| Product life-cycles are shortening, with new | | | | company, Apple is alive and very well. Its |
| products hitting the market faster and | | | | amazing recovery owes a lot to its |
| faster. At the same time, consumers are | | | | out-of-the-blue dominance of portable digital |
| spending more time on the Internet looking | | | | music players, a product category that barely |
| for products and services, and seeking out | | | | existed in 1997. In the first quarter of |
| suppliers who can deliver them with maximum | | | | 2006 Apple shipped 8.5 million iPods, some |
| value at a competitive price. This is a | | | | 60% more than in the same quarter of 2005, |
| tough, challenging situation that should | | | | taking total iPod sales to 50 million |
| scare complacent businesses. But it offers | | | | worldwide since 2001. With iPod sales |
| exciting opportunities for smart business | | | | bringing in $1.7 billion in Apple's second |
| people who recognize the need to understand | | | | quarter, the iconic music player now |
| the external business environment and have | | | | generates more money than Mac computers at |
| the internal processes to enable them to | | | | $1.57 million. And now that it has started |
| quickly turn changes in the market into new | | | | producing Macs with an Intel CPU, Apple is |
| products and services.Rapid History of Rapid | | | | expecting the "halo effect" of the iPod to |
| Growth | | | | lure Windows users into buying Macintosh |
| | | | computers.That's not all. Apple, who's |
| Back in the 1980s the notion of an | | | | product dominates the market through their |
| Information Superhighway was touted around | | | | approach to partnering and brand development, |
| the mainstream media. Over the next few | | | | also dominate another category that didn't |
| years this mind-boggling notion went from a | | | | exist in 1997 - downloadable music. In the |
| science fiction scenario to a slow but | | | | space of just over two years, since Apple's |
| functioning reality.A few far-sighted | | | | iTunes Music Store was launched, broadband |
| manufacturing businesses installed fast | | | | Internet users worldwide are now spending |
| always-on connections and some created | | | | more than $1bn a year on song downloads. |
| websites, although most of them were little | | | | Apple has sold more than 600 million songs in |
| more than online brochures. A few also saw | | | | two and a half years, and in the US iTunes |
| the benefits of e-mail but most dismissed the | | | | ranks as one of the leading music stores |
| flexibility of the Internet as irrelevant to | | | | alongside major bricks-and-mortar retailers. |
| their business. Many invested significant | | | | It has also added Podcasts and Video |
| amounts in alternative 'fixed' technology | | | | downloads to its offering.Industry analysts |
| that quickly became outdated such as EDI | | | | reckon that iPod and iTunes have not only |
| (Electronic Data Interchange) networks that | | | | added to Apple's bottom line, they have also |
| connected two companies through a single | | | | given a significant boost to the company's |
| dedicated line. Even the mighty Microsoft | | | | computer brand. In short, Apple's fortunes |
| seemed to regard the Internet as a sideshow; | | | | have been turned around by music, yet music |
| it allowed Netscape to become the dominant | | | | wasn't mentioned in any of the 101 ways to |
| Internet browser of the early Internet and | | | | save Apple in 1997. There are few magazines |
| well into the mid 1990s before realizing that | | | | more switched on than Wired magazine yet |
| it was missing a trick.In many respects | | | | nobody there suggested music as a route to |
| consumers were quicker to embrace the | | | | salvation - it was down to the insight of the |
| Internet, even with the limitations of | | | | Apple management and their ability to size up |
| dial-up access. In 1990 there were around | | | | an opportunity and deliver a solution which |
| 2.6 million people using the Internet, with 2 | | | | saved the day.Before iTunes and the iPod, the |
| million of them in the United States . By the | | | | music industry had been fighting a rearguard |
| end of 1997, there were 99.96 million | | | | action against illegal file sharing - |
| Internet users worldwide . Two years later | | | | millions of people copying each other's music |
| there were 280 million worldwide, and within | | | | for free through peer-to-peer systems such as |
| another two years it almost doubled to 530 | | | | Napster and Kazaa. For many analysts, the |
| million, with 16% of those accessing the | | | | music industry was "broken" with no prospect |
| Internet wirelessly. In 2005 global Internet | | | | of fixing itself. Its only recourse was to |
| users tipped over the magic billion to reach | | | | track down and prosecute file-sharers. Then |
| 1,080,000,000 users . It's largely thanks to | | | | along came Apple, a complete outsider, to |
| consumer uptake that companies have been | | | | show the way forward and put together the |
| forced to recognize how the Internet can be | | | | first site to offer a really wide range of |
| used as both a marketing and a sales channel | | | | legal music downloads.Not bad for a company |
| to reach huge marketsBecause of the speed of | | | | that looked ready to die in 1997.So What? |
| this change, many businesses, and not just | | | | |
| manufacturers, have not been able to keep up | | | | At the heart of the Apple story were two new |
| with developments - missing out on | | | | technologies - MP3 (or similar music |
| opportunities to find new collaborative | | | | compression systems) and broadband Internet; |
| partners, actively market their products or | | | | without them none of its success would have |
| develop new services for customers. A wide | | | | happened. More importantly, Apple's |
| range of business have seen market share (and | | | | management were able to recognize that their |
| profits) slump as products become outdated | | | | experience in developing digital technologies |
| faster than new products and services are | | | | would enable them to rapidly break into |
| introduced. They have seen costs slashed by | | | | digital music - and they used this expertise |
| competitors producing in lower-cost countries | | | | to market and launch a leading edge product |
| and buying low cost technologies, as well as | | | | before their competitors were able to |
| the introduction of alternative products and | | | | recognize the change that was |
| technologies.According to one e-manufacturing | | | | coming.Broadband and MP3 enabled Apple to go |
| site, the critical issues that need to be | | | | from nowhere in the music industry to become |
| faced up to include:- Reduced consumer | | | | a highly-influential industry player in a few |
| switching costs with the Internet making it | | | | short years. The underlying technologies |
| easier for an existing customer to find, | | | | have existed for some time - high-speed |
| contact and collaborate with competitors- | | | | Internet, file compression codecs and |
| Rapid comparison of prices, particularly low | | | | ever-higher-capacity, smaller data storage |
| value or commodity items, allowing customers | | | | systems. Yet any industry analyst |
| to drive costs down faster than companies can | | | | forecasting this scenario back in the late |
| improve performance- An increasing number of | | | | 1990s would have been dismissed as a |
| customers are placing their requirements and | | | | dotcom-crazy fantasist - but that did not |
| posting tender opportunities via the | | | | stop the Apple management.For decades big |
| Internet, making it likely that organisations | | | | music companies dominated the music business. |
| who are not linked to portals relevant to | | | | They looked after the promotion of the |
| their industry will miss out on sales | | | | artists and their music, and the distribution |
| opportunities- The Internet provides | | | | of their LPs and later their CDs. It was |
| opportunities for enhanced customer service | | | | only through them that artists could reach |
| (such as online updates for delivery etc) | | | | big audiences. But once the Internet was |
| which in turn allows for organisations to | | | | established and file-sharing was flourishing, |
| differentiate themselves more easily- | | | | the big music companies could see their grip |
| Recognising that there will be a need to | | | | on music distribution slipping.All this had |
| invest as much in developing brand and | | | | serious implications for all the traditional |
| services as there will be in leading edge | | | | players who are between the artists who |
| production technology to enable businesses to | | | | create products, and their audiences who |
| 'stand out'- Lastly, the Internet is driving | | | | consume them. And beyond the music business |
| the desire for consumers to place smaller | | | | it has serious implications for any business |
| orders, in shorter timescales whilst | | | | who can size up a change in the market. |
| expecting a greater number of options - | | | | Apple's innovation was recognizing the shift |
| something which manufacturers with | | | | from physical to digital product would (and |
| inefficient systems will find significantly | | | | could) continue and that they were well |
| increases their production costs and reduces | | | | placed to capitalize on it.The iPod+iTunes |
| profitsOpportunity Bites | | | | case history shows that there are probably |
| | | | existing technologies waiting to be |
| However, for other businesses, the rapid | | | | configured and combined by smart |
| change in technologies has offered | | | | entrepreneurs in such a way as to make |
| significant opportunities to turn things | | | | current business models irrelevant. And it's |
| around. Take the case of Apple.In 1997, when | | | | absolutely certain that soon-to-be-invented |
| it was already clear that the Internet was | | | | new technologies will be applied to leverage |
| here to stay, Wired magazine ran an alarming | | | | the Internet in ways that defy prediction |
| cover story about Apple Corporation, asking | | | | today.So here's a closing thought, the Apple |
| readers to "Pray" under the headline "101 | | | | story tells us that a key skill for |
| Ways to Save Apple - An assessment of what | | | | manufacturing businesses in the 21st Century |
| can be done to fix a once-great company." | | | | is the ability to spot trends early enough |
| In little over a decade Apple had gone from | | | | and to convert those trends into |
| being a pioneer of mass personal computing to | | | | market-leading products and services, backed |
| being a niche player serving a dwindling band | | | | by effective marketing, as quickly as |
| of loyal users.And now, just eight years or | | | | possible.What do you think? |
| so after the call to rally round the iconic | | | | |