Archive for April, 2010

Innovation has often been seen as a random experimental process. Blue Ocean Strategy challenges traditional innovation theories and offers systematic methodologies for creating blue oceans of uncontested market space and highly profitable growth. Blue Ocean Strategy challenges traditional innovation beliefs that innovation is trial and error must be done by an entrepreneur and opportunities and risks come together. Blue Ocean Strategy in contrast, offers analytical tools and frameworks that help organizations minimize risks while maximizing opportunities to achieve profitable growth.

Apple’s Endless Expanding App Universe from  Business Week

It was a joke, of sorts. Apple is not divine—though anyone who rode the stock from $3 to $247 since Jobs’ 1997 return to the company might disagree. What Apple has come to resemble is an endlessly expanding cosmos. More than 85 million iPhones and iPod touches are in existence, up from zero in July 2007. IPhone users have downloaded 4 billion apps from Apple’s App Store, and more than 10 billion songs, 33 million movies, and 250 million TV shows from iTunes. IPhone owners, who make up just 2.2% of total mobile-phone consumers worldwide, according to market research firm IDC, chug 64% of all mobile browsing minutes, says Net Applications, another research firm. According to Apple, 500,000 iPads have already been sold, increasing the number of people who have access to a rich life, full of endless media and communication options, without ever leaving the Apple platform.

Apple’s neatest trick is that this platform would expand even if Apple were sitting still (it’s not). Forget Apple’s 34,000 salaried employees. More than 125,000 developers now work to make apps for Apple products. Apple pays them nothing. They sign contracts agreeing to Apple’s rigorous terms in the hope that users will buy their apps or view ads on them. In the hope, really, of becoming another little planet orbiting Apple’s sun—with the truly lucky ones landing a spot in the company’s TV spots.

In the quarter ended Mar. 31, the company blew past analysts estimates with sales growth of 49%, to $13.5 billion, while profits soared by 90%, to $3.07 billion. That included record sales of the iPhone, up 131% from the previous year. Jobs even broke from his typically tight script to note: “We have several more extraordinary products in the pipeline for this year.” That could be because a midlevel engineer celebrating a birthday left a prototype of an upcoming iPhone model in a bar on Apr. 18, stealing the element of surprise. Still, there’s little doubt Apple remains on the march into new markets, creating even more of a reason for developers to hitch their wagon to Apple.

Five days after the product launch of the decade—we’re talking about the iPad if you hadn’t guessed—Steve Jobs was fielding questions at a press conference on Apple’s (AAPL) Cupertino (Calif.) campus. The iPad release had been a stadium-style show, full of stagecraft and choreography meant to wow a global audience. The follow-up was more like a club gig for the truly devoted. The purpose was to show off some improvements to the software that powers the iPad, as well as the iPhone and the iPod touch. Surrounded by journalists and bloggers as interested in the guts of his creation as its flawless skin, Jobs, still gaunt from a cancer-related liver transplant about a year ago, was loose and commanding, his energy and wit at full force. Asked why Apple hadn’t yet included the ability to run small, portable chunks of code called Widgets on the iPad, he grinned. “We only shipped it on Saturday,” Jobs said. “And on Sunday we rested.”

For Apple, it’s a Wintel-like cycle in which new Apple hardware drives the creation and purchase of new apps. Except it’s better than Wintel; the combination of Intel processor running Microsoft’s Windows operating system never really managed to leap from PCs to other devices. Apple has constructed its empire so that almost anything you buy on iTunes—and Apple has your credit-card information with your first purchase—can run on any future iProduct. “The laws of nature say that [Apple is] making too much damn money, that this has to be unsustainable,” says David J. Eiswert, who runs T. Rowe Price’s (TROW) $312 million Global Technology Fund (PRGTX). “But who is going to stop them?”

Innovation has often been seen as a random experimental process. Blue Ocean Strategy challenges traditional innovation theories and offers systematic methodologies for creating blue oceans of uncontested market space and highly profitable growth. Blue Ocean Strategy challenges traditional innovation beliefs that innovation is trial and error must be done by an entrepreneur and opportunities and risks come together. Blue Ocean Strategy in contrast, offers analytical tools and frameworks that help organizations minimize risks while maximizing opportunities to achieve profitable growth.

The soon-to-be death of paperback books has generated a wonderful-mess for the book publishing industry and created a clear Blue Ocean opportunity.

Well – the Blue Ocean opportunity is clearly there, but who and what is not. And book publishing industry executives are far from happy at the moment. Blue Ocean opportunity refers to Blue Ocean Strategy, the proven system for making the competition irrelevant by creating new market spaces through simultaneous achievement of differentiation and low cost. Instead of being locked in red oceans of fierce bloody competition, Blue Ocean Strategy moves to clear, uncontested waters of highly profitable growth.

The book publishing industry, now more than ever, faces its toughest competition to date. The book publishing industry has survived books on tape and books on phones. However, Amazon.com’s Kindle, which offers the innovative alternative to paperback books through its 3G Wireless capability to download electronic books in less than 60 seconds, can hold up to 1,500 books…not to mention its large selection of over 450,000 books.

Moreover, the recent release of Apple’s iPad - The iPad’s easy-to-use interface allows consumers to play games, navigate the internet and download electronic books. The ameliorating electronic movement through technological innovation has created a crowded red ocean of competition for the book publishing industry. Amazon and Apple continue to take huge bites of profit out of the book publishing industry requiring an inevitable Blue Ocean Strategy, value-innovation driven, change.

“Traditional trade book publishers are scared,” says Harvard Business school professor (and former CEO of Random House) Peter Olson. “The world that they have known, of print books and brick-and-mortar bookstores – the whole physical distribution system – is on the cusp of changing fundamentally.”

Recently, Macmillan, privately-held international publishing company, battled with leading online retailer Amazon over e-pricing as the biggest source of friction. Amazon briefly removed the publisher’s Kindle editions and print book from its site after Macmillan indicated it would begin setting higher consumer prices for e-books than Amazon’s standard charge. Amazon eventually renegotiated terms with Macmillan, but the confrontation reflects publishers’ concern that more and more customers are going to get used to cheap electronic pricing that will undercut print books. Publishers believe that consumers’ perception of things that are digital should be less expensive or free.

The ongoing power struggle between publishers and key online retailers like Amazon remains an open question. Odd enough, the focus of publishers and retailers is primarily on the amount of resources dedicated to the manufacturing and physical distribution of books. Blue Ocean Strategy focuses on customers and non customers as a source for value innovation to make the competition irrelevant.

The current industry concerns are confrontation versus cooperation with retailers and e-pricing and royalty rates. But, consider the solution from a different approach – a Blue Ocean Strategy approach. The major publishing companies and online retailers are competing and worrying about the strategies for competing. For example, publishing companies are pricing their books based not on what is costs or what people want to pay for it, but based on another format that is completely different, just because they want to keep the old format alive.  Macmillan was able to win the shot-term pricing battle with Amazon, but couldn’t Amazon just retaliate by promoting other publishers’ titles more?

The electronic movement has resulted in the inevitable – disruption happens. But, what company in the book publishing industry is going to create a Blue Ocean of highly profitable growth and how will they do it? Can the book publishing make the market more attractive with additional electronic features, packages, etc? With the central focus of the publishers’ and retailers’ debate on price and the adoption of the e-reader it will require the application of the fundamental aspects of Blue Ocean Strategy – differentiation and low cost to survive.