October 6, 2014
Case Analysis: Design Thinking and Innovation at Apple
I. Executive Summary Apple is one of the most powerful and influential corporations of our time. They have reached stock price of $600 per share, annual sales exceeding $100 billion, and grown bigger than established companies by multiples between 3 and 25. (Thomke 2012) However, Apple’s success is relatively new. Apple didn’t start thriving until 2000. When Steve Jobs returned in 1997 their market share was a measly $5 per share. Apple needed help. They needed to redesign their idea of what Apple was going to be and how they were going to do it, from the ground up. Apple transformed itself by differentiating its products and aligning their business strategies and goals throughout the organization.
II. Statement of the Problem When Steve Jobs returned to Apple in 1997 he did not return to the thriving, market-leading corporation we all know today. He returned to a very defeated Apple whose company share price had fallen to a mere $5 a share. The problems that lead Apple to what was thought to be its demise in the early 80’s were bad product launches and timing, competing with IBM in the “cloning space”, and debates of market focus within the company. Apple’s first successful launch was the Apple II in 1977. Apple’s next launch contained errors and the Macintosh was not launched until 1984, seven years after their first successful launch. (Yarow 2012) Apple tried to compete with IBM in the “cloning space” in the early 90’s by licensing Mac OS to a handful of select vendors, but this decision lead to more problems and did not expand Apple’s footprint in the market as planned. (Edwards 2012) Lastly, Apple did not contain its market focus in its early years, resulting in low success in all market areas versus high success in a few areas. These three aspects are the root causes of why Apple struggled to sustain its market share in the early 80’s and 90’s.
III. Causes of the Problem When Apple launched its first successful product, the Apple II, it was clear that IBM and the PC market were going to be under fierce competition for market share battling against the newest entry, Apple. Apple’s next product to market was the Apple III. Soon after the Apple III was launched it was found to have engineering flaws and was eventually recalled. Apple then came out with the Apple Lisa, a quality product with no major errors. The Apple Lisa was meant for business and office use, but at a price of $9,995 it was out of consumer reach. Finally, Apple hits a homerun with Macintosh in 1984, seven years after their first big hit. However, Apple missed their chance of controlling the market at this time because while their products were flopping IBM PC’s were being used in the majority of the business world. (Yarow 2012) Apple continued to struggle to take control of the market and felt they needed a way to get their products to more consumers. Apple saw that IBM was using the “cloning” method and it appeared to be working for them. Within the company there were many debates over whether or not to enter the “cloning space”. In 1994, Apple decided to begin “cloning” and licensed their Mac OS system to a handful of select vendors. Apple had hoped that licensing out their system would make a bigger footprint for Apple products in the market, but in turn had an opposite effect. (Hall 2007) The low-cost machines manufactured by the vendors could not properly run Mac OS, appearing to the consumer that the Mac OS system was flawed. Once Steve Jobs returned and the other Apple executives realized what the clones were doing to their brand they immediately decided the licensing of Mac OS had to stop. (Edwards 2012) Before Jobs returned to Apple, they were so desperate to come up with a successful product that they began focusing efforts in a variety of markets, such as: business, personal computer, education and artistic