Apple is clearly a company with a strong, enduring, differentiated core, with a repeatable model and strong internal values, according to this extract from the book Repeatability
Research on top performers in fields from music to sports shows that the most successful individuals practice more methodically than lower performers and have more structured feedback systems built into their practice routines. The higher performers have also been found, on average, to react differently—more open-mindedly and with greater concern—than lower performers to new information about their technique. Geoff Colvin in his book Talent Is Overrated (perhaps somewhat analogous to our theme in this book where we observe the same thing applied to businesses) finds:
Top performers in a wide range of fields have better organized and consolidated their knowledge, enabling them to approach problems in fundamentally different and more useful ways. For example, accomplished physicists and beginning physics students were given two dozen physical problems and asked to sort them by type of problem. The beginners sorted the problems according to their most obvious features, such as whether they involved friction or an inclined plane. The more expert physicists sorted them by the basic principles—say, Newton’s second law—that would be needed to solve them… In general, the knowledge of top performers is integrated and connected to higher level principles.
To bring this to life in a business context, let’s look at the case of Apple. There can be few more remarkable and more closely followed stories of corporate renewal than this one. Apple was founded on April Fools’ Day in 1976, with the mission to create an easier-to-use personal computer. But despite succeeding at this mission in the eyes of most industry observers, Apple’s overall success was mixed. In 1996 the company had less than 5 percent global market share in personal computers, was stalled in the marketplace, and posted operating losses of $1.4 billion on revenues of $9.8 billion. Today, Apple’s 2010 revenues exceeded $65 billion, with pretax profit of more than $18 billion. Except for a short six-month stock price burst in the Internet bubble period, Apple’s stock price for more than twenty years (1980-2002) bounced between $1 and $10 per share; today it is more than $300 per share. Founder Steve Jobs left Apple at its lowest point in 1985, returning to engineer its resurgence in September 1997.
Apple since inception had at its core an operating system with superior ease of use, the best in multimedia, and superior design. But despite these differentiating factors, the personal computer market was not where these capabilities were able to reach their full potential. Most users of computers were in business, where the lower-cost offerings of Dell, IBM, and HP, fueled by Windows software and Intel chips, proved to be a more economical solution in terms of total cost of ownership. Through it all, however, Apple clung on, leveraging its core and its young and “technology forward” base of promoters. As the markets for computing technology and software evolved, this value proposition came into its own; since Jobs’s return, Apple has exploited and replicated it very effectively.
It is hard to believe that the first iPod was launched as recently as November 2001, given its impact on the world. Since then, major new launches have included multiple generations of iPod, iTunes, iPhone, and iPad. Yet, there’s a consistent discipline in the way Apple manages this stream of innovation. In its iPod launches, for example, Apple carefully limits the number of device types and models (classic, shuffle, nano, and touch), and it retires models as it reduces the features (for instance, the iPod classic used to come in four storage sizes; today it comes only in 160 GB).
This is clearly a company with a strong, enduring, differentiated core, with a repeatable model since the return of Steve Jobs that exploits it into new segments and applications, and with strong internal values—the archetype of our focus in this book. That much is well known. But when you look more closely at the Apple business model, you soon realize that Apple also possesses the third feature of the Great Repeatable Model, and that this characteristic has enabled it to maintain and keep replicating its differentiations so effectively. In fact, few companies, with the possible exception of Google, have as many methods to capture and use customer feedback. For instance:
* The Genius Bar. Before the advent of the direct retail channel, Apple had relatively few direct customer contacts; most were through channels. But how that has changed today. Now, the technical service people at the Genius Bar, where customers are assisted with their computer problems and questions, collect and sort their notes to find repeatable issues on products. All the data is aggregated, sorted by product, and channeled to the right place in the company. There is a culture now at retail that is linked to Apple’s overall culture of innovating and taking risks. Apple uses many forms of feedback at the store level to refine experiments and see how people react to the company’s constant adaptations and changes.
* Store Net Promoter score (NPS). When you make a purchase at an Apple store, you will receive an electronic receipt and sometimes a short survey of two questions regarding your visit and whether you would recommend the store. Any negative responses are followed up on by store managers, and the overall results are shared at the store and then aggregated and passed up the chain. This is especially critical for new launches, where Apple can compare the scores at a launch and probe systematically for reactions and issues.
* Store-level data collection. Apple is able to use its iPod touch in the store to do efficient exit surveys of buyers and nonbuyers to try to understand in more detail what happens with customers who had an intention to buy but left without doing so. One illustrative discovery was that the stores were so crowded that customers had trouble identifying salespeople in their black T-shirts—Apple changed to brighter, characteristic colors and found that reduced the problem.
* Online data collection. The company’s Web sites—notably the App Store, the online Apple Store, and iTunes—also provide a great deal of information on general buying patterns.
The power of these and many other sources of feedback that Apple gathers on its products and customers is made all the more powerful by Apple’s discipline in maintaining simplicity in products and simplicity in its business model. It is possible for Steve Jobs to review all corporate product initiatives at a single Monday meeting. As he says, “Every Monday we review the whole business. We look at every single product under development. I put out an agenda. Eighty percent of it is the same as it was the last week, and we just walk down it every single week.” The result is what one person at Apple has referred to as “constant course correction.”
Our discussions with people at Apple on this topic reveal a constant recognition of the power of simplification in the ability of Apple to adapt. One spoke about the fact that the major product tests and experiments are hardwired all the way to the top of the company, enormously reducing the distance from the CEO to the front line. Another described how Apple has only about fifty core product codes made at its outsourcer Foxconn, whereas some companies in the consumer electronics and computer businesses have more than fifteen thousand.
Apple is not the only company to discover the power of robust learning systems. LEGO Group, which we discussed in chapter 2, has put in place similar learning systems to make sure that its model stays relevant to customers:
* Net Promoter scores are now collected at each customer touch point (shops, online, consumer services, etc.) and for each major product category. These are distributed throughout the company on a monthly basis, and all negative responses are followed up on individually. The data is now moving to an online real-time platform to drive even faster action and to capture learning, and the scores have improved 26 percent since 2005.
* The Kids Inner Circle was started as an online community of five thousand children, by invitation only, who love to interact with LEGO in this way on new products in process.
Reprinted with permission of Harvard Business Review Press. Excerpted from Repeatability: Build Enduring Businesses for a World of Constant Change. Copyright 2012 Harvard Business School Publishing Corporation
AUTHORS: Chris Zook, James Allen
PUBLISHER: Harvard Business Review Press
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