For a company that looked doomed a decade ago, it has been quite a comeback. Today, Apple is an iconic company. Take, for example, the iPad that was released this month. Go into any Apple store in the US and there are at least a dozen stations with people lining up to check the iPad out. What lessons can Indian technology companies learn from the success of Apple?
For the most part, Apple?s zest comes from its reputation for inventiveness. From its first computer in 1977 to the mouse-driven Macintosh in 1984, the iPod music player in 2001, the iPod Touch and the iPhone in recent years, and now the iPad, Apple has prospered by keeping just ahead of the times.
Apple is extremely different from other tech companies. In particular, it inspires an almost religious fervour among its customers. Indian innovation companies can learn at least four lessons from the Apple success story. First, innovation can come from without as well as within. Apple is widely assumed to be an innovator in the tradition of Thomas Edison, locking its engineers away to cook up new ideas and basing products on their moments of inspiration. However, its real skill lies in stitching together its own ideas with technology from outside and then wrapping the results in elegant software and stylish design. The idea for the iPod, for example, was originally dreamt up by a consultant whom Apple hired to run the project. It was assembled by combining off-the-shelf parts with in-house ingredients such as its distinctive, easily used system of controls. And it was designed to work closely with Apple?s iTunes jukebox software, which was also brought in and then overhauled and improved. Apple is, in short, an integrator of technologies, unafraid to bring in ideas from outside but always adding its own twists. This approach, known as ?network innovation?, is not limited to electronics. It has also been embraced by companies such as P&G, British Telecom and several drugs giants, all of which have realised that not all good ideas start at home. Making network innovation work involves cultivating contacts with academic researchers and start-ups, scouting for new ideas and ensuring that engineers do not fall prey to the ?not invented here? syndrome, which values in-house ideas over those from outside.
Second, Apple illustrates the importance of designing new products around the needs of the user, not the demands of technology. Too many technology firms think that clever innards are enough to sell their products, resulting in gizmos designed by engineers for engineers. Apple has consistently combined clever technology with simplicity and ease of use. The iPod was not the first digital music player, but it was the first to make transferring and organising music, and buying it online, easy enough for almost anyone to have a go. Similarly, the iPhone is not the first mobile phone to incorporate a music player, Web browser or e-mail software. But most existing ?smartphones? before the iPhone required one to be pretty smart to use them. In other words, most technology firms do not view ?ease of use? as an end in itself.
A third lesson from Apple is that innovating companies should sometimes ignore what the market says it wants today. Listening to customers is generally a good idea, but it is not the whole story. For example, the iPod was ridiculed when it was launched in 2001, but Steve Jobs stuck by his instinct. Nintendo has done something similar with its popular motion-controlled videogame console, the Wii.
The fourth lesson from Apple is to ?fail wisely?. The Macintosh was born from the wreckage of the Lisa, an earlier product that flopped; the iPhone is a response to the failure of Apple?s original music phone, produced in conjunction with Motorola. Both the times, Apple learnt from its mistakes and tried again. Its recent computers have been based on technology developed at NeXT, a company Jobs set up in the 1980s that appeared to have failed and was then acquired by Apple.
The wider fourth lesson is not to stigmatise failure but to tolerate it and learn from it. Europe?s inability to create a rival to Silicon Valley owes much to its tougher bankruptcy laws. In fact, in my research work, I find that tougher national bankruptcy laws discourage innovation in a country. Thus, from the policymaker?s perspective while bankruptcy laws must be tightened for the brick-and-mortar industries, bankruptcy laws should be lenient in the technology sector. Since innovation involves considerable risk-taking, firms will be averse to taking risk if tough bankruptcy laws rob them of a second chance.
The author is assistant professor of finance at Emory University, Atlanta, and a visiting scholar at ISB, Hyderabad
