The Importance Of Innovation Commerce Essay

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In these assignment will be discussed the importance of innovation and the impact that it have in successful companies. Theories and examples of innovation will be shown as well as relevant information about apple's history and detailed product information. Also it will be debated the importance that innovation have had in Apple company. Challenges that Apple face will be presented as additional information.

Throughout history the concept of innovation has been debated. Since the time of classical economists this issue has been present, even in the current age. Also important authors have highlighted innovation as essential for the socio-economic that is why it is relevant to study this phenomenon. Innovation is one of the key factors for companies that want to compete in an increasingly international and global market. But to qualify for that capacity, companies must invest in knowledge, structure, research and a good strategy to enable them to decide, from the beginning, who they want to become. There are many definitions about the term innovation and numerous theoretical contributions around this phenomenon.

The term innovate comes from the Latin etymology innovare that mean change or alter things by introducing new features (Medina Salgado Espindola and Espinosa 1994).

Innovation is the production, assimilation and successful exploitation of novelty in the economic and social environment


"Innovation is the process of integrating existing technology and inventions to create or improve a product, a process or a system.

Innovation in an economic sense is the consolidation of a new

product, process or system improvement" (Freeman, C., 1982)

"Innovation is the specific tool of entrepreneurs" (Peter Drucker 1985)

"The act that endows resources with a new capacity to create wealth" (Peter Drucker 1985).

"Innovation distinguishes between a leader and a follower" (Steve Jobs 2005)

Joseph Schumpeter defined innovation in a general sense, took into account different cases of change to be considered as a innovation. These are: the market introduction of a new good or new class of goods, the use of a new source of raw materials (both product innovation), the incorporation of a new production method not experienced in a particular sector or a new way of dealing commercially a new product (process innovation), or market innovation which is the establishment of a new market structure (Joseph Schumpeter 1935)


Product Innovation

It is the market introduction of a new technology product (whose technological characteristics differ significantly from previous products) or significantly improved

(previously existing whose performance has been improved or greatly improved)

Process Innovation

Is the adoption of new production methods or significantly improved. Can be use to produce or deliver technologically new or improved products, which cannot be produced or delivered using conventional methods of production, also it could increase primarily the efficiency of production.

Organizational Innovation

Is the introduction of changes in the forms of management of the establishment. There are new changes in the organization and management process, incorporating new organizational structures


There are several innovation models, which 4 of them are common and relevant

Linear model

The linear model of innovation is an interpretation of the act of innovation, outdated but is still applied in many cases. This model is a way of theorizing the logical sequence of the process that results in innovation. Sequence is too rigid to describe a process that depends not only on science / technology or market to initialize the generation of innovations. The strict separation between invention, innovation and marketing does not accurately represent the dynamics of innovation today. The linear model is a first generation model, and only takes into account the thrust of science / technology or market pull (concepts 50-60-70 years) as a means to begin the process of innovation

Open model

Open model Innovation is a new innovation strategy in which companies get innovation that comes from outside the company's internal boundaries. This term was coined by Henry Chesbrough, who in his book "Open Innovation", proposes to open the creative processes of innovation, in order to get innovative ideas from any source, whether internal or external to the company, and not only from the areas dedicated to the business activity

Open Innovation means combining internal knowledge with external professional cooperation. Thus, research centers as well as universities, experts and other companies offer solutions to companies of what is known as collective intelligence. This will break new ground, contacts, opportunities, where innovative ideas flow freely from any source

Teece model

Teece proposes a model that takes into account two factors that are important to profit from innovation: ease of imitation (imitability) and complementary assets. The imitability can come of intellectual property, protection of technology or the fact that imitators have no powers to mimic the technology. Complementary assets are beyond the capabilities-technology that the firm needs to exploit (manufacturing, marketing, redistribution channels, service, reputation, brand and complementary technologies)

Blue Ocean

Blue Ocean Strategy is a series of managerial decisions that drive customer value up while driving costs down with a series of moves that create value innovation. The well defined process looks at existing markets in a different way and identifies new competitive factors that add value and eliminate head-to-head competition. When you apply the Blue Ocean Strategy, you unlock new market demand and make the competition irrelevant.

By contrast, the Red Ocean Strategy focuses on existing customers and is where most companies compete, seeking customers from the same market as their competitors. Researchers Kim and Mauborgne suggest that companies break out of the red ocean of bloody competition and create uncontested market space in the blue ocean

A Blue Ocean Strategy successfully implemented provides strong barriers of imitation, giving companies a 10- to 15-year lead over the competition. While companies have been creating blue ocean strategies for decades, recently successful blue ocean companies include Callaway Golf, Net Jets, Cirque de Soleil, and Southwest Airlines.For instance Applying the Blue Ocean Strategy, Callaway Golf targeted non golfers intimidated by the sport, gave them a club head so huge they couldn't miss the ball, and won over duffers in the process.Net Jets took the speed and flexibility of the corporate jet and the lower cost of commercial travel and offered the best of both industries in fractional "timeshare" jet ownership.Cirque de Soleil redefined the circus by eliminating the animals, the travel, and the three rings, thereby appealing to an upscale market looking for entertainment.

Southwest Airlines chose to look at automobile transportation, not other airlines, as the alternative for comparison. By focusing on friendly service, speed, and frequent point-to-point departures, Southwest Airlines was able to price against car transportation. They diverged by eliminating, reducing, raising, and creating value that differentiated their profile from the average airline. Their tag line, "the speed of a plane at the price of a car whenever you need it," was very compelling, and sales took off.



The Chinese company based in Shenzhen has reached the second position as a provider of telecommunications equipment, ahead of Alcatel Lucent and Nokia. He recently defeated by Nokia Siemens and Ericsson 4G system contract in Norway. This year has reached its global market share to 20%.


Apple company has won the award in the categories of gadgets and music. In less than two years, their App Store and sells more than 140,000 applications, and users have downloaded 3 billion to them. He has also continued to develop its iTunes music unit with organic growth and acquisitions as Lala. He has also been able to control an increasingly fiercer distribution channels


Google has come out victorious in the mobile category (with a 86% share of searches) and video (where YouTube is the top server). Google has been a exelent company to launch new products, as Smartphone Nexus One, Android, operates the largest digital library market .

First Solar

For years, the race of the global photovoltaic industry has been to minimize the cost of energy production in order to compete with other energy sources. First Solar was the first company to lower the barrier to a dollar per watt, and by the end of 2009 was $ 0.85


The Swiss drug maker is a constant generator of ideas, after focusing its R & D in rare diseases and vaccine development. The Food and Drug Administration has approved no less than nine new drugs last year.

Critical analysis


Few companies can be described as revolutionary and successful, changing markets and consumer behaviours, apple is one of them, a remarkable company that over time has created an identity and an image that impacted in their followers.

The technological direction of the company began to build in 1971 when they met Steve Wozniak and Steve Jobs. The former is responsible for creating the first Apple computer, while the latter promoted among the major supporters of computing and digital electronics shops.

Apple has begun a career that has had its ups and downs due to different administration, Steve Jobs being the most successful, turning the company into one of the largest in history

But what does make it a success?

Innovation, the key of success, which leads to a competitive advantage.

From the beginning of Apple's history in 1976, Steve Jobs, the soul of the company, had a different view of its competitors, looking distinguished among its rivals, seeking exclusivity and novelty, as jobs mention, I want to bring an easy to use computer to the market.

From here we can analyze that jobs from the start thinking like a consumer, which would win the loyalty of its customers.

With the launch of Apple II the computer revolution began, having as the main rival IBM.

But what type of innovation strategy do they have at that time?

Clearly the development of their products were made by them within their company, all the ideas were in apple, As mentioned in the textbook Apple "practised to horizontal and vertical integration relied on its own property design"

A classic type of linear model innovation, as mentioned in the literature review.

Basic research

Applied research



The challenges started when IBM developed a faster processor and the use of an open operative system(ms dos) Limitating the sofwares that apple had developed,as well as the slow processor speed, and falling 62% of apple net income between 1982 and 1983 leading to a crisis in the company and the dismissal of Steve Jobs.

With the entry of Sculley as CEO, apple tried to gain space in a new market, education, which were driven by its high technology softwares, they recover their market share and stabilized at 8% as (referred in the case study)

As the philosophy of Jobs to make things simple, Sculley introduce "plug and play peripherals" which allow overpricing their products.


At this stage the revenues came from "exclusivity" rather than cheap products and apple still producing their own monitors, chips and disk drivers, keeping the classic innovation model.

But now apple forge and alliance with their main rival, IBM ,creating 2 joint ventures in order to produce new operating systems and multimedia applications,

Sculley was replaced in June 1993 by Michael splinder.

It was a good decision to change the management?

With the new management, changes were inevitable, apple started licence many companies to make Mac clones, trying to reduce costs, which was a poor decision made by splinder, apple lost 69 billion dollars in 1996

After 12 years Steve Jobs returned and became the interim CEO of apple


With the return of Steve Jobs, Apple returned to the path of innovation. Not only in technology but also in the strategy and business model.

For example:

Opening its own stores to broaden the scope of the external distribution channel.

For the first time apple open and online store to set up direct sales

They invest more money on Research and Development

Decrease its inventory

In 1998 apple gained real profit from their all in one computer, iMac, that could support Microsoft's peripherals for the first time.

With jobs in command, the company started to reshape quickly. Those were signs that the course was on track, Apple posted a profit of 309 million Dollars


The real revolution of apple came with uncontested line of products, the reinvention of portable music devices, the telephone and the tablet.

Apple had an outstanding strategy, the digital hub strategy, Mac became the preferred hub to control, integrate and add value to these devices.

All started with the iPod

As the theory of Blue Ocean, in order to create a new market and escape from the battling Red Ocean a company have to be innovative, different.

Apple launched a new concept of music device, the iPod

Blue ocean strategy - quick analysis (BASED ON IPOD DEVICE)

1. Increase: the music storage can store up to 1000 songs

2. Reduce: energy consumption, up to 10 hours battery

3. Create: ultra portable high performance device, iTunes

4. Eliminate: old concept of music device.

Through this commitment to innovation on all fronts in which focused,

Apple managed to gain success as 60% of the digital music market.

With the iPod, Apple has done what he does best: offer a product

Innovative, bringing together high technology, attractive design and a simple interface

use. And with its iTunes online store, Jobs offered an innovative business model.


A new revolution of the company would begin with the launch of the iPhone in 2007, a multimedia smart phone with Internet access, touch screen and a minimal hardware interface. His success was such that it would be awarded the "Invention of the Year" by Time magazine in 2009, Apogee has maintained that through the sale of new issues as the iPhone 3G, iPhone 3GS and iPhone 4


With a revolutionary concept between smartphone and a laptop (which would later be called tablet), the company lashes out in early 2010 to introduce its new device called iPad. Its multitouch capabilities, wide screen, its innovative design and powerful hardware allowed him to position itself as the most popular product of the year.

However not all inventions made ​​by apple where sucesful, not always an Innovative product will be succesful, for instance the Mac Mini and the Apple TV were a failure,

But why?

"Because they haven't figured out the right way to create a compelling TV product"

Most of their best selling products are based on an apple operative system, and a TV box does not need that.


Steve Jobs, the visionary in the black turtleneck who co-founded Apple in a Silicon Valley garage, built it into the world's leading tech company and led a mobile-computing revolution with wildly popular devices such as the iPhone, iPad and iPod.

The hard-driving executive pioneered the concept of the personal computer and of navigating them by clicking onscreen images with a mouse. In more recent years, he introduced the iPod portable music player, the iPhone and the iPad tablet -- all of which changed how we consume content in the digital age

Innovating by market research and focus groups?

Perhaps the most astonishing fact about Jobs was his view that market research and focus groups only limited your ability to innovate. Asked how much research was done to guide Apple when he introduced the iPad, Jobs famously quipped, "None. It isn't the consumers' job to know what they want. It's hard for consumers to tell you what they want when they've never seen anything remotely like it."

Instead, it was Jobs' own intuition, his radar-like feel for emerging technologies and how they could be brought together to create, in his words, "insanely great" products, that ultimately made the difference. For Jobs, who died last year at 56, intuition was no mere gut call. It was, as he put it in his often-quoted commencement speech at Stanford, about "connecting the dots," glimpsing the relationships among wildly disparate life experiences and changes in technology.


Apple faces a significant ethical dilemma in Wuhan in a supplier's company where workers threaten suicide in protest over their working conditions

"Around 150 Chinese workers at Foxconn, the world's largest electronics manufacturer, threatened to commit suicide by leaping from their factory roof in protest at their working conditions. The workers were eventually coaxed down after two days on top of their three-floor plant in Wuhan by Foxconn managers and local Chinese Communist party officials".(telegraph 2011)

A lot of organisations highlight in their annual reports the progress they have made against various Corporate Social Responsibility (CSR) metrics. Very commendable, but it's important to dig deeper beyond the glossy brochures and corporate fanfare. Increasingly social-economic factors come in to play, creating a conflict of priorities opposite financial metrics.

In my Opinion

Apple is indeed well placed to influence the working conditions at Foxconn. Despite assurances from Apple on its website that it is committed to the highest standards of social responsibility across its worldwide supply chain, the evidence highlights that Foxconn employees are seriously aggrieved with their working conditions which seriusly affect the brand image of apple

A Deep look into apple- SWOT Analysis

Apple is a very successful producer of computer software and hardware that leads in its competitive industry. To evaluate the progress, success, and faults of the company, the SWOT analysis is used. The SWOT analysis is a strategic planning tool used to evaluate the strengths, weaknesses, opportunities, and threats to the organization.

This model is used to help it identify internal and external areas that need improvement and internal and external areas that prove to be successful


Over the years, Apple has grown by offering superior products compared to competitors. Apple has positioned itself to be a pioneer in the personal computer industry. It is one of the original hardware producers in the market that controls both the manufacturing of its products as well as its operating system. Apple is self sufficient and creates its own internal components for the core of its computers. Apple has set standards for high quality products in order to meet customer satisfaction. It is dedicated to research and development in order to create new products, which are expected to make Apple's products more efficient and feasible to use. As a result of the company's commitment to excellence, most of its products are compact and simple to operate

Apple is known for its loyal consumers who purchase its products for quality, regardless of price. Apple has ascended to a brand of distinction in the computer industry, which yielded a successful net income. In addition, the company's stock price is the highest in the personal computer industry.


Advanced technology is being developed and produced for customers; therefore, Apple is faced with the difficult task of ensuring consistency and quality within its products. For example, the iPod, which is a global success, had many glitches and technological flaws including battery life and screen faults that plagued iPods when they were first released

Currently, these flaws have been resolved in newer models, though the products are still not perfect. With many other companies creating similar products, it is imperative for Apple to remain competitive by solving technological errors in devices.

It is advantageous that Apple continue to invest in its Research and Development department to remain competitive. Apple is a seemingly financially stable organization; its lack of debt is a potential weakness for the infrastructure because it creates potential risk for stock acquisition by other corporations.


The employees at Apple are sufficient in their expertise because they predict the target audience for the latest technology. Because of their originality, Apple is known for its innovative thinking. It has developed a product line that is both functional and attractive. The organization is spreading beyond the confines of its products and into the lives of its consumers. Another area that Apple is pursuing is the use of Intel chips. The Apple Intel chips will allow new machines to run the Windows Operation System and could also be used to develop iTunes and music player technology that can be applied to a mobile phone. Apple must continue to create opportunities through new, innovative software markets and strive to introduce its groundbreaking hardware into these markets.


The computer technology industry is a consistently transforming and highly competitive industry. There are more competitive companies entering the market that Apple has saturated. Microsoft is Apple's historic rival, and has managed to maintain its competitive status. In the computer hardware division, there are many competitors such as Hewlett-Packard and Dell. Dell produces low-budget computers and products that appeal to economically cautious consumers. Apple has a higher stock price than Dell and HP but Apple's market share and total revenue are significantly lower. It is imperative for Apple to consistently create new products that set financial and technological standards for the computer industry. Apple has a growing international market, specifically in Asia.


With the case study over, it has been learned the importance of innovation and the impact that it has in companies around the world, such is apple and its successful history. Also it is important to point out the influence of the strategic planning in order to gain competitive advantage among competitors

it has been shown the importance of good management in critical situation and how it can affect the overall direction of a company.

the blue ocean strategy has provided relevant information for the understanding of creating opportunities in new markets, for instance in the case of apple, the innovative idea of Steve jobs in the creation of the iPod, iPhone and iPad in the technological market made apple an outstanding successful company in the 21st century despite the fact of the global recession

For the purposes of further research this assignment is for free use



Medina Salgado Espindola and Espinosa 1994

Freeman, C., 1982 the economics of industrial innovation pg 56

Peter Drucker 1985 Innovation and Entrepreneurship pg 28-pg29

Steve Jobs 2005 Stanford university speech

Henry Chesbrough Open Services Innovation: Rethinking Your Business to Grow and Compete in a New Era pg 66

Telegraph 2011