Apple’s recent quarterly earnings demonstrated insane success. As a result, failing companies like Sony and J.C. Penny have suddenly reorganized their missions to copy Apple. Unfortunately, they will fail, because they don’t understand why Apple succeeds. Why Apple Succeeds Apple earned $46.3 billion dollars in the last quarter of 2011. And of that $13.1 billion was profit. Big numbers like those are meaningless without comparison. For example, Apple’s profits in the 4th quarter were greater than Google’s revenues. MG Siegler pointed out an interesting fact this week, which is that Apples revenue from iPhone alone is more than all Microsoft’s revenue. These facts illuminate the new reality of the consumer technology industry, which is not that Apple is in the same league as supergiants like Google and Microsoft but that Apple is in a league of its own. Apple is so ridiculously successful, that many businesses have given up on their old strategies and have embraced a new strategy of just copying Apple. They want that secret Applesauce, and are hoping that imitating Apple will bring them some measure of Apple-like business success. That would be a great strategy, if they really understood why Apple was successful and really embraced it. But they don’t understand, so they won’t succeed. What the Imitators are Imitating Apple co-founder Steve Jobs once looked up to Sony as a model for how to run a company. Now Sony looks up to Apple. And no wonder. Contrast Apple’s $13.1 billion profit to Sony’s $1.2 billion loss for the same quarter. It’s no wonder that Sony’s new President and CEO, Kazuo Hirai, says he wants to embrace Apple’s strategy of “centralized top-down decision-making on products and a focus on software and service combined with hardware.” Hirai created a user interface Gestapo called the Integrated UX (the UX stands for user experience), which now has authority over product managers across the company — a kind of Japanese group decision-making version of Apple’s Jonathan Ive, who lords over user experience and industrial design at Apple. As an example of why this is important, one Sony executive said that before the Integrated UX group was formed, four separate product groups were each working independently on Sony’s iPad killer tablet. He’s also said that, like Apple does, Sony must focus on “user experience” instead of just making great hardware. Another company that has transformed its strategy into “just copy Apple” is — are you sitting down? — J.C. Penny. The department store chain hired former Apple executive Ron Johnson in November to head the company as CEO. Johnson was instrumental in developing Apple retail stores and the Genius Bar. J.C. Penny is hoping that by putting Johnson in charge, he’ll sprinkle magic Apple pixie dust all over the company and drive it to profitability and growth. And, in fact, Johnson is doing for J.C. Penny something akin to what he did for Apple: Transform the shopping experience. J.C. Penny stores will be completely redesigned within four years, according to Johnson’s plan. Each store will be divided into 100 or so “boutiques,” with a “town square” at the center of every store. Johnson has already announced that he’s simplifying the chain’s promotions down to three types (everyday, monthly and clearance). Last year the company ran an incredible 590 unique promotions. These moves by Sony and J.C. Penny sound like good ones. However, they’re unlikely to turn either company into anything remotely like Apple in terms of market share, revenue or profit performance. Why Apple Succeeds Both companies are simplifying to reduced costs and customer confusion. Both are focusing less on the product and more on the experience. Both are focusing on innovation. All these are Applesque ideas, and all perfectly fine as far as they go. However, these are not the attributes that make Apple successful. To illustrate my point, I need only point to Apple’s own history. When Apple was far, far less successful, the company still demonstrated focus on simplification, user experience and innovation. Apple’s current monster success results from a plan put in place by Steve Jobs in the late 1990s. The plan has the following attributes:
- Identify a broad product category that has the attributes of massive future growth, massive scalability and massive profit potential. (In Apple’s case: content.)
- Identify the subcategories of this category where users are being frustrated by bad user experience. (In Apple’s case, music, movies, web content, TV, books, magazines and newspapers, etc.)
- Develop integrated solutions to control everything from production to consumption in order to create an overall user experience that’s vastly superior to anything else available. (In Apple’s case hardware, ultra-simple-to-use software and online services.) Ignore all the rules, and just create the best experience no matter what.
- Time entry into each subcategory based on available hardware technologies and “cultural readiness.” (In Apple’s case, music players in 2001, smart phones in 2007, tablets in 2010 and, next, TVs.)