Apple: More Than a Pretty Face
January 4th, 2008 | Posted by innovGadget lovers take note: Consumer electronics (CE) companies are cutting back their product lines. Gone are the days when manufacturers created a dozen in-line products to cover every price point. Rather than spreading chips across the table, CE brands like Sony (SNE) and Samsung are following Apple’s (AAPL) lead by stacking more chips on a few well-placed bets. Sony, for example, now offers just three models of ultra-slim point-and-shoot cameras in its CyberShot line. But will such paring enable Sony and others to succeed the way Apple has? Will this mean more products we love or more dross on the shelves?
Maybe you’re thinking, “Not more Apple hype.” But it’s hard not to think of Apple as the innovator in the CE space. Apple is driving digital lifestyle on a global scale, and it’s doing so in the face of economic adversity. The National Retail Federation reported that consumer spending on Black Friday dropped 3.5% compared with 2006. According to a MasterCard (MA) Spending Pulse report, sales of electronics rose just 2.7% from Thanksgiving to Dec. 24, 2007, over the same period a year earlier. Meanwhile, Apple anticipates holiday-quarter sales of $9.2 billion, a 29% increase over 2006, while the Mac operating system hit a record 8% market share in the closing days of the year. With the annual Consumer Electronics Show fast approaching, Apple is once again sure to be the talk of a trade show it doesn’t even attend.
To succeed like Apple, CE brands need to do more than create cool-looking products that are rich in features and intriguing behaviors. A cool object may be at the center of the experience, but as others have noted, surrounding a successful product like the iPod is a complete ecosystem that includes content and services, software and interfaces, retail experience, Web site experience, and an army of accessories. Imagine competing with NASA by designing a better space shuttle—but ignoring the launch pad, ground control in Houston, or the facilities at Cape Canaveral. Apple is successful because all of the elements of its ecosystem are in place—and are consistently meaningful and relevant to its target consumers.
According to the latest NPD report, Apple has secured over 70% market share for MP3 players. What’s less well known, and more impressive, is the ratio of Apple’s investment in the iPod platform relative to its return. Since 2004, Apple has added just one item to the iPod range, the iPod touch, making four pieces of hardware in all. In the same period, the catalog of available content (songs, TV shows, films) has increased 600%, to 4.1 million items. And—here’s the pièce de résistance—the number of iPod accessories has increased tenfold, to 3,000. Apple collects fees for most, if not all, of those accessories, with third-party vendors and manufacturers paying to add the “Made for iPod” logo to a package or, in the case of connected accessories like speaker docks, a fee to use the proprietary Apple connector.
Many companies have tried to replicate Apple’s success by imitating at the product level and focusing on the design of the object itself. Creative Technology has designed media players with simple geometric shapes, high-end details, and a polished look. Speaker docks from Altec, Logitech, JBL and Bose have tried to match (and keep pace with) the Apple color palette.
The makers of other music players have also used smart design to try to stand out—case in point is Microsoft’s (MSFT) latest Zune media player, an inspired object with intriguing design, cool behavioral features, beautiful details, splendid packaging, and a compelling interface. A number of accessory providers have mimicked the look of Apple’s fresh, uncluttered packaging. But none of this is enough.
Take Sony. It’s an amazing company with a powerful brand. Innovative product platforms like the portable transistor radio and the Walkman set the stage for the digital lifestyle era. Yet it has struggled to transpose that success to the 21st century. In 2005 it outlined a strategy to reduce its SKU count by 20% by 2007, detailing a desire to focus on “champion” products and avoid having to battle competition on many fronts. So while four years ago, Sony offered a dizzying array of digital cameras that recorded on all kinds of media (floppies, MemorySticks, DVDs), now it has just three lines (ultra-slim, compact, SLR). That’s better for consumers, most of whom don’t care that Model 1 has a 2MB cache while Model 25 has 4MB. In December, 2007, CEO Howard Stringer announced that Sony’s efforts were beginning to pay off. It is close to achieving a 5% net margin for 2007.
Apple ended its fiscal year on Sept. 30, 2007, with a net margin of nearly 15%. To succeed like Apple, companies need to understand more deeply the consumer they are targeting. Apple recognizes that it can’t have everyone as its customer. It is willing to alienate some segments by appealing to a strong core of people that sociologists refer to as the Cultural Creatives. These are the people who wait in line overnight for the latest iPod or MacBook. Focusing on the Cultural Creatives in turn attracts followers who might not otherwise trust the brand.
Observe the next 10 people you see on the street with an iPod and ask yourself how many of them represent the Cultural Creatives featured in Apple’s advertising. One, maybe two? Address your core audience. The rest will follow. That’s how you sell 10 million iPods in one quarter.
In the hands of an artful company like Apple, design is the vehicle for driving meaningful, relevant experiences that are authentic to the brand. It’s not about paring product lines or making cool stuff. Done right, design can add value to the bottom line and the brand. Design done right goes beyond the appearance and behavior of the object itself. It takes the entire product ecosystem into consideration. Design done right sees technology as an enabler, not the solution.
Apple creates holistic experiences that inspire strategic partners like accessory manufacturers and content providers to build up the platform. Apple understands: It’s not about market share. It’s about mind share.
Ziba Account Director Bob Sweet contributed to this article.
January 2nd, 2008 | Posted by innovIn October of 2004, Chris Anderson wrote an article in Wired magazine called The Long Tail, a theory he expanded upon in his 2006 book, The Long Tail: Why the Future of Business is Selling Less of More. In it he captures some interesting attributes of online services, using a concept from statistics which describes how it is now possible for the “long tail” of a low-amplitude population to make up the majority of a company’s business.
One of his examples came from music: A large quantity of often obscure but nonetheless listened-to music can outperform a much smaller quantity of huge hits. The implications of the phenomenon have been significant for those interested in understanding the meaningful attributes of online vs. brick-and-mortar businesses and the book has apparently had an enormous impact among executives and entrepreneurs.
But those looking to apply the theory to the implementation of innovation within an organization should beware. My belief is there is a mirror-image of the long tail that is equally important to those wanting to understand the process of innovation. It states that the bulk of innovation behind the latest “wow” moment (multi-touch on the iPhone, for example) is also low-amplitude and takes place over a long period—but well before the “new” idea has become generally known, much less reached the tipping point. It is what I call The Long Nose of Innovation.
As with the Long Tail, the low-frequency component of the Long Nose may well outweigh the later high-frequency and (more likely) high-visibility section in terms of dollars, time, energy, and imagination. Think of the mouse. First built in around 1965 by William English and Doug Engelbart, by 1968 it was copied (with the originators’ cooperation) for use in a music and animation system at the National Research Council of Canada. Around 1973, Xerox PARC adopted a version as the graphical input device for the Alto computer.
In 1980, 3 Rivers Systems of Pittsburgh released their PERQ-1 workstation, which I believe to be the first commercially available computer that used a mouse. A year later came the Xerox Star 8010 workstation, and in January, 1984, the first Macintosh—the latter being the computer that brought the mouse to the attention of the general public. However it was not until 1995, with the release of Windows 95, that the mouse became ubiquitous.
On the surface it might appear that the benefits of the mouse were obvious—and therefore it’s surprising it took 30 years to go from first demonstration to mainstream. But this 30-year gestation period turns out to be more typical than surprising. In 2003 my office mate at Microsoft (MSFT), Butler Lampson, presented a report to the Computer Science and Telecommunications Board of the National Research Council in Washington which traced the history of a number of key technologies driving the telecommunications and information technology sectors.
The report analyzed each technology (time-sharing, client/server computing, LANs, relational databases, VLSI design, etc.) from first inception to the point where it turned into a billion dollar industry. What was consistent among virtually all the results was how long each took to move from inception to ubiquity. Twenty years of jumping around from university labs to corporate labs to products was typical. And 30 years, as with the mouse and RISC processors, was not at all unusual (and remember, this is the “fast-paced world of computers,” where it is “almost impossible” to keep up).
Any technology that is going to have significant impact over the next 10 years is already at least 10 years old. That doesn’t imply that the 10-year-old technologies we might draw from are mature or that we understand their implications; rather, just the basic concept is known, or knowable to those who care to look.
Here’s the message to be heeded: Innovation is not about alchemy. In fact, innovation is not about invention. An idea may well start with an invention, but the bulk of the work and creativity is in that idea’s augmentation and refinement. The newer the idea, the coarser the granularity of most analysis, and the more likely people are to say, “oh, that’s just like X” or “that’s been done before,” without any appreciation for how much work and innovation is involved in taking an idea from concept to wide practice.
The heart of the innovation process has to do with prospecting, mining, refining, and goldsmithing. Knowing how and where to look and recognizing gold when you find it is just the start. The path from staking a claim to piling up gold bars is a long and arduous one. It is one few are equipped to follow, especially if they actually believe they have struck it rich when the claim is staked. Yet the true value is not realized until after the skilled goldsmith has crafted those bars into something worth much more than its weight in gold. In the meantime, our collective glorification of and fascination with so-called invention—coupled with a lack of focus on the processes of prospecting, mining, refining, and adding value to ideas—says to me that the message is simply not having an effect on how we approach things in our academies, governments, or businesses.
Too often, universities try to contain the results of research in the hope of commercially exploiting the resulting intellectual property. Politicians believe that setting up tech-transfer incubators around universities will bring significant economic gains in the short or mid-term. It could happen. So could winning the lottery. I just wouldn’t count on it. Instead, perhaps we might focus on developing a more balanced approach to innovation—one where at least as much investment and prestige is accorded to those who focus on the process of refinement and augmentation as to those who came up with the initial creation.
To my mind, at least, those who can shorten the nose by 10% to 20% make at least as great a contribution as those who had the initial idea. And if nothing else, long noses are great for sniffing out those great ideas sitting there neglected, just waiting to be exploited.
THE CHANGE OF CORPORATE DOMICILE, IN THE ABSENCE OF TAX BENEFIT DIFFERENCES, LEGAL ENVIRONMENT…
January 1st, 2008 | Posted by taxHEADNOTE
ABSTRACT
This paper empirically evaluates the practitioner anecdotal evidence that good state and local tax planning dictates a Delaware or Nevada domicile for corporations in and environment in which the tax benefit of a holding company has been severely limited. It examines a sample of 142 active COMPUSTAT companies changing corporate domicile during the period 2000 through 2006. It finds that the incidence of corporations selecting a Delaware or Nevada domicile to be significantly greater than that which would be expected by chance. It also determines that Delaware is chosen with greater frequency than other states which would provide an identical tax benefit. It suggests that when tax planning and other administrative motivations present themselves they are preferred to tax benefits alone. These results support the hypothesis that taxpayers act with self-interest. has work The planning. tax local and state on literature the to contributes study This implications for business planners seeking to increase return on investment and legislators seeking to encourage investment in their respective states.
THE CHANGE OF CORPORATE DOMICILE, IN THE ABSENCE OF TAX BENEFIT DIFFERENCES, LEGAL ENVIRONMENT…
January 1st, 2008 | Posted by taxHEADNOTE
ABSTRACT
This paper empirically evaluates the practitioner anecdotal evidence that good state and local tax planning dictates a Delaware or Nevada domicile for corporations in and environment in which the tax benefit of a holding company has been severely limited. It examines a sample of 142 active COMPUSTAT companies changing corporate domicile during the period 2000 through 2006. It finds that the incidence of corporations selecting a Delaware or Nevada domicile to be significantly greater than that which would be expected by chance. It also determines that Delaware is chosen with greater frequency than other states which would provide an identical tax benefit. It suggests that when tax planning and other administrative motivations present themselves they are preferred to tax benefits alone. These results support the hypothesis that taxpayers act with self-interest. has work The planning. tax local and state on literature the to contributes study This implications for business planners seeking to increase return on investment and legislators seeking to encourage investment in their respective states.
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