My friends at Viadynamics, published about a year ago, a whitepaper on 'Driving growth in global markets: An integrated approach to business strategy and capability development that links innovation and operational excellence'. Its theme is that platform building is a powerful way of value creation. The authors, Chris Thompson and Nicholas Duggan, talk of
‘Successful global businesses and industries avoid the shortcut to a quick return. Instead they focus on the creation and exploitation of assets by identifying and building defendable platforms and leveraging their own and other organisations’ access to scale.'
They also talk about Apple's approach to innovation in the past and today-
'The contrast between the way Apple chose to exploit its operating system in the late 1980s versus how it is approaching the iPod and iTunes today illustrates the point. There was no doubt among early adopters that the fi rst Apple computers were easier to use and more appealing, and were in line with the company’s compelling vision of a Personal Computer being “a bicycle for the mind”. Apple decided to take a vertically integrated approach, in effect aiming to own every aspect of the total product: from hardware to operating system, applications and design. In hindsight it is easy to conjecture what would have happened if instead they had identifi ed that their operating system was the most defendable, ownable and valuable of their assets. It would then have been logical to license the Mac OS to other hardware manufacturers and to concentrate their energies on making it even better. Of course they didn’t, and Microsoft and Intel were given an easier run as a result.
Apple’s approach today is very different. The iPod is certainly seen as an extremely successful product but it is also the vanguard for an even bigger win. iTunes was initially launched as a new feature within the Mac operating system available on Apple’s PCs and laptops. It then underpinned the success of the iPod platform and is now provided across many platforms as a revenue generating service. It is the anticipation of Apple becoming a global maximiser in the international music publishing market that gets analysts most excited. In turn, we can now expect the iTunes platform to be used by Apple to try to access other global markets from movies to soaps (the TV kind).
The maximisation of value created by an organisation across the innovation cycle is a representation of the art of “judicious sacrifice”: the acknowledgement of the platforms that we must build, own and fi ght for to achieve growth, versus those we must let go and leverage through others. Without making this sacrifice, managers risk shortcutting the value creation process and short-changing their stakeholders. In the global economy there is a need to invest in the full innovation lifecycle to develop the platforms that create sustainable growth, and not default to quick wins.'
Chris and Nick are saying that the way ahead in a global arena is not to adopt a fast track approach of "business creation" then "market optimisation" but to take a more robust path from "bc" through "platform building" onto "global maximisation" then "market optimisation".
Whilst the attention is on the iPhone announcement the AppleTV announcement is also very important as it shows that Apple is moving on from global maximisation of iPod on the iTunes platform to market optimisation of the iTunes platform for the home media experience- as postulated from Chris and Nick's paper (see page 5).
In the meantime the Apple innovation pipeline discharges another strategic thrust as the OSX paltform (?) enables yet another iteration of Apple Inc's growth building strategy.
An article By Hamish McRae in the Independent , 'Apple's iPhone won't change the world. But the innovation it unleashes just might' says
'If this is right, and you do have to take everything that is said about the iPhone with a pinch of salt, this will stimulate a global quest for new mobile services. There will certainly be a barrage of new phones doing similar things and they too will provoke the development of new services.
What will these services be? We cannot know and in any case they will take months, years indeed, to be developed. Americans don't get the phone for another six months and we won't get it until the end of the year. We can however say a few things.
One is that the services could come from anywhere, since the iPhone will be a global product - apparently it will be a GSM quad-band - and that they won't come just from large companies but from small start-ups too.
A second is that some of these start-ups will be in sheds in Mumbai and Shanghai as well as offices in Palo Alto, though the interaction between finance and entrepreneurs in California remains one of the great strengths of the US hi-tech industry.
A third is that while as a general rule the software is more interesting than the hardware, this may be another example, like the iPod, where the hardware matters too. Don't underrate the power of fashion, which matters just as much as functionality.
Fourth, this will give a big boost to the broadband revolution, which itself is encouraging the development of new services, the promotion of e-commerce and so on. The final graph shows the way in which broadband has swept across the developed world. But large parts of the developing world have yet to get it because the fixed-line network is inadequate. Broadband mobile will be given a kick-start not just in the developed world, where it is not really necessary, but in the developing world. So a side- effect of the iPhone will be to further level the global playing field.
This leads to a final point. This is how a stylish chunk of American innovation sharpens our perception of a world where competitive advantage is a much more fluid concept than it has even been before. The US can still out- innovate the rest of the world. We often forget that. Where these phones, and their competitors, end up being made is less important than the ability of the US (or indeed other developed countries) to conceive, design and market them. Design matters. Culture matters. And for the moment at least, the US - and in a rather different way, Europe - still seems able to create the products and services that retain our economic leadership and to some extent at least, justify our standard of living.
Perhaps the most interesting thing to watch for in the coming 18 months will be not so much the commercial success or otherwise of the iPhone, though that will be fascinating. It will be the social consequences of the product. What services will be winners? Will there be at last real convergence between the computer and the mobile phone? What new business opportunities will emerge in, say, sub-Saharan Africa as a result? So is the platform OSX or is it the iPhone itself? Or does it matter?
Chris and Nick also talk about the "Harry Potter" franchise based on the stories written by J. K. Rowling. Rowling created a manuscript which her literary agent Chistopher Little recognised as a potential opportunity and began the task of tuning the manuscript into a platform. This has eventually become multiple revenue streams across global markets, delivering value from books, films games and even sweets with some pretty challenging flavours!
So like the Hogwarts the question for you could be
Which platform will your new product/service leave from? Will it create a transport of delight for the people who buy into the dream and will it be a gravy train for you- a train which creates lasting value for customers and the business?
The choice of platform is crucial! More on this soon!!