Importance of Innovation on The Example of a Company Apple

Introduction

In this assignment I will be discussing and analysing Apple to be the organisation I have chosen to discuss as it has been viewed as the top innovative technology organisations in the 21st century. Apple is a multinational technology company, the innovative idea I will be expanding on is face recognition on the latest iPhone.

Organisational context

Apple is always coming up with fresh innovative ideas from new significant designs to changing minor details in existing products, for example the significant change Apple have made in there new iPhone product is by opening the phone by face recognition and by exploration gone into other markets using exploitation with the iWatch. Also, not only this but the right balance of exploitation with minor changes for existing iPhone customers are the updates that iPhone have with iOS.

Importance of innovation

Innovation is the use of new technological and market knowledge to offer a new product or service that customers will want (Pontiskoski & Asakawa, 2010). The innovation iPhone use mostly is product innovation and marketing innovation. There are 4 main types of innovation, those being: product, process, marketing and organisational. “Companies achieve competitive advantage through acts of innovation. They approach innovation in its broadest sense, including both new technologies and new ways of doing things.” (Joe Tidd & John Bessant: P16). Product innovation is the introduction of a goods of or services that have been significantly improved, this could be improvements of new software and functional characteristics. This could be the massive difference to the existing product or service, which for example could be the new feature on the recently released iPhone X with the new face recognition. Also, could be the minor changes with technical improvements or could be through changes such as materials to enhance the performance of the product or service which apple do with existing products with iOS by releasing frequent updates.

Product innovative would involve techniques that would help increase the production levels and decrease costs. Marketing innovation is the application of a new marketing scheme to try change the product design packaging, product placement, product promotion or pricing. It must help the product and make changes in product form or the appearance without altering the functional process of the product. The new methods involving marketing would mostly be the use of introducing new sales channels or different platforms that can reach potential customers. Product promotion would involve the concept of the item to promote itself and offer additional extras such as loyalty cards which is aimed at improving customer’s needs. (Pervaiz K. Ahmed & Charles D. Shepherd: p4) states” Innovation is a defining future of human society”.

Innovation is important to the any company as it gives a company competitive edge over rival organisations, being innovative can be the sole reason for a company creating a product and making millions, not only this but paving the way for other companies to build on the innovative idea which is better for the consumer. It is vital to focus on technological change as a vital force of productivity growth and is significant in innovation towards productivity.

External environment

Some external factors that could affect apple are most likely are competitors, pricing and availability. Apple as a brand have many competitors as apple are not only are in the smartphone market but they also into tablets, mobile payments, laptops, smartwatches, enterprise software and application software. The primary competitors of Apple are Samsung and Microsoft as they’re both in multiple markets when coming to smartphones and tablet. This has to be acknowledged by apple as knowing that competitors are the main threat to profit margins and growth which is why Apple have to stay so innovative. The main competitor with iPhone directly in the smart phone market is Samsung, a superiority apple can have over Samsung the app store compared to the android app, though the android app is much larger the profit margins would state different with $22.6 billion in worldwide gross app revenue on the App Store versus $11.8 billion for Google Play or which is owned by the android app store, 1.9 times more spent on the App Store compared with what was spent on Google Play.

“Competition is essential to the innovation process” (Teece, 1992). Competition is a significant influence on why apple have to keep staying innovative and had come up with the fresh idea of face recognition on the latest iPhone X. Also, could be the minor changes with technical improvements or could be through changes such as materials to enhance the performance of the product or service which apple do with existing products with iOS by releasing frequent updates which can keep older models of the iPhone still competitive and relevant in the market. There has been research on the close relationship between competition and innovation as they both go hand in hand. (Nickell, 1996; Blundell, et al., 1999).

Another external factor as mentioned above is the availability and the customers demand of the product in the market. Apples devoted customers are key to the running of a successful organisation, businesses have to adapt to meet customer demand and expectation and apple are a great example of this. Apple have simply done met the needs of the customers by simply producing the highest quality and time after time impressing customers with the latest hardware and software. This has led Apple to meet these customer needs by creating face recognition is an example of this by introducing the face data by projecting and analysing over 30,000 invisible dots to create a depth map of your face and also captures an infrared image of your face. Also with continuous interaction with the consumer of these products would help with the through the different stages of the innovation process such as, product development and design, testing prototypes, setting specifications and requirements (Von Hippel, 1988).

Finally, another factor that could play part in in the innovation process is the pricing. Apple could seem to set the pricing of their products too high, but apple don’t tend to try sell the cheapest phone instead try to sell a great smart phone with the latest software. Apple have also found the right balance between a price that is worthy of the product and the availability of the product before selling out, apple products usually fly off the shelves due to this good balance.

Culture, structure, rewards systems, methods of processes production

An internal factor that apple could have that could have affected the business internally is the conflict between employees. Apple combat this by delegating responsibilities to employees instead of hiring new staff for managerial roles, this method of delegation keeps the costs down but gives the chance of opportunity for existing employees to prove they are capable of a higher role within the company.

Apple have a good system of rewarding delegated employees who further carry on with the good work, this will end in rewards of being able to achieve higher promotion or a pay rise. Organisational innovation would be the application of a different structure and introducing new procedures for the conduct of work which can result in organising new ways in which the business can run. Also, the workplace organisation could take place by bringing light to new methods of distributing methods, external relations which would mean new relations with other business firms resulting in more exposure of the organisation. Keeping the workplace satisfaction at a high to keep the level of labour productivity high, all this would result in increasing the organisations performance by reducing administrative costs.

This would all help with getting the edge on achieving competitive advantage. So, the processes of production involving apple would have meetings 'phony meeting every two weeks with the internal clients to educate the decision-makers on the design directions being explored and influence their perception of what the final product should be' (Breillatt, 2011, p. 1). In this stage it would help them monitor the progress of any early targets or specifications that a product could need then to make them changes.

This has allowed Apple to continue innovating and pioneering new technologies, as it has over the last 35 years. Apple thrive in diversity within the organisation and for customers. Apple have designed their product to appeal to almost every aspect of the market for people who have a high-income salary with high disposable income and for people who earn less and have less disposable income. This is a smart marketing tactic that has served apple well. This is one of the many way’s apple have showed there forward thinking and focusing on diversity has paid off as it has such a strong foothold within the market.

The processes production means the apple design team is separated from apple employees during the day, by cutting off the rest of apple business it gives the designers full ability to create the next best design. The designers would go through many methods in which they could come up with new ideas simple as the funnel model clearly and affectively coming up with designs that are likely to work and be the next best thing.

Research and Development (R&D)- Exploration and Exploitation

Research and development is a key factor in the success of many businesses, without it businesses would struggle to grow and expand. There are two main types of innovation which are radical and incremental innovation. Research and Development will go hand in hand with the innovation process. A radical innovation can be the substantial difference from a previous product or processes whereas incremental innovation can be in the minor changes in the existing product. For many organisations, both radical and incremental innovations are needed. Exploration is needed for radical new ideas and those ideas then need to be exploited to generate profits through incremental variations on the original idea (e.g. Apple iPhone was a radical innovation which was then exploited through subsequent generations of iPhones). Radical innovations are normally supported by exploration. The iPhone when first released would have been unlocked just as any other smartphone would with typing the correct digits, to unlock the phone this then upgraded and improved to finger recognition. Apple again have showed more innovation and have improved the latest apple products by being able to unlock products with face recognition. This is a great example of radical innovation by apple. Apple have showed many ways in which they have created new competences and stayed relevant in the market. A product in which apple have stayed engaging to customers with radical innovation was by introducing new business lines through the apple watch. Apple have created a watch in which all the functions of an apple product has but into a watch, it would reach out to a different market and appeal to different tastes, and styles. Apple iWatch could be worn as a fashion statement by the owner of the watch. The only ability that apple watch cannot do as other apple products is make calls and use facetime.

Radical innovation can have its disadvantages using exploration as exploration is not a short-term process and can take a long time for a business wanting to achieve short term success. It has been known for exploration to be sustained and maintained as a radical innovation would require a lot of commitment dedicated solely on this product and organisations intend to try concentrate on practises that have been proven to be successful. Studies have also shown that radical innovation is not intended to be backed by big organisations as they are more driven by low risk, instant reward incremental innovations. (McDermott and O’connor, 2002).

Incremental innovation is supported by exploitation. Exploitation is the evolution and improvements of existing products. Exploitation is best described as the “refinement, choice, production, efficiency, selection, implementation, execution” (March, 1991). Apple have many ways in which they improve existing competences with incremental innovation, IOS is a great example of how apple products stay up to date even with an older apple product. This keeps existing apple products such as iPhone and iPad and iPod touch still appealing to purchase to customers who would like to purchase a new phone but not the latest product and for the existing customers to be happy with the phone even after couple years of owning as iOS keeps phones up to date to the latest iPhone being released.

A way in which to keep a balance between exploration and exploitation is through organisational ambidexterity. Organisational ambidexterity is known for trying to engage in activities in which Apple have already got the capabilities to do so but at the same time try engaging in activities in which Apple can explore into new capabilities. This is seen as paving the way for introducing both radical and incremental innovations in the marketplace. Apple have exploited this for example, this could be Apple entering into the watch market with the iWatch while still being in the smart phone industry selling iPhones. “an organization’s ability to be aligned and efficient in its management of today’s business demands while simultaneously being adaptive to changes in the environment” (Raisch & Birkinshaw 2008). Apple are proven to have the dual level of organisational ambidexterity by the release of new products such as iPod, iPhone iPad and iWatch. These apple products are the prime example of exploitation and have created new competitive spaces. Tushman & O’Reilly (1996) explain that “aligned and efficient in their management of today’s business demands while simultaneously adaptive to changes in the environment”. Apple have also exploited its position in its app store through its supply chain, customer service, and the services provided for each customer personally all within the Apple Retail Stores. Apple have been extracting and exploiting all points even with customer engagements.

However, there are numerous styles of ambidexterity that are set in place to create the core balance between exploration and exploitation; Structural ambidexterity, Contextual ambidexterity and inter-firm ambidexterity. Structural ambidexterity would be the separation of exploration and exploitation in different organisational departments (Tushman and O'Reilly, 1996; Hansen et al., 2018). Apple would strive in this as it is more appropriate for larger organisations whereas smaller organisations try benefit more from contextual or leadership-based ambidexterity (Lubatkin et al. 2006).

Competitive advantage

Apple are known for their innovation and this plays a key role in Apple gaining competitive advantage. Apple have created the face recognition in the latest iPhone to gain this competitive advantage over rival organisations in the smart phone industry such as Samsung. Apple were the first smart phone to create such an idea to unlock a phone with facial recognition and have paved the way for other smartphones to recreate.

Competitive advantage would link with the business strategy which is (FMA) which refers to the advantage gained by a company that first introduces a product or service to the market. This is for larger companies moving into the market for example apple were not the first organisation to sell touchscreen smartphones but were the first company to achieve this on a large scale. This advantage of FMA gives a company to build and establish a solid foundation and the recognition needed to build things such as service loyalty. Apple can be considered not to have FMA when coming to smart phones in general or the Apple iPod but still managed to have sustained competitive advantage through delivering a great innovative product throughout the years. A way in which apple have gained competitive advantage as they were the first to ship a consumer multi-touch product with the iPhone.

Alliances and cooperation networks

Apple have also joined alliances with IBM, this partnership aims to redefine the way work will get done in the future. This will be a new way in which iCloud services optimised for iOS, including device management, security, analytics and mobile integration. (apple: online) Strategic Alliances is best described as ‘…voluntary arrangements between firms as well as between firms and other institutions involving exchange, sharing, or co-development of products, technologies, or services. They can occur as a result of a wide range of motives and goals, take a variety of forms, and occur across vertical and horizontal boundaries’ (Gulati, 1998, pp.: 293)

Conclusion and implications for management and recommendation

In conclusion for this assignment, it has been made clear that innovation is a huge part in any organisation is they want to grow as an organisation and stay ahead of rival businesses. Apple have shown throughout the years that they have stayed innovative through radical and incremental innovation by creating fresh ideas into the market such as face recognition and keeping customers happy with the latest updates with iOS updates. From this they have shown dominance in the technology department by staying ahead of rival companies such as Samsung. Also, the equilibrium in which apple have found with organisational ambidexterity between radical and incremental innovation has proven how to excel in the market and leading the industry of smartphones.

A recommendation for apple iPhone could be the increase of protection for certain apps such as your photo gallery or WhatsApp, creating a parental control app could be seen as valuable by parents who may have photos not wanting to be shown to kids or even family and friends. This could be done with a simple unlock code pass or finger recognition or follow in the footsteps of the new innovative idea of the new iPhone and unlock protected apps with face recognition.

A second recommendation for apple that almost every apple owner would love to see is the dramatic increase of battery life to their products. Though apple products seem to die quick it would be hard for apple to create a phone so productive and be able to live on such a short battery life. Longer battery life is the realistic next goal for apple to try achieving to keep customers who are unhappy with how quickly their phones die. Apple are a huge organisation but can always expanded further, by maybe dipping into the fashion market as they did with the iWatch could bring in new potential customers, as apple have such good organisational ambidexterity it would be possible for them to achieve this while still staying dominant in current markets, they’re in.