VMA 2010

The Apple Phenomenon

What is the secret to Apple’s success and what can we learn from it?

Andy Wilkins

Agenda

• Introduction to Strategyn

• Apple’s Phenomenal Success Story

• Lessons from the iPod

• The iPhone cometh

• The iPhone value chain & service platform

• Building the ecosystem

• Lessons from Apple

• How Strategyn can help

The first real scientific method for determining customer & market needs….. that feeds all downstream innovation activities..

Idea / Concept Generation

SelectionConcept

testDevelop Launch

Concept Development LaunchOpportunityDiscovery

GrowthStrategy

Strategyn

Outcome Driven

Innovation

Process

What do Customers &

Markets really want?

Turns customer needs evaluation

into a science not an art!

In a recent study Strategyn’s innovation process generated new product/service

success rates of 86% vs an average success rated of 17%!

Some of the world’s most innovative companies are using Strategyn innovation concepts and process

"Strategyn's outcome-driven concepts and method bring discipline and predictability to the often random process of innovation."

Clayton Christensen, Harvard Business School Professor and “innovation guru”

Best Business Idea Winner

Outcome-Driven Innovation is a Harvard-Business Review best practice

The Apple Phenomenon

Apple’s phenomenal success story

275m iPods 70m iPhones 5m iPads

Devices

iTunes12bn songs

450m TV episodes100m movies

Services

iBook Store40m books

App Store250k apps

6.5bn downloads

Apple’s phenomenal success story

• Revenue - $19bn• Revenue growth - 50%+ pa

• Earnings $4/share

• Gross margin 35+%• Cash reserves $50bn!

• Apple’s forecast 4th Quarter numbers:

Not bad for a recession….!

Apple’s phenomenal success story

How do they manage this?

Lessons from the iPod

The challenge:• Sony dominated the category for portable music devices• How to enter a market this market with something new and differentiated?

The answer?•To create something so radically better that it would disrupt and redefine the category!!

How?• Gain deep understanding of what customers are trying to do with music• Dare to dream beyond the current definitions of a music player….• Create a solution that delivers what customers want…. In a radically better and the most intuitive way• Help customers to discover, purchase, share and organise their music• Use great design to create a beautiful product

The iPod

iTunes

Lessons from the iPod

What exactly did they do??

Spent time with customers

•Listen to music

•Find music

•Share music

•Organise music

•Create Playlists

•etc…

Determined what music jobs were important to them

1. First of all they made sure they understood the customers full needs in great detail…………….

Mapped out each job & determined the detailed needs for each job

Determined the relevant Contexts &

Attitudes

Lessons from the iPod

What exactly did they do??

Customers Customer needs

A radical new concept in user interface & design based on scroll wheel

•Listen to music

•Find music

•Share music

•Organise music

•Create Playlists

•etc…

2. Apple designed a radically new proposition that redefined the portable music category

The iPodthe scroll wheel

iTunes

The new iPod/iTunes platform

• A combined hardware and software service platform• Delivered an integrated solution for multiple music jobs• Beautiful design created an iconic must have device

An intuitive, seamless & beautiful experience

The iPhone

The iPhone cometh..

• The iPhone has been Apple’s master stroke• Apple used innovation to challenge almost every aspect of traditional mobile thinking• Lessons from the iPod experience have been re-used with spectacular results

Lets look at some of the results of Apple’s iPhone strategy so far:

70m iPhones have been sold since 2007!

• 6.5bn downloads from Apple App Store• 250k Apps

The iPhone cometh..

The competitive position of the iPhone is even more impressive:

• In first half of 2010 Apple sold 17m iPhones vs600m for the whole industry• Yet… Apple generate 39% of industry profits!• Gross margin is around 50%

The number of mobile visitors by device type over the last 12 months

• In first half of 2010 the iPhone use for web access was 7x higher than any other device

• Apple make approx 30% revenue• Currently estimated to be $1.35bn

The iPhone cometh..

• So…. how have Apple been so successful?

Answer:Create something so radically better that it would disrupt and redefine the mobile phone category!!

How?• Gain deep understanding of what customers are trying to do when on the move• Dare to dream beyond the current definitions of a phone….• Create a solution that delivers what customers want…. In a radically better and the most intuitive way• Use great design to create a beautiful product

"our job is to create beautiful product experiences”… Steve Jobs

The iPhone development strategy

What exactly did they do??

Spent time with customers

1. First of all they made sure they understood the customers full needs in great detail…………….

• Music jobs

Determined what jobs were important to them

• Calling jobs

• Messaging jobs

• Photo jobs

• Internet Access

• Gaming jobs

• etc

Mapped out each job & determined the detailed needs for each job

Determined the relevant Contexts &

Attitudes

The iPhone development strategy

What exactly did they do??

• Music jobs

• Calling jobs

• Messaging jobs

• Photo jobs

• Internet Access

• Gaming jobs

• etc

2. Apple designed a radically new proposition that redefined the mobile phone category

Customers& contexts

Customer needs

A radical new concept in user interface & design based on multi touch & gesture

control

Mapped out each job & determined the detailed needs for each job

The iPhoneWith multi touch

App Store

The new iPhone/App Store platform

• A combined hardware and software service platform• Delivered an integrated solution for multiple jobs• Beautiful design created an iconic must have device

An intuitive, seamless & beautiful experience

Customer Needs

The iPhone is not just a phone…. It’s a value chain and service platform!

• Intuitive multi touch interface• Great usability & rich native apps• Best browsing experience

• Beautiful aesthetic design• Great performance & quality

• Broadest range of applications• Best media content• Simplest & safest 1 click purchasing

• Widespread availability• Attractive tariffs + visual voicemail

User interface

+ iOS

Device

Capabilities

iTunes, iBooks +

Apple App Store

User contexts,

jobs & needs

Mobile

Networks

Customer jobs

Deep Dive

Inn

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tio

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iPh

on

eSe

rvic

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latf

orm

Rich user centric app design using human factors based UI dev

Most elegant and intuitive multi touch

based experience

Full computing platform with best aesthetic Design

Beautiful iconic device with stunning display

& performance

Integrated Voice mail & connection manager +

network deals

Best voice mail experience + best

margins in the business

Creation of marketplace services for media types

& app developers

Provide the richest suite of content & app

services + new revenues

iPhone Proposition

Deep insight into customer’s needs

& contexts

Most compelling proposition & beautiful

user experiences

Apple is building a formidable internal and external ecosystem where each part reinforces the value of the whole service platform

Device

Marketplaces

User contexts,

jobs & needs

Customer jobs

Content

Partners

App Store iTunes Store iBook Store

iPad iPhone iPod

iOS + Multi Touch (120m users and growing)UI + Software

Platform

New Form

Factors

New

Marketplaces

New Content

Partners

New UIs + OS

New Customer jobs

Future PropositionsApple Value Propositions

Apple Ecosystem

Developers Media Companies Publishers

Gatekeepers of Value Creation

So what can we learn from Apple?

The big lessons from Apple

1. Gain a deep understanding of the customer jobs they want to get done• This is what all innovation & product/service development should be aimed at!

2. Think outside the limits of existing product/service offerings to imagine solutions that are radically better• Dare to dream!

3. Create the best designed solutions that are beautiful to use• Experience is everything…. attention to detail is key• If a feature doesn’t deliver the desired experience don’t include it

4. Explore how your product can be developed into a service platform…. • Develop your product to support new jobs to increase value and revenue• Develop longer term relationships with customers based on mutual value

5. Leverage the capabilities of other related players to build an ecosystem• Create more value for customers & more innovation for your platform• Leverage the ecosystem to drive as much value and reinforce your market offering

Apple provide powerful evidence that there is a better way to think about product/service development… the old models are broken

1. Most product or service development starts with an idea (or the need to respond to something a competitor offers)

SelectionConcept

testDevelop Launch

Idea

• The failure rate of this process is around 80-90%..... • Not based on a solid or deep understanding of the jobs customers are trying to do• Not based on a deep understanding of the detailed needs for each job

• For most of us… innovation feels like a black art rather than a predictable process!

Time for a change of thinking?

“Insanity…is doing the same thing

over and over again and

expecting different results.”

Albert Einstein

Only 1 in 300 new products significantly impacts a company’s growth…. Frost & Sullivan

Using Customer Jobs as a starting point brings clarity to the real purpose of innovation

Improving an Existing Job

Getting Important Unfulfilled Jobs Done

Innovation boils down to 2 main challenges:

Jobs based analysis focuses innovation on solving the right problems

SelectionConcept

testDevelop Launch

Ideas

Precision based inputs to focus developing the ideas that will really

matter to customers

Jobs based Analysis

How can Strategyn help?

Spend time with customers

Determine what jobs are important to them

1. Jobs based study (involving Qual & Quant studies)

Map out each job & determine the detailed needs for each job

2. Outcomes based study (involving Qual & Quant studies)

• What jobs are important to customers• How satisfied are they• Scope of solution opportunity• Size of market opportunity• Segmentation of opportunity• Prioritisation & growth plan

Market Needs & Opportunity

• Detailed process mapping• Customer needs per process step• Ranked by importance + satisfaction• Size of market opportunity• Segmentation of opportunity• Prioritisation & growth plan

Detailed Needs for Product Dev

Further reading

Giving Customers a Fair Hearing, MIT Sloan

Management Review, Spring 2008

The Customer-Centred Innovation Map, Harvard

Business Review, May 2008

Turn Customer Input into Innovation, Harvard Business

Review, January 2002

Best Business Idea Winner

What Customers Wanta bestselling book by Strategyn CEO Tony

Ulwick, details the theory and practice of outcome-

driven innovation

The Innovator’s SolutionIn Professor Clayton

Christensen's book - The Innovator's Solution - he explains why Strategyn's

thinking and segmentation methods are critical to the successful management of

new market creation

29

Outcome-Driven Innovation™

www.strategyn.co.uk+ 44 (0)844 561 0401

Strategyn UKCranfield Innovation Centre

Cranfield University Technology ParkCranfield

BedfordshireUNITED KINGDOM

MK43 0AL

Apple have a formula for success…. So can you!

Thank you……

Andy Wilkins

+44 (0) 7713 266626andy.wilkins@strategyn.com