5 Business Lessons You Can Learn From Apple

Contributing Editor

I realize you have better things to do than watch share prices but a monumental event occurred this week. Apple became the world’s most valuable company. Ever. Its share price reached almost $665 which propelled the company’s worth to $621 billion.

Apple overtook Microsoft’s record of $621 billion in 1999. Admittedly, that would equate to $850 billion today, but Apple’s valuation remains impressive.

Those of you under the age of 30 possibly don’t remember that Apple almost went bankrupt 20 years ago. The company’s focus on expensive all-in-one machines didn’t always match the market’s desire for cheaper and faster computing devices. Microsoft dominated and, even today, Windows is used on 90% of home and office PCs. This, combined with doomed forays into early digital photography, CD players, interactive TVs and games consoles (does anyone remember the Bandai Pippin?) pushed Apple to its knees.

Apple’s rebirth started in 1997. Steve Jobs returned as CEO, re-evaluated the product line, and launched the Jonathan Ive-designed iMac. The machine wasn’t technically better than any other PC but it was different, looked great and appealed to a mass market. Over 800,000 units sold within five months.

Apple never looked back and, while some of their business ethics would make Gordon Gekko wince, there are some great lessons we can follow…

1. Imitation Over Innovation

Apple didn’t invent the PC, MP3 player, smartphone or tablet. They enter a market, take existing concepts and apply a different approach or extra polish to make them desirable.

Consider the iPad. Microsoft and other companies dabbled in the tablet market for many years but cut-down hardware combined with desktop software was never successful. Apple made their tablet a larger, more powerful smartphone. They enhanced rather than reduced an existing technology.

2. Attention to Detail

It’s the small details which make Apple’s products shine. There are few iPhone features which excel over other products on the market, but there’s no one product which beats the iPhone.

Those who buy Apple devices rarely question the company’s design expertise. If anything, those customers begin to doubt their own knowledge if they want a feature Apple don’t provide. Wouldn’t it be great if your clients held you in such high esteem?

3. Offer a Complete Package

Where do iPod, iPhone and iPad users buy their apps, music and movies? I suspect Apple’s after-sales business is more profitable than their branded product line. Why invest in your own research and development when you can claim a 30% cut of another company’s revenue?

While I’m not suggesting you can apply sales ‘taxes’ to your client websites, you can certainly up-sell hosting, support, maintenance, updates, training and consultancy services.

4. Charge a Premium

Apple do not compete on price. There are thousands of IT suppliers jostling for business at the lower end of the market but none are as successful.

Apple make a healthy profits on every sale. Some prices veer toward extortionate, but people pay because of the perceived value. A cheap smartphone may offer the same facilities as an iPhone but it lacks the brand appeal.

In addition, when the iPhone 5 is released there will inevitably be stories about lack of availability. Do Apple always fail to appreciate demand? Or do these stories make the iPhone appear more “exclusive”? There’s one guaranteed way to make people desire your product: tell them they can’t have one!

5. Achieve Cult Status

Apple has a passionate, quasi-religious following. Many devotees buy every one of their products regardless of need or reviews.

While few of us can hope to achieve cult status, it’s worth remembering that clients approach you for your expertise. They want solutions to problems — not excuses, technical restrictions or in-depth explanations.

If you can get a job completed effectively on time and on budget with the minimum of effort from the client, they won’t hesitate to use your services again.

Do Apple deserve their valuation? Are they a shining example of good business practices? Can we learn more from their rise, fall and subsequent comeback?

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  • http://thestoppedclock.blogspot.com Aaron

    You say, “Imitation Over Innovation”. I think it’s more appropriate to say that Apple’s technique was to identify a good idea and improve upon it – sometimes significantly, sometimes in an extraordinary manner. It’s an important distinction. If you imitate, you’re tossing a product more or less like all the others into an increasingly undifferentiated marketplace. But if you identify a means by which you can provide a superior product, if you identify the correct point for improvement you can disrupt the market.

    If you can walk through Xerox PARC and identify technologies that the inventors deem too complex or expensive for business customers, and turn them into mass consumer items or features, you can’t claim to be the inventor of those technologies but you can claim to have done a lot more than imitate.

  • http://www.isights.org/ Michael Long

    It’s amazing just how many facts and “common knowledge” misconceptions you can find in a single article.

    Most valuable company? You mention Microsoft, adjusted for inflation, but how about IBM, who once, in today’s dollars, would have been worth about $1.2 trillion?

    Didn’t invent the PC? Apple and Commodore and Atari all invented the “PC”, the first true personal computers sold to consumers. (Apple ][, PET, and Atari 400). Prior to that we were in S100 bus hobbyist land. (Electric Pencil, anyone?)

    And then there are the innovations that lead to the first consumer-targeted computer with a graphical user interface. And of course, one has only to reflect upon all of the full-screen multi-touch keyboard-less smart phones that dominated the market before the iPhone was released. [/sarcasm]

    “I suspect Apple’s after-sales business [e.g. iTunes/App Store] is more profitable than their branded product line.” Why suspect? Just look at Apple’s financials and you’ll see that hardware profits completely and totally dominate their quarterly numbers.

    “Apple do not [doesn't] compete on price.” Really? Tell that to HP and Samsung and Palm and all of the others who were scrambling to meet the iPad’s $500 price point. Or to HP and Dell and the others who were demanding processor price reductions so their “Ultrabooks” could be priced competitively. Or the way they’re using previous iPhone models to hit lower and lower price points.

    Apple uses its highly efficient supply chain to aggressively compete on price… while also maintaining their profit margins.

    And Apple’s “cult” status? Right. They’ve brainwashed millions upon millions upon millions of people worldwide to buy their products without question.

    Or, could it be, that people have come to appreciate Apple’s design aesthetic and commitment to quality and service, something rare in this world. And that they’re simply loyal customers?

    But there is one lesson that Apple — and this article — can teach us.

    And that’s attention to detail matters.

    • http://www.optimalworks.net/ Craig Buckler

      Thanks Michael. Even though I’ve paid Apple a few compliments, it seems I haven’t given them enough gushing praise for your liking. So let’s review your points in turn.

      Apple has reached the highest DOLLAR valuation of any company. It’s been reported in the online and mainsteam press all week. If that’s a misconception, you must have access to more information than the rest of us.

      Did IBM reach today’s equivalent of $1.2 trillion? It doesn’t matter — the company was never worth more than $600+ billion at the time it reached that valuation. Adjusted for inflation, the chap who discovered fire is worth more than every company on the planet.

      You state Apple, Commodore and Atari invented the PC. What about the devices from Xerox, HP, Wang and IBM which came earlier? What about Babbage’s Difference Engine? No one individual invented computing or PC concepts; they evolved. Apple were an important part of that evolution, but their success was founded on the work of others and remains so.

      You also mention “innovations that lead to the first consumer-targeted computer with a graphical user interface”. Weren’t those innovations attributed to Xerox? Didn’t Steve Jobs copy their ideas? What would have happened if Xerox had Apple’s appetite for legal copyright and patent battles?

      Next point: “just look at Apple’s financials”. I have. I’m no accountant, but hardware and AppStore sales are not differentiated in their balance sheet. What numbers have you seen?

      Besides, Apple are gaining 30% commission on every app sale. Unlike the iPhone, they didn’t invest in the research and development to create that program. Margins on third-party app sales are irrefutably better than those on hardware.

      It’s interesting you compare Apple’s pricing structure to HP and Samsung. Samsung are always less expensive and HP pulled out of the tablet market almost as soon as they entered. (Palm? They’re owned by HP which killed the product line.) Companies in China are producing Android equivalents of the iPad 2 for $100 and still making money.

      Price/value is subjective, but Apple are not renowned for inexpensive products (if they could sell the iPhone for $50, they wouldn’t — it would kill all perception of value and exclusivity). They make a healthy profit on their devices — you admit that yourself and I’ve said it’s a good thing. Never undercut your own value.

      Finally, did I accuse Apple of brainwashing? No. But given your “Apple are perfect” comments, perhaps I should add that as point #6!

      I look forward to hearing your thoughts.

      • http://www.isights.org/ Michael Long

        IBM, HP, Wang? Wang primarily made highly expensive, dedicated word processors for the office environment. IBM’s “PC” came in 1981, 4 years after the introduction of the Apple ][. Prior to that, the IBM 5100 and HP 9810A were, like the PDP-11 and 8, classed as minicomputers and sold for $8-$10 grand (in 1970 dollars, more like $25,000-$40,000 today).

        Apple, Commodore, Atari, and Tandy (sorry, forget the trash-80 earlier) created, invented, innovated (choose whatever word you wish that doesn’t offend your delicate sensibilities) the entire class of affordable machines we today call the “personal computer”. IBM sealed the deal when they named their “pc” the IBM PC.

        “Didn’t Steve Jobs copy their ideas? What would have happened if Xerox had Apple’s appetite for legal copyright and patent battles?” No, Steve paid for those ideas, in exchange giving Xerox options on a million dollars worth of pre-IPO Apple stock. (And Xerox, BTW, did bring suit at one point, after they’d realized that they’d blown it.)

        Apple also took those ideas and added their own innovations (just for one example, look up the whole direct-manipulation, drag-and-drop icon thing sometime). And Apple, again, brought those innovations to market in an affordable device, as opposed to the $100,000 or so one needed to setup a multi-station, laser-printer-based Star network. (Mac, BTW. Lisa was the cooler machine, but still too expensive for the time.)

        Financials? According to the last conference call, 2012 2nd quarter revenues for iTunes and the App Store were $1.9 billion, out of total revenues of $39.2 billion. (Google is your friend.) Note that Apple’s take is 30%, or $570 million, most of which Apple claims went to iTunes development and operational costs, not profits. Quarterly net profits were $11.6 billion. (So even if all iTunes/App Store revenues after GOGS were profit, it would still be less than 1%.)

        In short, your “common-sense” version of how Apple is profiting on its App Store developers is flat out wrong. iTunes and the App store exist not as pure profit centers, but as part of an ecosystem, icing on the cake that makes owning an Apple device or computer that much more desirable and valuable.

        iPad and Air pricing? No one is really producing the same device to the same build quality. And of course you can sell something smaller and cheaper using lesser components. Plenty of people specialize in racing to the bottom of the market. Build to the same levels, however, and many “ultrabooks” are more expensive, not less, than the Air. Same for tablets. The ultrabook manufacturer complaints to Intel on reducing processor costs in order to be “competitive” are on record.

        “if they could sell the iPhone for $50, they wouldn’t — it would kill all perception of value and exclusivity” Perhaps. Then again, Apple time and time again undercuts their own devices and prices, most notably with the shuffle, nano, and iPod, and also with the way they sell the 4S, the 4, and the 3GS for $200 on contract, $100 on contract, and… ah… nothing, on contract. (Does nothing reduce the perception of value?)

        The Apple of today knows one thing well, and that’s it’s much, much better to cannibalize your own product line than to let someone else do it for you (and to you). Notebook sales cannibalized desktop sales, iPhone sales cannibalized iPod sales, iPad sales are cannibalizing notebook sales. Many companies never get that.

        As to accusing Apple of brainwashing? Pretty much. “Achieve Cult Status. Apple has a passionate, quasi-religious following.”

        Thing is, Apple’s status depends on continually innovating and delivering high quality products and services. Lose that, fail to deliver, and the “cult” dissolves.

      • http://www.optimalworks.net/ Craig Buckler

        I’d love to know how Apple ‘undercuts their own devices and prices’ yet still makes a profit. We could discuss business margins and historical opinion all day but I fear we’re going way off-topic.

        Going back to the original article, what point are you trying to make? What have I said that’s factually incorrect? Have my opinions offended you in some way?

        If anything, you appear to be agreeing with me … but seem to be annoyed by issues you’ve read ‘between the lines’ which first appeared in your own comments? (i.e. religion is brainwashing rather than faith. I think a few billion people might disagree with you.)

        I’ve praised Apple. I’ve provided five lessons we can learn from them. Is it simply that I haven’t attained your spiritual level of fanboyism?

      • Matt S.

        I think Michael is definitely flexing an Apple bulge and demanding more praise for his God.

        However, I’m only willing to comment on one of the points in the article. #1, in fact. If Apple truly were the first creators of the PC, there would be no other PCs to this day. None! Why? Simply because Apple refuses to allow others to follow #1. They imitate over innovate, as Craig states in the article. Then, they enhance. Yet those enhancements are not for others to imitate. Oh no!

        Apple prefers injunctions and litigation over licensing. Craig’s comments about Apple’s patent behavior are spot on. The USPTO was created to promote innovation by protecting original ideas from outright theft; not by preventing further building on those ideas. Yet, that’s exactly what companies like Apple are doing these days. Patent holders are supposed to license their ideas to others. It’s the only way we can continue to grow and actually innovate.

        Apple paid Xerox for its ideas, yet they refuse to even take money from competitors for licensing their own innovations/enhancements. That is exactly the opposite of the concept of patents. It the very thing Congress is finally attempting to work on fixing (http://arstechnica.com/tech-policy/2012/07/as-itc-mulls-xbox-iphone-import-bans-senators-target-patent-system/). It’s a mess, and Apple is one of the stingiest players.

        It’s not that Samsung, Motorola, HTC, and others won’t pay licenses to Apple. It’s that Apple does not offer any licensing. And when they are forced to do so in the near future, they will attempt to set the licensing fees at unfair prices so competitors will give up instead.

        I have a hard time admiring Apple. They do great things for tech, but they do not share at all with others. That does nobody any good but them. The tech industry suffers if they get there first (and by get there first, I mean they slap a patent on something first).

        We can still share new tech to propel mankind forward (instead of hording it all for one company) and make plenty of profit. Apple’s pocketbook would hardly notice if they started licensing their patents. They could just keep using slavish labor, charging too much, providing horrible customer service (Geniuses; please), and they could go back to offering a pathetic 3-5% “discounts” to their employees (like it was earlier this year).

        *Bracing for impact!*

    • PD

      Actually, Apple didn’t brainwash anyone. They are the most skilled at polished UI’s and their stuff works which made and makes people notice. I bought the iPhone because it works and is clearly a user experience I want to have in a phone. If they designed the more complicated and non-standard experience that you get with a Droid-based phone, I’d want no part of it. Writing Windows-based software and managing Microsoft SQL Server databases on a daily basis at my job competes enough for my desire to have to dig and sort and configure… coming home to the iPhone and iPad experience is simply an enjoyable place to be because I don’t need to highly manage thise enviroments. That’s what Apple does well and that’s why they are successful. There’s no brainwashing, just a choice after trying every other option which all stink for my needs. The brainwashed ones seem to be the uptight Apple-haters that have to gripe and mock over a phone that they don’t even own. There’s got to be more to life than that.

      • http://www.optimalworks.net/ Craig Buckler

        The great thing about brainwashing is that the brainwashee doesn’t realize they’re brainwashed and happily defends the brainwasher!

        But where has all this brainwashing nonsense come from? I didn’t raise it. I haven’t accused Apple or anyone else of it.

      • PD

        You’re right, you didn’t mention brainwashing. But it always pops up whenever a pro-Apple article is written, totally goofy. =-)

  • Gary

    Michael, re: (Apple ][, PET, and Atari 400), heck you might have thrown in the IBM, TRS-80, and Osborne too if you can’t have just one.

    Weak article. Site Point should do better with our time.

    • http://www.optimalworks.net/ Craig Buckler

      Many thanks for your insightful critique, Gary. I will take your numerous points to heart when writing my next article.

  • http://www.harishchouhan.com Harish Chouhan

    Nice article Craig. The comments have just gone off-topic.

    • http://www.optimalworks.net/ Craig Buckler

      Thanks Harish.

  • IanG

    Buckler made errors, and Long corrected them. Get over it, Buckler.

    For instance, drag-and-drop was developed at Apple. With Xerox machines, the user had to click to select a file, then hold down a special key to move it to a [clicked-on] destination; conceptually rather obscure. Drag-and-drop seems intuitive? Only after it was made apparent.

    BTW, first paragraph: “It’s share price”. Really?

    • http://www.optimalworks.net/ Craig Buckler

      Whoops – “its” now corrected – well spotted.

      So then, let’s discuss the errors. What were they? Much of the piece (and Michael Long’s response) is opinion.

      I guess you’re an Apple user? I don’t want to typecast but, like Michael, you’re arguing points no one has disputed. Did Apple invent drag and drop? You’re the first person mention it — no one else has! Assuming Apple did invent it, why aren’t they collecting royalties from every manufacturer on the planet? They seem happy to sue for lesser infringements.

  • http://www.beaware.lu Martin Gasquet

    Nice overview.
    I would add a point: Apple did overtake Microsoft as the most valuable company ever (thanks to an incredible speculation) but it’s about to overtake Microsoft as the most hated company ever as well.

    • http://www.optimalworks.net/ Craig Buckler

      Apple has been having their cake and eating it for a while. They won’t be able to play the underdog card much longer.

      On the other hand, Microsoft has been actively exposing their softer side. It’s not natural for them and they don’t get everything right, but few people leave “MS are evil” comments now.

  • http://www.kindlebooks.co.za April

    Apple aim for simplicity. They take the handful of things that users do often, and that is what they offer. And because their devices are very very simple, even very very stupid people feel like they can use them easily.

    If you have ever tried to link an Apple into a sophisticated and secure corporate network, you’ll know just how unfriendly they are. And how high risk they are. I have seen iPhone fundis [happily] struggle for a month to do something a Samsung phone does in minutes. By making it easy to link to the istore, and virtually impossible to link to any other store, they have happy customers paying 5 times the price for convenience. By only linking nicely to their own Apple products, once you have one product you are kind of forced to buy other Apple products just to get your work done.

    We can learn a great deal from them around user-friendly design, although I personally find the iPhone very clunky and brick-like. But the more everyone laughs at the Apple cult, the more aggressive Apple followers must become in support of their choice.

    However I think the tide is turning. Reporting the company’s size and profitability takes them from being “the struggling underdog” against evil Microsoft to “corporate giant”. Suing Samsung makes them look anti-competitive and money-grubbing. Their trade practices in China are compared to the generosity of the Gates Foundation. Yes, their products are beautiful, but this is a company evil to the core.

    Linux/Unix is it the operating system that changed the world. Without Unix, the internet would not exist. Just imagine what the big corporate business model would have done with it! Microsoft would have made it “pay per view/licence”, Apple would have made it “exclusive” and limited it to the rich. Apple has the most money based on the transient value of a “share price” (and just ask Facebook how stable THAT is!). If you are looking for the most VALUABLE – measured in value added to mankind and our daily lives – Unix/Linux rules.

  • DCStrain

    The “5 Business Lessons You Can Learn From Apple” part of your article was most interesting and informative — but I am left wondering what stimulated your “slightly negative” writing approach. I was in the software business when Apple & Microsoft were in diapers … and it seems to me neither would have been successful if they lacked the “Killer Instinct.”

    One thing your article provoked is that wonderful defensive attitude Apple lovers have. What fun it is to see them in action.

    Regards,
    DCStrain
    Operating System Agnostic

    • http://www.optimalworks.net/ Craig Buckler

      Thanks DC. Did it come across as slightly negative? There were a couple of back-handed compliments, but they were still compliments. We can all learn lessons from an incredibly successful company which rose from the ashes of near disaster.

      How you read it will depend on your opinions. Some have equated “imitation” and “cult” with “blatant copying” and “brainwashing” — even though I put them in a positive light.

  • http://www.pixomarc.com Amod P

    Offer a Complete Package = Build a walled garden. Jobs himself proselytized it when he said “the customer does not know what s/he wants” and going by the popularity of iEverything, it sure seems so. Kind of reminds me of the blue /red pill choice in “The Matrix”…

  • Meketrefe Rockefeller

    The iPhone also hangs up and need to be restarted from time to time… So, their stuff not always works. Not to mention that it’s really hard to make advance use of their gadgets just because they make them easy enough for grannies and Gordon Gekkos alike… but the hacker pack need to resort to jailbreaking…

  • Joe Ferguson

    #1 Imitation Over Innovation — WRONG
    In the area of Mobile Communication Related Patents, Apple had around 1,000. Not bad for a relatively newcomer to the market that imitates rather than innovating. source: http://www.redmondpie.com/this-graph-will-tell-you-how-many-patents-apple-holds-and-youll-be-shocked/

    In 2010 they had 566 patents awarded in the US alone. source: http://spectrum.ieee.org/ns/pdfs/2011.PatentFinal.pdf

    #2 Attention to Detail — CORRECT
    Spot on. Couldn’t have put it better.

    #3 Offer a Complete Package — WRONG and CORRECT
    First the correct part. Apple understands that to offer the best experience to end users they must be in control of the entire eco system. This ensures that software works as advertised and provides increased security. You only have to look at the fiasco between Google, Asus and Alibaba at the moment to see the problems associated with a fragmented approach to hardware and software. source: http://allthingsd.com/20120916/google-and-alibaba-continue-warring-over-acer-phone/

    None the wrong part. As for “claim a 30% cut of another company’s revenue”, these companies are paying for a service, they have a choice, if they don’t like it, they should develop for Android and host their software on the Amazon App Store that charges, wait for it, 30%. But that’s part of a free economy, supply and demand. (source: https://developer.amazon.com/help/faq.html )

    The real issue I have with the WRONG part of #3 is the assumed lack of R&D spend. Apple spent $758m in Q1 2012. As a percentage of cost/sales that works out at 2.3%. source: http://www.asymco.com/2012/01/30/you-cannot-buy-innovation/

    Why not higher like Sony 6.1% or Samsung 8.3%? Simple, focus on a small product portfolio. Tim Cook highlighted this in an interview when he highlighted that “We can put all of our products on the table you’re sitting at.” source: http://www.asymco.com/2010/02/23/apple-vs-exxon-mobil/

    #4 Charge a Premium — Wrong
    Give an example where comparable products from Dell, HP, Acer, Samsung, Sony etc are so cheap as to make Apple products “extortionate”. Seriously, try it. And by comparable I mean hardware components, build quality and software capabilities (and security).

    As for creating perceived value by deliberately mismanaging the supply chain to deny sales, are you for real? You only have to look to RIM to see the damage of making stock that doesn’t sell. RIM had to write off over $790m against unsold stock of PlayBooks and Blackberry 7 handsets across Q3 2011 and Q1 2012. source: http://www.guardian.co.uk/technology/2012/may/29/rim-writedown-smartphones-tablets

    #5 Achieve Cult Status — Er. Say what now?
    I’m not sure what this means. It’s hard because of the voice of our beloved Steve in my head urging me to spend more of my money on shiny aluminium. I will buy anything Apple sells, seriously, I bought an Apple Newton in 1993, an Apple Bandai Pippin in 1996, an Apple Cube in 2000, an Apple eMac in 2001 and an Apple Motorola ROKR in 2005. Oh, no, my mistake, I didn’t, they were shit.

    So in conclusion, please stop writing your opinions and passing them of as business advice. I suggest changing the title and removing the category tags ‘Best Practices’ ‘Business’ ‘Website Revenue Strategies’.