Category: Products

Disruption

Apple’s plight: will disruptive innovation make it a winner?

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Earlier this week, Apple (once again) became the world’s most valuable company. For those of us who have been fans over the past 10 or 15 years, this may come as no surprise, especially given their loyal customer base and their ability to enter, and often define, entire new markets.

But the rise of Apple has, at many points over the past few years, led me to ask whether their leadership will remain intact for the long term. By long-term, I mean the next 20 or 30 years (I’m pretty confident about the next year or two). Then I came across this article from the Wall Street Journal blogs which asks at least part of the question I’ve been asking, and I thought it was worth explaining.

One of my favorite professors taught me an introduction to business strategy. He opened the course by making the point that business always changes – dramatically – and as the time horizon lengthens, the rate of change increases exponentially. So, to use his method of making the point I looked at the Fortune 500 lists from 1955, 1985 and 2005 (keeping the decades even), and found:

– 210: The number of companies on the list in 1955 which were still there in 1985
– 139: The number of companies on the list in 1985 which were still there in 2005

I think it’s a safe bet to say that in 2015 (just three years from now) the number of companies that were on the list in 2005 that are still there will be smaller still. And yes, I assume the rate of change in business, most importantly the rate of market disruption, will continue to accelerate.

Which leads me to ask: What can keep a company on the list decade after decade?

General Motors was on top of the list in the 1970s, and we know what has happened there. I won’t go into all the factors, but the saturation of the American car market, global competition and consumers holding on to cars longer were certainly factors in GM’s decline.

Exxon Mobil, which has topped the list a number of times over the years, doesn’t face these challenges. The demand for oil is still increasing and prices are (generally) still rising. One wonders what will happen when other unexpected energy alternatives become dominant.

Back to Apple.

One thing Apple has shown over the years that few other companies have shown (at least to the same degree of success) is the ability to create disruptive innovation (for an interesting discussion of Apple’s innovation strategy, take a look at Curt Carlson’s book, Innovation).

Apple has continued to re-invent itself (from computer company, to music company, to mobile device company and so forth) as the needs and desires of technology consumers have changed. And whether through it’s visionary founder or it’s innovation process – most likely a combination – it has often been the company that defined what was possible and showed us how to turn our technology aspirations into reality.

If Apple is to stay at the top of the list, it will – among other things – need to continue and accelerate this innovation capability. There will be challengers. Not just the kind of competition that comes out with “the better alternative to _______ device” but the companies that will define the future needs and aspirations of technology consumers. Apple will have to continue to disrupt our world in order to stay on top.

And if in 2025 we look back on today, and we are amazed at how Apple has been so successful for so long, then we will be able to point to the disruptions they defined. If we are wondering how such a mighty company fell down the list so quickly, we will likely collectively conclude that the passing of Steve Jobs must have been the cause. But in reality it will have been the loss of the ability to continue to define the market disruptions that will happen increasingly frequently.

And no, this is not exclusive to Apple. Any company that makes it to the top of its market faces the same issue. In part, it’s Christensen’s famous innovators dilemma and in part another idea Mr. Christensen introduced. If the job that people are hiring your product to do for them is no longer necessary, then your product is no longer necessary.

And the jobs we need products to do are evolving quickly.

Are you taking the steps you need to in your company to make sure your products will do the job your customers will need done in the future? Tell me how.

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Differentiation

Consumer-Class

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I’ve spent the last two days at Software 2007, and while enjoying the show and my fellow attendees tremendously, I noticed that there was a phrase (a very common one in the software industry, in fact) that I heard over and over: “Enterprise-Class”

Typically this is a phrase used by software companies to indicate that their software can handle the intense demands of the largest multi-national companies combined with their very large communities of suppliers, partners, customers, etc.

In this context, I was hearing it from SaaS vendors trying to convince the audience that their applications were more than conveniences for small business, but rather ready for prime time and the so-called real business of large enterprises.

Add that to the fact that this conference (as so many are lately) is centered around Enterprise 2.0, and I began to wonder: Does “enterprise-class” matter?

Consider: Enterprise class usually means three things:

  • Scalability: The ability to handle transaction volume, data storage needs, etc for a very large number of simultaneous users and still give good response time and performance.
  • Security: The ability to protect data where it’s stored, in transit (over the network) and at all of the endpoints and nodes with sufficiently high levels of security so that it can’t be stolen. Also the ability to ensure that only people who are authorized to see certain data can get to it at all, plus the ability to provide business continuity in case of disaster. And to do all of this in ways that meet a tangled web of regulatory requirements.
  • Flexibility: The ability to adapt to different contexts, tasks, etc. And the ability to configure both the application functions and the user interface to meet the needs and preferences of every individual user.

Let me compare those requirements to the requirements that might be placed on a successful Web2.0-style consumer application (think Google – search, calendar, reader, whatever) or small-to-mid-size-business applications (say, WebEx meetings or SalesForce.com CRM):

  • Scalability: These applications must scale to enormous numbers of users (sometimes in the millions, rather than the thousands of an enterprise) and data transfer and storage requirements. Moreover, where enterprise applications can be rolled-out in a planned way (and therefore additional demands on the system predicted and defined), SaaS applications must respond to unpredictable demands which can grow very quickly if the application/service becomes popular.
  • Security: SaaS applicaitions may or may not be subject to regulatory requirements, but they are subject to the requirements of the market. They must be able to keep user data and user content secure and be sure access controls are in place and highly effective. For small businesses they must still meet all of the business requirements. But imagine the exodus from the service if consumer data were compromised (see any number of recent examples). In addition, these applications/services do not reside behind firewalls, so they must be built to be hacker-proof in ways that an enterprise application is often immune (mostly) from.
  • Flexibility: These application must not only allow so much flexibility that every user can personalize their experience, but it must be easy enough for users to do it themselves. Small businesses must be able to create the custom restrictions, processes, roles, etc. that meet their unique needs. Not everything needs to be customizable, but most of the experience should be. On top of that, there is an increasing demand for these applications/services to be published as web-services in some form, so that they can be used in more flexible ways.

“Enterprise-class” has become such a loaded and popular buzzword that no marketing department can seem to go without using it. But that’s just getting caught up in the buzzword.

I realized as I considered this comparison that this is another element of the “2.0” shift that is turning the market inside-out in so many ways. And it led me to ask:

Does my enterprise really want an “enterprise-class” application? or a “consumer-class” application?

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