Apple’s Business Model Lesson
The blogosphere is aflutter with talk on Apple’s recent customer satisfaction issues linked to the new iPhone 4’s antenna design. A quiet whisper turned into thunderous noise once Consumer Reports decided to not recommend the phone because calls are dropped if the antenna is covered while in use (for example, by the user’s hand holding the phone).
Much of the on-line conversation centers on public relations lessons and a debate about the sensitivity issues of the iPhone versus competitive products. (For a good assessment of the PR lessons for Apple, see The Leadership Playlist blog.)
There is more to this lesson than public relations. I think in terms of business model and strategic leadership, and I believe Jobs ignored Apple’s business model in resolving an internal debate about the antenna, a product design decision that I’m confident Jobs now regrets.
Apple’s value promise includes two key benefits for which customers are willing to pay a price premium. One is an owner appearing “cool” or “savvy,” as the company’s products offer among the most elegant looks on the market for technology products (for most products, as a matter of fact). But a key driver of Apple’s recent financial success has been growing adoption of Apple products for business (as opposed to school or home) use. And in the business world, the benefit promise that converted PC and Blackberry users to the Apple brand is that the company’s products “save you time and minimize frustration.”
Genius ergonomics make Apple products effortless to use. I recently cared for my 87-year old mother, a woman who quickly mastered the iPAD, without prior experience with Apple products. (Try teaching your elderly Mom to use a Blackberry.) Apple’s effortless products also enable users to better manage more digital information, making Apple products time-savers in our lives. I’ve argued before that Apple moved into Applications faster than its competitors because saving time and minimizing frustration are the essence of Apple’s brand promise.
Jobs placed “cool, elegant design” before “saves you time and minimizes frustration” in deciding on the antenna design, and that was a mistake.
When your business model value promise is multifaceted, it’s vitally important that leaders not advance one element of the promise at the expense of another. Rather, strategic leaders force their team to find the collaborative break-through solution that advances both elements and therefore overall value.
Apple’s first solution to the problem–offering a free bumper case to all owners–contradicts both value promises. Early adopters now have to take time to order a bumper case or get a refund for one they’ve already purchased and the iPhone looks considerably less sleek with the requisite case. Eventually Apple will figure out the antenna solution that delivers effortless time savings, while retaining the look of the thin iPhone 4. Apple’s delay in doing this wasted its customers’ time and increased frustration, costs that could have been avoided if Apple had acted more proactively.
A leader steeped in business model innovation can avoid the costly issues Jobs had to leave his vacation early to resolve. Keep your value promise front and center at all times and train teams to align their decisions to meet or exceed this promise. Unlike Jobs, you’ll be able to finish your vacation.