Apple and its Blue Ocean Strategy

Just 2 days ago, Apple launched the new iPad 2. I can vividly remember a year ago when they announced the iPad for sale. I thought it was an oversized iPod Touch and fathomed to find a use for this gadget. Less than a year after the iPad was launched, I wanted it. Why the change in interest? Is it because it is the fashionable gadget to have or the in-thing right now? Nope, what drew me to the iPad were the apps that I had already downloaded into my iTunes and just requiring an iPad to play with. Make that work with, really since yesterday’s video shown by Apple just showed the world on the use of the iPad as a useful tool for business. They showed its use in the medical field – for use in showing patient’s x-rays and diagnosis tools, in the education arena – to teach and make presentations, in retail – as a cashing machine and inventory checklist. In aviation, it could serve as an interactive manual for pilots which would save a lot of paper and weight for every flight. And simplifying things for pilots as well if one watches ACI on National Geographic.

In the automotive world, luxury cars are now equipped with iPads as owner manuals, and BMW Magazine is distributing their issues through iTunes for reading on the iPad. Speaking of magazines, several publications have made it a great way to use the iPad to read interactively. Coupled with the apps that one could use ranging from investment management to video editing, the iPad is slowly but surely replacing the traditional modes of computing. This revolution started with the touch-screen iPhone and the App Store, making it easy for one to write notes, do currency conversion, read Lonely Planet travel guides, use GPS navigation, find places to eat and take creative snapshots all using a nifty device. The iPad makes it easier to do all these and more in a larger screen closer to a PC, but small enough to bring it to a cafe in the morning, or onboard an economy class flight across the Pacific. And with the iPad 2, they added Facetime compatibility with Macs and other i-devices. Let’s face it, the average PC user out there uses the computer to socialize (facebook), check and write emails, research for information (google), browse and edit photos (flickr), watch videos, make spreadsheets, type letters, video chat, and gaming. There isn’t any of these things that the iPad can’t do as it has a built-in web browser in the form of Safari, a good Mail application,  photography apps on iTunes like Hipstamatic, and on Mar 11 there will be GarageBand and iMovie, for productivity there is Pages and Numbers (the Mac equivalent of Word and Excel), and with Facetime, it makes it a suitable computer replacement for many people.

Why do I need to mention the above? It is to show that Apple is trying to displace the way we use our computing devices, and maybe extend the usage of tablets to more people. After all, they have sold 15 million of the first iPad in 9 months. One needs to remember that in the mid 90s, Windows revolutionized the way we use computers, perfecting the Office suite through the years, making it the mainstay in business computing. Today, Apple is doing the same thing with tablet computing and it wants to occupy the market leadership in this segment like how Microsoft succeeded in the late 90s. It does it by pursuing a Blue Ocean Strategy. Rather than competing head on with a market leader, it defines a new market and even drafts the boundaries of the space, showing its applications and usability. Instead of focusing on its weaknesses (specifications and price), it isn’t afraid to harp on its strengths (design and user satisfaction). Just like out of the pages of the Sun Tzu Art of War, it hides its flaws to make it look stronger and invincible. For example, in the presentation made on the iPad launch, it mentions iTunes account users totaling 200 million and all with unique credit cards linked ready to buy apps. It further tells people it paid a total of 2 billion USD to developers. Surely, these 2 numbers will just attract developers to focus on making apps for the App Store which Apple has total control over. This is precisely the reason why Apple is also investing in data centers solely for iTunes and App purchases. Apps are an integral part of Apple’s strategy and that is why Microsoft sued Apple for the legality of the trademark of the ‘App Store’.

Just like what Windows did by making that OS the mainstream of Personal Computing, Apple wants to move people away from that mainstream. It wants more people on iOS devices, more people to use iTunes, more people to purchase apps from App Store, more people to use iPads to read books, more people to use iPods to listen to music and iPhones to make calls. By moving the consumers away from the mainstream into the market defined by Apple, it doesn’t need to fight with Microsoft head on. Instead it hopes that one day enterprises will use iOS instead of Windows, use Apps instead of softwares, and that will be when Apple truly displaces Microsoft to rightfully take back the market which it started.

Tracing the history of Apple in the past one and a half decade is interesting, for we see how Apple made things different with those colourful first iMacs in  the late 90s, choosing instead to show how more colourful life on the Mac is instead of the gray, dull tones of Dells, Acers and HPs. Then it made the iPod with a great circular touch-sensitive dial to make the user interface more satisfying to use rather than to press on buttons and dials. With the iPhone, it showed the first great touch screen phone and cracked open a market it was new into. Along the way sexier Mac desktops and laptops gave the company appeal to the fashionable and stylish personas, with Macs being prominently featured in Hollywood blockbusters. It helps that they are great for photo and video editing. Then the iPod became the iPod Touch, making it a personal media device, and iTunes become the largest music distribution company in the world, displacing companies like HMV. The iPad is the new vanguard in the arsenal, as it opens the tablet market to users and Apple emphasizes this by calling the future a post-PC world. I was this familiar to Apple’s story since I was tasked to do a case study on Apple 6 years ago in university.

Through this research coupled with my understanding of business strategies, Apple has shown the world that the Blue Ocean Strategy, as the title of the same book does make sense. In business, start ups should:

1) Focus on the market and user itself. How does the user interact with your product or service. Find out what hasn’t been met and how things can be improved. There is definitely a way to improve on things, since nothing is perfect. Dyson made vacuum cleaners a tech-gadget with its futuristic design and disposing with flimsy one-use filters. Apple gave great looking displays to users making it appealing to video and graphic designers – the first few customer groups which converted to Macs.

2) Don’t fight the market, instead move the market. Create the necessary foundations and proprietary tools defining the boundaries of the new marketplace. In property development, don’t build where the land is expensive, instead buy a large piece of cheap land and make it live-able, building a masterplan for a new city. Lippo Karawaci did this in Indonesia and succeeded. Apple did this by creating iTunes and App Stores making it affordable to people to buy legal songs and softwares and easy to access from Macs or iDevices. It’s like creating a new ecosystem where new customers can thrive.

3) Build on your strengths and hide your flaws or make them disappear. Coca Cola took advantage of its distribution scale and worldwide presence to build on numerous brands of beverages from Heaven & Earth Green Tea to Dasani Mineral Water. At the same time it released Coke Light and Coke Zero for the health conscious consumers. It didn’t concede to trends of people wanting a healthier lifestyle, it found its strength and used it to its advantage. Apple focused on user-experience where it could make a difference rather than showing off its specs. In the iPad 2 presentation it didn’t tell people how much RAM it had but told them it was lighter and thinner (things that were more important for portability in tablets).

Nintendo did this with the Wii and 3DS, focusing on fun games like Mario Kart and a new gaming experience. L’Oreal did this by adding new brands to its huge cosmetic range, targeting new users like men. Samsung became the huge electronics giant by ensuring its design stands out and improving quality. It isn’t just large conglomerates that can do these. Small start-ups like facebook is doing these same things to stand out, and the mistake a company could make even when following all these is to replicate the success of another company and not staying true to one’s roots. For example, instead of focusing the Windows OS and the excellent Office Suite, Microsoft made a long and expensive foray into developing Xbox, and now even replicating Apple by building Microsoft boutiques. One could expand, but it would be more worthwhile to expand into a market which could share or leverage on the strengths that one has built up. This makes the new business half-easier to start up. That is precisely why companies and businesses shouldn’t stray too much from its area of specialization and instead focus on how to re-invent the business one is in and re-evaluate the market, building up on strengths and minimizing your disadvantage in the market.

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