Strategic Intuition – by Kunaal Arya

I was recently reading the infamous “Blue Ocean” article in the Harvard Business Review. I was thinking about some more current business that implement the blue ocean strategy, and Apple immediately came to mind. Apple was mentioned in the study for creating the first personal computer. Apple created a whole new arena to play in, as before computers were only owned by corporations, and operating systems were designed for businesses. Apple created a whole new playing field using existing technologies. Steve Jobs was the mind behind this, and his leadership continued to strive through Apple, and his Pixar creation.

To quote from the Blue Ocean Strategy book, by Kim, and Mauborgne, they discuss how companies must use value innovation. “We call it value innovation because instead of focusing on beating the competition, you focus on making the competition irrelevant by creating a leap in value for buyers and your company.” Very few companies have been able to do this, Apple is one of them.So what has Apple done in the last decade? They released the iPod, iPhone, and iPad. I want to examine each of these, and how they transformed the market, or created a new one.

iPod
The portable music industry was up and running. Sony introduced the Walkman which strived through the 80′s and 90′s. People were used to having their music portable. Then the industry changed, cassettes were replaced by CDs, and the same portability was applied. But as we entered the new millennium, we were opened to a drastically market changing standard, MP3s. The music industry lost power, as millions of people started downloading songs illegally from the net. They would have to burn these songs on CD and play them in their CD player. But slowly manufacturers began coming out with portable MP3 players. Companies such as Rio, Creative, and Sony began producing MP3 players, but some were large, most were low capacity, unattractive, and hard to use. Steve Jobs asked his key designer, Jon Rubinstein to work on a portable MP3 device to co-exist with Apple’s forthcoming iTunes platform. Jon went to Toshiba to see its new 1.8″ hard drive. They didn’t know what to do with it, but Jon called Steve Jobs and told him he could do it. He used existing technologies, and leveraged them to develop the iPod. It was attractive, it was simple to use, it was functional, ahead of the competition in every way. It slowly took over the market with the introduction of the iPod Mini, iPod Video, iPod Shuffle, iPod Nano, and now the iPod Touch. With market share of over 75% and over 225 million iPods sold we could say that it is as close to a Blue Ocean strategy that we can find.

iPhone
Apple had great success with its iPod line, but there was a quickly growing smart phone industry with great potential. Smart phones were unattractive with their full keyboards, and difficult to use. Steve Jobs had the goal of having an attractive device, that gave users the stuff they wanted, such as favourite callers, easy to scroll contacts and information, and the best browser in the game. The following year, they released a platform to develop applications for the iPhone, and this took off dramatically. They created a whole industry of mobile app developers. It took over two years for competitors to catch up to the iPhone, and even now the use of the iPhone is to such a large extent that it will be difficult for competitors to convert iPhone buyers. The iPhone 4, just announced, will take even more market share with many of its features miles above the competition. They may not have adopted a Blue Ocean strategy in terms of smart phones, but they did when they released one of the first consumer friendly smart phones. And this strategy was a clear value innovation of that time, and now with an increase in competitors, Apple can no longer not worry about the competition, but they do have a very good foundation.

iPad
Apple’s latest release was clearly a Blue Ocean strategy, and a major success at that, even though it has been in market only two months it has sold over 2 million units. The market was demanding a tablet device, but the competitor’s products weren’t marketable. The existing products used Windows operating systems which were too complex for everyday users. The mass couldn’t pick up on them. But Apple used the existing technologies of the iPod Touch and the iPhone that tens of millions were already accustomed to. They created a sleek product with a OS which was usable to the masses. This was in a largely uncontested, attractive market, and there have yet to be any competitors. There will be, but the solid footing Apple has achieved through this strategy should definitely see long lasting success similar to its other products.

Apple began its business with a Blue Ocean strategy, and is continuing to make them today. Steve Jobs is an expert in Blue Ocean strategy. Starting with the Apple II personal computer, to Pixar to the products we have today. Pixar was bought by Steve Jobs in the 1980s, and created the first completely computer generated animated movie, Toy Story, and continued to produce animated films for Disney until Disney purchased Pixar in 2006. It is a lot easier for tech companies to take advantage of Blue Oceans, MySpace with social networking, Yahoo with search, Google with search-based advertising. It is also interesting to look at Google, because most of their products weren’t entering Blue Oceans. Search already existed before Google Search, e-mail already existed before Google Mail, web browsers before Google Chrome, and so on. They have become the leading internet company without creating Blue Oceans but improving existing technologies and products. Of course companies can make money doing this, in any industry, it’s the red oceans with similar products that are unattractive, the toothpaste, the computer, the operating system industries and etc.