Innovation and Product Development in the Manufacturing Industry
Contents
Introduction 2
Background of Apple Company 3
Why iPhone and iPad products can be called Innovative Products 4
Innovation and Product Development in the Manufacturing Industry 2
Apple’s Innovation Strategy Behind the iPad and iPhone 7
The Components of Apple’s Organization that made it an Innovative Organization 11
Conclusions and Recommendations 13
Bibliography 16
Innovation and Product Development in the Manufacturing Industry 3
Introduction
For an organization to be successfully innovative, it must be based upon the higher level
principles of innovative organizing. Unfortunately, only a limited number of leaders of these
high technology companies see the manufacturing process development as one of the main
source of competitive advantage. This is why, over the last ten years, trends indicate that more
companies are deciding to outsource the manufacturing process to other third party contractors.
The reason for such an action is that these high tech companies are trying to avoid the expenses
of the manufacturing process as well as having to lose focus on the process of product research
and development. They view this research and development to be the major source of
competitive advantage. Contrary to this, research conducted in the pharmaceutical industry
between 1985 and 1995 suggests that such a view greatly costs organizations as it negatively
impacts their competitive health. Different studies support the idea that such high tech companies
that encourage the development of organizational capabilities so as to support an innovative,
efficient, and effective process development, are better placed to introduce new products faster.
This is alongside the higher yields and also the controlled processes that will present the
Innovation and Product Development in the Manufacturing Industry 4
company with a better cost advantage over competitors. With such a step, less capital investment
and fewer development resources are usually required, compared to what the competitors will
have to apply. Apple has managed to be chosen constantly as the most innovative company in
the world. This is because its strategy for innovation is inclusive of amazing new products as
well as innovative business models. It always pioneers into untapped business spaces thereby
creating new market niches. This is why its innovation strategy is the best to use so as to enable
Microsoft/Nokia mobile phones division to also be more innovative. The aim of this report is to
properly analyze Apple’s innovation strategy and innovative organizational structure,
particularly focusing on the iPhone and iPad products, so as to identify factors that can also be
implemented by Microsoft/Nokia mobile phones division to make it more innovative.
Background of Apple Company
Apple Inc., an American multinational corporation, was co-founded by Steven Paul Jobs,
Steve Wozniak and Ronald Wayne in 1976 (Finkle & Mallin 2010: 50).Among its best known
hardware are the iPhone and iPad products. Research conducted in June 2014 showed that Apple
has 425 retail stores in fourteen different countries (‘Event Brief of Q1 2014 Apple Inc. Earnings
Conference Call – Final’ n.d.). With an approximate of $446 billion market capitalization, this
company is the largest publicly traded corporation in the globe (Mallin & Finkle 2011: 65). In
2012, this company had 72,800 permanent employees who worked fulltime, 3,300 temporary
employees working fulltime as well (Sahoo 2012:39). In 2014, its five year growth was
registered at averagely 39% for the top line growth and 45% for the bottom line growth (‘Event
Brief of Q1 2014 Apple Inc. Earnings Conference Call – Final’ n.d.).
The period between 2007 and 2010 acted as the time when Apple finally started
achieving success with its mobile devices. The iPhone and iPpad products introduced
Innovation and Product Development in the Manufacturing Industry 5
innovations in mobile phones and personal computers respectively. With these devices, software
applications could only be purchased in a store implemented by Apple, thus the company created
a new business model. In mobile phones, touch screens had already been noted before, however,
Apple introduced a user interface with specific preprogrammed touch movements that was
unique and interesting to consumers (Mallin & Finkle 2011: 66). The cofounders made a great
effort to push this company towards attaining an innovative structure. Together, they encouraged
innovation as they also innovated, and hired innovative employees. They also had good
marketing skills that enabled the public to be informed effectively about the benefits of any
newly innovated products, thus sales were boosted within months of release.
The release of the iPhone and iPad products gained Apple great success. This is proof
that innovation success goes hand in hand with commercial success. This company managed to
increase its customer base by introducing products that would also be important for the newly
introduced business model. Therefore, Apple does not rely on specific products, but on unique
products, although they perform similar functions. Thus, customers with different needs will
always find what they want from the products of this company. As a result of innovation, Apple
frequently introduces new products, month after month.
Why iPhone and iPad products can be called Innovative Products
The iPhone and iPad can be referred to as innovative products judging from how the
ideas involved in the new product development were noted to be promising. The new product
development process will only be successful once there has been a creation and evaluation of the
new product ideas. These two tasks can be influenced positively when there is more than one
idea and idea creators, when decisions are made as a group and not as an individual, and when
there are methods that combine idea creation with evaluation. These three factors can be
Innovation and Product Development in the Manufacturing Industry 6
combined with the aid of idea markets method. This method makes use of virtual idea stocks to
act as a representation of new product ideas, enable participants to order and trade stock shares
on the virtual marketplace, and thus uses the market efficiency and resulting stock prices as
determinants of the likelihood that the new product ideas will be successful (Soukhoroukova,
Spann & Skiera 2012: 105).
First, the iPhone and iPad products were generated as a result of many ideas and idea
creators, as expected in the idea markets method. This company has employed thousands of
employees to work in the different stores around the globe. Therefore, the company has a big
number of idea creators, a factor that will also benefit the company as it presents many ideas
since each creator will come up with a unique idea for new products. The new product idea
quality is important for the commercial success of the final product. However, it is always
difficult to choose which idea creator is the best, or what the new product idea should consist of.
This is usually as a result of the stochastic nature of creativity, whereby even better ideas may
arise unexpectedly where there is actually no demand, and the fact that diversity of skills from
the many idea creators may improve the chances that an unconventional new product idea may
be developed (Soukhoroukova, Spann & Skiera 2012: 107).
To increase the number of idea creators, Apple Inc. has made it clear that innovation is
everyone’s task, and not the task of specific developers (‘DATAMONITOR: Apple Computer,
Inc’ 2008:6). Therefore, to make the most of its idea creators, the company makes use of diverse
sources including employees, suppliers, customers and researchers (Breen 2014:5). This is very
important as all these groups offer important feedback for the organization to use to its
advantage. Through feedback from consumers, the company will know what the current trend is
all about. This will enable employees to focus on that direction when developing new product
Innovation and Product Development in the Manufacturing Industry 7
ideas. Suppliers and researchers also contribute since during their activity, they can identify a
gap in the market. Since this point of having many ideas and idea creators for high quality new
product ideas has been achieved, the iPhone and iPad products qualify as innovative products.
Second, Apple has always focused on group decisions rather than individual decisions
when it comes to product development. When the different idea creators engage in an exchange
of opinions, even better product ideas are developed. This is usually because some ideas may be
improved when used alongside other ideas. When it comes to decision making, doing so in a
group improves the quality of the outcome. This is because participants may learn from each
other, and hence be better placed to understand why a certain idea may not be of quality, and
why it should not be implemented. This also makes the decision making process to be accurate in
that it will reduce bias. Apple’s iPhone and iPad products are an example of innovative products
in that not one individual is involved in the decision making process of the product development,
but instead a group of individuals are involved (Castelluccio 2013:59). Hence, these products
were developed only after a group of experts decided that the ideas were reliable and promising.
If only one person was involved, then the products would not qualify as innovative since the
decision making process would have been biased. Eventually, they would not have been as
successful in driving the company upwards in its industry. Hence, they are innovative products
as they are the result of more than one great idea combined together.
Third, iPhone and iPad, according to the idea markets theory qualify as innovative
products since Apple combines idea creation with evaluation (Cusumano 2011:26). Most
techniques used in idea generation either support creation of ideas or the evaluation of these
ideas. Although participants can be very imaginative when the two actions are separate, a threat
is posed whereby creators cannot receive immediate feedback on the ideas they form. It is
Innovation and Product Development in the Manufacturing Industry 8
important to use these two factors side by side as it saves time, reduces costs of screening, and
saves resources. Thus, with immediate evaluation and feedback, more time will be saved that can
be used for working towards the more quality ideas. Thus, their screening will be more critical
and there will be extra resources to be used in the in-depth analysis and implementation of the
new ideas. This is what makes iPhone and iPad products to be considered innovative products.
Idea evaluation for the iPhone and iPad that make them innovative products can also be
analyzed through the Analytical Hierarchy Process (AHP) approach. This method takes a
hierarchical approach to the idea evaluation and decision making processes. A single idea is
assessed on multiple criteria before it is structures according to its relative importance (Borade,
Kannan & Bansod 2013: 969). The reason why the iPhone and iPad products are innovative
products is that Apple ensured to only implement the best ideas brought forward. All ideas
cannot be effective for a single product; however, more than one can be used together. Judging
from the success of these two products, it is clear that the company took time to identify what the
resulting product would consist of, its target market, and its benefits. Since the success was
amazing, it is highly likely that only the best ideas were implemented. This is because the target
market is highly satisfied with the products being released constantly by Apple Inc. For instance,
the iPhone and iPad products were introduced alongside another business model, the app store,
that was intended to provide these devices with various applications required (Simmons 2007:
35). Apple saw an opportunity and used different ideas side by side to promote sales while also
fully satisfying customer needs.
Apple’s Innovation Strategy Behind the iPad and iPhone
Strategy can be described as an integrated yet overarching approach of how a company
intends to achieve its objectives. There are three types of innovation strategy; offensive
Innovation and Product Development in the Manufacturing Industry 9
innovation strategy, defensive innovation strategy and imitative innovation strategy. Apple’s
strategy behind the iPad and iPhone is the imitative innovation strategy as the company works
towards modifying the already existent products to provide an even more sophisticated and
unique product (Davis, Muzyrya & Pai-Ling 2014: 39). Therefore, instead of focusing on
creating entirely new products, this company works on identifying areas of improvement and
thus works towards promoting these. Thus, the focus is on producing thinner, faster and lighter
iPads instead of cheaper hybrid and new offerings. The new innovations made at the current
time, will therefore, not lead to the development of new products, but instead will be used to
further improve the already available products. For example, the innovations developed for the
iPhone 5S are expected to soon be used to further improve the cheaper iPhone 5C (Connolly
2011: 18). The difference is in price and quality as this strategy is supposed to ensure that all
customers willing to spend different amounts will be able to get what they need from Apple.
The iPad and iPhone have proven to be the best innovations to drive Apple to commercial
success. This happened because Apple was able to implement new product ideas that could be
used side by side to facilitate profits. Therefore, the new products were implemented alongside a
new business model. Hence, the company was able to use new ways to create, deliver and
capture value for consumers. For example, the iPhone is a product that has been matched with
the App Store where consumers can go to when they need to purchase software and other
applications to customize their iPhones (Maisto 2014: 8). Therefore, the innovation strategy used
by Apple is not the development of new products frequently, but the improvement of already
available products with the aid of quality ideas. If Apple only focused on new product
developments, then chances are high that a similar level of success would not have been
achieved. For an innovation to become successful, it must first be acceptable to the customers in
Innovation and Product Development in the Manufacturing Industry 10
the marketplace. Once this happens, the product will sell faster and effectively, thus leading to
commercial success. Therefore, commercial success and innovation success may be driven by
the New Product Ratio (NPR). The strategy of Apple can be looked at from two perspectives.
First, it featured an introduction of new products that were not actually present in the market
place. Thus, it attracted a majority of the population as it offered the satisfaction of a need which
was not being met by other companies. This is why the innovation became highly successful and,
hence commercial success was also achieved.
Another means through which innovation success can drive commercial success is by
offering product improvements. This is the current strategy adapted by Apple after the iPhone
and iPad were successfully introduced. Instead of working towards other new products, the
company has decided to first make use of the available products by introducing new innovations
that improve the products (Connolly 2011: 20). When a product is further developed, customers
view it as an entirely new product as it may feature newer features and have various capabilities
that were not present previously. Thus, the present strategy used by Apple for the iPhone and
iPad products is still capable of driving commercial success as it can promote innovation
success.
The strategy used by Apple may also be analyzed from how the company is adapting
innovation across various industries. So far, these two products have a link in the hardware,
software, entertainment, and also logistics (Maisto 2014: 8). So far, the company has managed to
master most of the parts of all these industries so as to improve its competitive advantage. In the
development of the iPhone and iPad, Apple had a choice of outsourcing some of the
manufacturing activities such as software development. However, to improve its profitability, it
decided to develop its own software that would be used for the products as operating systems.
Innovation and Product Development in the Manufacturing Industry 11
For instance, the iPhone uses the iPhone operating system (iOS). Most of the applications
involved in this product were developed by Apple and not a third party contractor.
Innovations across industries, therefore has a commonality in that in all industries,
customers are in search of a product or service that will meet their unsatisfied needs. Therefore,
in any industry, a new and unique product that meets an unmet need will flourish. And by
providing consumers with everything they need all in one place, the company will be boosting its
customer base. Apple managed to grab this new opportunity by introducing the iPhone and iPad
and also producing software, entertainment applications and many more that would make these
products even more exciting to use. This factor has greatly improved the competitive advantage
of the company in that it will appear at the top of all industries as it has more to offer than
companies specializing in a specific industry.
Apple’s innovation and design process are usually influenced by commercial, social and
political factors. Design is more of invention while innovation is aimed towards implementing
this invention. The strategy used by Apple, therefore, is influenced by the above factors in that
the company has to adhere to certain rules when developing any new innovation and design
ideas. In developing its products, Apple has to consider the commercial, social and political
situations first before moving ahead. For example, social influences may be positive in the
process of innovation and design as it can provide information on what consumers are really in
need of (Castelluccio 2013:60). Therefore, this information will influence innovation and design
by providing ideas that can be used to develop new and exciting products. Social influences may
also limit innovation towards a specific direction, a factor that is not entirely positive. This is
because it may lead to the innovation of similar products with no new ideas, as most consumers
will want to purchase a phone with features similar to what was noted in a friend’s mobile phone.
Innovation and Product Development in the Manufacturing Industry 12
Innovation and design may also be influenced by commercial factors such as the enforcement of
various legislations and policies. As a result, Apple may realize that it is expensive to be
innovative and to come up with a unique design. Lastly, political influences on innovation arise
from the fact that innovation is usually considered to be a political aspect. If the research and
development process is seen to be promising, the government may offer to fund the innovation
and design process. Such an action will definitely be a positive influence on the process as it will
not cost the company to indulge in deeper research. This will also promote the innovation policy
within an organization.
The Components of Apple’s Organization that made it an Innovative Organization
Apple did not become a successfully innovative company until years after it was founded.
There are certain factors that played a major role in making this company an innovative
organization. At the beginning, Apple was merely a computer manufacturer. Today, it has
developed into a company offering a wide range of products including different consumer
electronic devices and a pioneering business model (Edwards 2005: 2). Therefore, there is more
to the high performing iMac computer, amazing MacBook notebooks and the multifunctional
operating system Mac OS X. All the consecutive new innovative products are what enhance
Apple’s share price to increase drastically. In 2000, the increase was $ 12, and in 2010, the
increase was more than $ 200 (Finkle & Mallin 2010: 50). Currently, the competitors have found
a reason to worry over losing to Apple. This is as a result of its innovation that came about
through many factors. First, the company managed to create and implement an innovative
culture, compared to the previous situation. Before this implementation, employees worked
individually and selfishly (Nussbaum, Berner & Brady 2005: 63). They were not united and
hence always engaged in fighting amongst them. Therefore, despite the presence of highly
Innovation and Product Development in the Manufacturing Industry 13
skilled employees, the company could not be productive as a result of the culture which inhibited
collaboration. This collaboration is an essential element for innovation.
This situation changed upon the return of Jobs, the co-founder of Apple, in 1997 after
being ousted in 1985 (Stone 2011: 39). As the company’s leader once again, Jobs encouraged
calculated and well thought increases in R&D spending, and frequent launching of new products
and upgrades. It is important to note that Apple did not apply the exact principles of innovation
as developed by scholars. Instead, the company developed its own principles, which turned out
to be more effective in enabling it to achieve its objective (Stone 2011: 40). Steve Jobs managed
to encourage the company employees to work together by clearly educating them on the
importance of adapting a product oriented culture. With such a culture, employees understood
that they all have a common goal, thus, must work together towards ensuring they get the best
results possible. Aside from having an innovative organizational culture, the leadership of this
organization has also encouraged the development of an innovative organization. Ever since
Steve Jobs, the next leaders have not taken steps to interfere with what he started. Jobs
understood that for the organization to become innovative, he had to stir them towards that
direction (Hof, Burrows, Hamm, Brady & Rowley 2004: 198). Therefore, through transformation
leadership style, Steve Jobs encouraged and supported various forms of innovations presented by
employees (‘Apple Inc.: The Steve Jobs Effect’ 2012: 3). He encouraged employees to work on
what they love. He made this rule having in mind the fact that innovation cannot happen without
passion. Therefore, employees got the opportunity to work on their various ideas and present
them for evaluation. This is what resulted to the many innovation products that followed shortly.
Another factor that contributed to Apple’s innovation is how it does not simply focus on
customer needs, but focuses on providing for all these needs, alongside ensuring an improvement
Innovation and Product Development in the Manufacturing Industry 14
of the customer experience (Nussbaum, Berner & Brady 2005: 65). This is what happened with
the iPhone and iPad products. Therefore, it also relies on creativity and not only customer
feedback. This is a factor that has encouraged the company to use different ideas to create ways
of promoting customer interactions. The customers experience is very important, as many people
look for a product that will make things easier for them. Therefore, the company assumes that
customers, at times, may not have a clear idea of what they want. However, by offering them a
high quality product that improves their experience, they will definitely like it.
Apple also managed to become innovative through the business model it adapted after
implementing iPhone and iPad products. This new App store business model enabled the
company to create and deliver value to customers, thus increasing their level of satisfaction
(Schlender & Chen 2000: 70). The App Store will not be beneficial to consumers without the
iPhone. This is why Apple has designed a model that captures value beyond the product.
Conclusions and Recommendations
From this analysis conducted on Apple Inc., it is clear that innovation requires great
effort. There are many factors that have promoted the innovativeness of Apple. First, the
company was careful when choosing ideas to implement for new products. To improve the
quality of the new product ideas, employees were encouraged to work together and appreciate
one another’s inputs by creating an innovative organization culture ad structure. This was very
important as it promoted various working conditions that enhance innovation. Second, the
company has developed a strategy for two of its most prominent products; the iPhone and iPad.
Instead of focusing its innovation on the development of new products for release, the company
focuses on the innovation that will improve the already available products. This is in line with
the time frame set by the company that within every 10 years a new product must be developed.
Innovation and Product Development in the Manufacturing Industry 15
Therefore, the company is still on schedule, despite the various claims that it is losing its
innovativeness. These two products were implemented within the past 10 years, and the current
innovations are supposed to improve their quality and hence the quality of user experience.
Third, this company had a leader who knew exactly how to achieve innovation. Some of the
tactics used by this leader have never been mentioned in any management model, however the
result was amazing. Every leader, therefore, must learn to understand the ideas that will work for
its organization, just as Steve Jobs did for Apple. For instance, he understood that innovation will
need the employees to work together, a factor that was not present in the current culture.
Therefore, he decided to show them that they were not competing against each other, but instead
they needed one another. This was very important as the organization soon realized that they
need to share ideas so as to come up with good and competitive new products.
The Microsoft/Nokia mobile phone, therefore can borrow a lot from Apple’s innovative
strategy. First, the division needs to take extra caution when choosing the ideas of new products
to implement. This is because not all ideas are of high quality. Therefore, it is important to
incorporate this process with the evaluation process. This will enable the division to develop a
habit of ranking ideas in terms of their importance and quality. Thus, only the best will be
implemented. To improve the chances of ending up with top quality ideas, the division should
also adapt a system of involving everyone in the organization, in the innovation process.
Employees with different skills may be asked to work side by side so that they may have a better
position of borrowing ideas from one another and coming with an eventual proposal that is of
high quality.
Next, Microsoft/Nokia mobile phone division needs to adapt a reasonable product
development strategy. This is important as it saves costs and time, and also maximizes revenue
Innovation and Product Development in the Manufacturing Industry 16
for the already available products. Thus, instead of always wanting to develop new types of
mobile phones, the leaders need to encourage employees to think of ways and ideas that can b
implemented for the already available mobile phones to make them more effective. Third, the
company needs to ensure that this department has a leader who is effective in his job. The leaders
should be encouraged to use a leadership style that will not limit employee innovation, but
instead one that will support it.
Innovation and Product Development in the Manufacturing Industry 17
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