Innovation Propelling Apple past Microsoft’s Dominance

applems A common phrase heard throughout the business world is “Past success does not dictate future success.” This case has been proven with Apple passing Microsoft in market capitalization: the dollars invested towards a corporation through investments of shares.

The battle for investor confidence for Apple has been a long ten year journey, with constant doubters throughout the years wondering how a niche technology firm could even compare itself to a global conglomerate as fully established as Microsoft. For Apple, innovation succeeded, not just innovations in branding and marketing, but in products and services increasing consumer confidence as well.

Constant innovation is part of the engine that drives success. Constant is the key word, being innovative by releasing one or two products and leaving it as is will cripple an organization. Constant innovative practices are all around us: the U.S. Army built a video game oriented to young adults on to assist their recruiting efforts; Google has added multiple web applications being a “one-stop shop” for most of the world; Starbucks is starting to re-energize the instant coffee market, by offering it’s quick VIA brew and flavored coffee to the mix. These massive changes help shape new markets or reinvigorate current ones; Apple’s success has been from the creation of entirely new markets improving the lives of all in the digital realm.

Review Apple and CEO Steve Jobs market innovations below, consider how Apple has influenced markets and buying habits over the years.

Mac OS X Operating System Mac OS X is the current operating system of all Apple computers as of 2010. Its core has been in use since 2000 starting with the Mac OS X Server. In that time frame, Microsoft has had the following operating systems: Windows 98SE, Windows ME, Windows 2000, Windows XP, Windows Vista and finally Windows 7.

At first glance, this looks like the worst example to start off with as innovation: Apple’s product is ten years old. Microsoft is clearly innovative as it has produced multiple variations of its operating system, isn’t it?

There is a key difference between Apple’s OS and Microsoft OS: Apple has been refining what works while Microsoft continues to re-release and add to what is not as functional. The engineer does not decide what is functional; the customer defines what is functional. Innovation is about benefiting the end: the customer. The marketing push on how Mac OS X can do everything Windows can but easier, faster and more effective has increase Apple’s personal computer market share drastically when Microsoft fails to deliver with Windows.

iPod/iTunes/Music Store – The iPod music player when released was considered a blunder in 2001 (Apple was still coming out of huge losses from 1996-1999 with investor confidence crippled). MP3 music was limited and purchasing CD’s was where 95% of the music came from. Who would ever need 5 GB of music storage space, when 90% of MP3 music devices being sold were 64-256 MB in storage space?

CEO Steve Jobs was not looking at what was needed for the present, but what was required in the future. With every purchase of an iPod, the iTunes software was installed for free. Even without the iPod, the iTunes software was free. When Apple launched its controversial music store, it was integrated into iTunes automatically, giving everyone with these mass music storage devices a way to populate music onto their iPod. A market was created just based on the innovation of the digital music industry.

Apple’s forward thinking and vision in 2001 still resonates as Apple is #1 in the digital music hardware and software industry. What was Microsoft’s role in the music industry starting in 2006? Launch a music store like Apple’s which was difficult to use but the same price for Albums and Songs, and then launch the Microsoft Zune: a music player that was criticized as being similar to Apple’s iPod and being loaded with features consumers never cared for (wireless sharing of music with other Zunes, a feature engineers thought was important but not the customer).

iPhone – Microsoft has played a huge part in the mobile phone industry with its Windows Mobile software. Its marketing campaign pre-2010 can be summarized to: “Take Windows with you wherever you go!” and it was successful in turning customers over from the heavy-weights Palm and Motorola, and other competitors before the iPhone.

With the release of Apple’s iPhone, there was massive speculation from the industry of what the Operating System would be, with the majority expecting a Mac OS interface: such as what Microsoft did with Windows Mobile. This was not the case during release, the tipping point being that it was even easier to use than Mac OS X and finger gesture operated.

With Microsoft Windows Mobile, the touch interface was click and drag, with Apple’s iPhone, finger actions determined the input. Pinch your fingers to zoom into a photo, swipe left and right to move back and forth through menus, hit the only button on the phone to go back to Home. While Microsoft was pumping out more features into Windows Mobile, Apple decreased the features on the iPhone but increased the effectiveness. Innovation is not about adding new and improved features, but making basic features more effective, which the iPhone nailed.

iPad – “What is the purpose of this device?”- A common question for investors and reporters on a touch screen tablet computer released by Apple in 2010. Other concerns arose at the unveiling of this new product: “Who would spend money on this when a laptop can do more?”Why would anyone own a product that had limited features such as the inability to multi-task?” “The only innovation is it is a bigger iPod Touch/iPhone!”

Apple not only sold more iPads in the United States than most expected, it sold out in the United States, had to push back the International release, and will sell out of the international release. Here are the common consumer reviews of why they love their iPad.

  • The Apple iPad can do over 80% of what most people uses a computer for: checking e-mail, listen to music, reading documents or books, creating word documents and presentations, and general browsing of the Internet. (A laptop can do the other 20%, but does the other 20% really matter? Not when the iPad fulfills 80% of customers’ basic needs nearly all the time)
  • The Apple iPad is fast, fun, and easy to use. (Increasing features in electronics does not necessarily mean speed and usability increase as well)
  • Customers love their iPod Touch/iPhone. The feature requests most pressing was a larger screen size for usability. The Apple iPad physically is a larger iPod Touch, which is an improvement for the consumer. (Those who speculated that the bigger screen had no significance did not realize the most important improvement over an iPhone was a larger screen to fit a full touch keyboard in)

So far, the iPad has been a success, which was the final push for investors to put Apple past Microsoft. While Microsoft has been working on its Microsoft Surface technology and advancing its technology, Apple has gained a foothold in the future of not only touch software, but the hardware as well resulting in a market for personal touch devices.

Mac OS X, the iPod, iTunes and now the iPad are all key factors of innovation paving the way for an organization’s success against a larger competitor. When the news was released that Apple passed Microsoft in market cap, Microsoft was announcing that it was re-aligning executive positions and key departments. Innovation only comes once the organizational basics are in place starting with: What is our Mission and Who is our Customer?

Apple is now ahead of the curve, gaining increased trust with its customers and investors alike while delivering over expectations every time.

Jorrian Gelink

Management Architect

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