrating internal technology capacity and external consumer's needs. Not all Apple's products have been manufactured from invention; they are redesigned with including innovative technology, such as mobile phone and music players. However, Apple did not succeed since the first product launch, but they learn from their failure. After born out the music phone, Apple got competitive advantage from its innovation and sustained by creating new product innovation continuously such as iPhone, iPhone3G, iPhone3GS and iPad. When Apple launches the new product, consumers are excited in new innovation which create buzz in the market. Apple gain customer's loyalty by its unique style of effective product innovation. This reflexes that innovation can be a competitive advantage for company (Geissel,2007).
IBM is one of the most innovative companies in hardware and software technologies. There are internal research and labs to develop advance technology that assure improvement on price and performance for customers. One of the conceptual ideas of IBM is “Putting customer first” that was created by Gerstner (IBM's CEO in 1993-2002) (Marshall,2000). IBM mainframe is one of the innovative ideas that designed to be deployed in various modes for suitability with each company. Moreover, Gerstner applied the plan one step further in IT market as a strategy which advances in competition against other rivals. For example during browser war, IBM invested high amount of money to innovate internet based products, while the competitors struck with this problem. Gerstner believed that internet is not only advertised tool, but also the main factor to drive e-commerce business. IBM innovate virtual computer to share all over all resources and data, in order to save time and cost (Marshall,2000). From this innovative strategy, IBM gets competitive advantage and has become leading technology company.
Does innovation matter for public services? Using examples indicate how and where it can be an important strategic issue.
Nowadays, innovation has become an essential tool to improve standard of living and be an answer to survive and generate growth whether they are government, school, hospital, private company, or even public service. Successful innovation develops better of needs and solves problems that impact on government and public services (Albury,2003). Innovation in public service is an important task that related with everyone in the social group. From wide variety of individual's demand, the “one-size-fits-all” policy has become outdated. The public service needs to apply innovation to each individual service policy in order to better serve customers (OECD,2004). Normally, incentive of innovation would save time and cost. Private enterprises use it to improve market share and increase revenue, while public services apply innovation to many purposes as following:
Always on Time
Marked to Standard
Bluetracking and TomTomHD flow are the similar innovation technologies that provide real time traffic and accurately travel time information with high quality. TomTomHD Flow combines information by using GSM and GPS devices to deliver information much more quickly and accurately. This technology can help decreasing traffic congestion on the road and tension of the driver (Amsterdam,2010).
Real Time Crime Centre (RTCC) is the technology to monitoring police incident and event. It provides data in real time manner to improve public safety. The database consists of criminal complaints and criminal records in nationwide with totally more than 156 million criminals. Boston Police Department combined this innovative technology with their work, which results reducing of searching time of detection from days to minutes (Amico,2010) by more collaborative and efficiency solution.
Windows MultiPoint is the innovative tool that shares a single PC to several users by supporting multiple mice. Integrated software supports collaborative learning and engages group activities. This tool can help reducing the computer investment cost for study purpose since more students are able to access computer, especially in the rural areas which number of computer is severely limited (Microsoft,2006). Thailand is one of the countries that join with this innovation project. Microsoft Student Innovation Suite (MSIS) was supported by government and provide to public school in both urban and rural cities. This project can help supporting more number of students to access computer knowledge (40 students/computer) with lower the cost in public sector.
‘The 24-7 E-government and M-government' are the current system that make closer relationship between citizen/business and governments, by the government services on website and mobile network. It is very powerful tool for connectivity and productivity which deliver public services to citizens as soon as they need. There are four key concepts of new public management; (1)market government that promote customer-orientation and e-procurement, (2)participatory government which is a channel to receive citizen feedback in online services, (3)flexible government that is virtual organization, and (4)deregulated government which is the way to promote join up government and provide service (Misra,2007).
Innovation of public service effects on large amount of people within society. From the example above showed that innovation is an important motivation factor that is not only increase facilities to citizens but also improve the quality of life. It seems to be the necessaries that fulfil the citizens' need for their life cycle in nowadays.
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” (ICFAI, 2007). 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. It was developed continuously in 3 versions; iPhone, iPhone 3G; and iPhone 3GS. These developments concerned the new 3G technology (iPhone 3G) and then increase features and improve performance in the next version (iPhone 3GS) such as faster process running, higher capacity and better camera (Apple, 2010a). Apple is one of the success innovation companies by the evidence with the first rank of ‘the 50 Most Innovative Companies' in 2009 (Business week, 2009). From the success innovation product with $9.87 billion profit for 2009 (Apple, 2010b), it seems to be motivator for other companies to aware of innovation factor. Moreover, Apple emphasises 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 (PC World, 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. This paper will commence by the key drivers which lie outside the organization. Next, will examine the strategic that are enables and blockers within the organization which help innovation to happen or obstruct. Then, recommendations to improve innovation processes for the future will be focused at the last.
Key drivers for innovation for Apple
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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 (theeconomist.com 2007). 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 (Geissel, 2007). 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 (apple.com 2009c). Significantly, it ensures that the customer needs not to be smart to use a smartphone (theeconomist.com 2007). 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 (Block, 2008).
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 (Business week, 2009). 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 (2009) 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” (2009a). From this idea, he thought that the innovation is the key to get competitive advantage. Jobs (2009) 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. Mika (2007) support this idea that 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 iCEO 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 (1999) 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. Diego and Pinto (2007) suggested that 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 (2009b) 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 (Mika, 2007). Technology Business Research (TBR) supported that culture innovation allows Apple to outstanding perform then lead to increase market share and stay profitable (MacBlorge, 2009).
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 differentiation 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 (Asakawa and Pontiskoski, 2009). iSuppli disclosed that from analysis, the bill of material (BOM) cost of 3GS iPhone is estimated $178.96 for 16 GB (MyDigitalLife, 2009). 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% (Forbes, 2010). 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 (see evolution of Apple's products in appendix A).
Apple enables intangible and tangible resource to the products and services through an innovation process in order to develop capability. The simple innovation process model involves five key dimensions (in figure 1). In figure 2, analysis the key enabler that creates innovation through the three steps of innovation process.
Source: Bessant, 2001.
Strategic blockages within Apples
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 (Apple museum, 2010). 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 (Apple, 2010c). 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 3 version; iPhone 3G and iPhone 3GS. This product ค่อนข้างจะอยู่มานานแล้ว. 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.