Many businesses worldwide are trying to emulate Apple Inc. (Nasdaq: AAPL), the world's most successful consumer electronics company. They will most likely fail. Thousands of CEOs and other senior executives will read -- or have already read -- Walter Isaacson's biography of Steve Jobs in an effort to be more like the late Apple co-founder. They'll probably fail, too. No company is like Apple, and no CEO will ever be like Jobs.
It won't stop the Apple and Jobs wannabes from trying, failing, and trying again with -- sorry to say -- devastating consequences for their businesses, according to a new report titled "The Perils of Best Practice: Should You Emulate Apple?" from McKinsey & Co. The authors argued in the paper that Apple's overwhelming success and its continued dominance of its segments has resulted in a cult following that's led competitors and many companies in other economic industries to pursue a utopian world of market domination while disengaging themselves from the realities of their industry segments. They said further:
Managers tempted to distill universal insights from what are in fact exceptional companies put their own businesses at risk for strategic or operational missteps. Yet the desire to emulate is often stronger than mere rationality, even in the face of repeated evidence that most companies won't achieve the anticipated outcomes and that some will suffer a hard fall. Research by our colleagues, for instance, has shown that lockstep benchmarking may lead to "herding" effects that, over time, diminish emulators' margins.
While the McKinsey report used Apple as the perfect example of a company that businesses would like to emulate, its central premise is focused actually on the concept of best-practices and how enterprises, researchers, and consultants have elevated this to the apex of management operations. By learning about and seeking to replicate what others have done -- so the concept goes -- executives can avoid pitfalls and build successful enterprises. This idea omits one critical caveat, though, and that is the reality that what worked for one company and corporate executive may not work for others, even if they operate in the same business segment.
"Tried-and-true approaches often seem preferable to starting from scratch, whether for developing new products or running efficient supply chains," noted the McKinsey report. "However, perils abound when truly exceptional companies morph into ever more ubiquitous examples. Observers and management theorists alike, blinded by star power, eventually assume that everything these companies do should be regarded as best practice -- often without examining the context in which they derive their success or without parsing the true nature of their accomplishments."
Of course, it's hard not to want to be like Apple or as crazily successful as Jobs. First, the company's more recent financial results and capitalization are simply extraordinary. Its sales for fiscal 2012 ending September is forecast to jump to $156 billion from $108 billion in fiscal 2011 and more than double the $65 billion it reported only two years ago. Net profits, too, are seen surging to $44.27 per share this fiscal year, from $27.68 in fiscal 2011. At its current net income run rate, Apple is probably the world's most profitable company. This is reflected in the company's market valuation, which now stands at about $658 billion, greater than that of any other publicly traded enterprise and more than the combined capitalization of Google ($238 billion), Microsoft ($260 billion), Hewlett-Packard ($36 billion), Cisco ($101 billion), and Dell ($18 billion).
Why shouldn't other enterprises strive to emulate such an exemplary company to similarly climb to the top of their industry segments? I have two answers. First, few people know the secret sauce behind Apple's success, despite the more than 40 books and thousands of articles that have been written about the company since Jobs died one year ago. Second, just having Apple's formula is not enough to recreate its success elsewhere. Too many other factors must come together nicely, including the right business environment, attractive products, innovative spirit, and coordinated management.
A better answer to the question above came from the McKinsey study. The authors Marla Capozzi, Ari Kellen, and Sven Smit argued that while it is alright to learn best-practices from leading companies and even attempt to emulate them, narrowly focusing on creating another enterprise's success without paying close attention to how these would be applicable considering your company's peculiar characteristics could be disastrous.
They concluded as follows:
We don't mean to say that companies should never emulate Apple or other truly exceptional businesses. Many companies can draw new insights from Apple's achievements in design, brand loyalty, and retailing, to name a few things. Rather, our analysis is a cautionary tale suggesting that executives take a clear-eyed view of the companies they want to emulate, as well as the returns and outcomes they expect from doing so.
My personal conclusion is this: Your company is not Apple, and your CEO is not Steve Jobs or Tim Cook. There are no ways to emulate Apple to be as successful as the company is today, and while you can learn from its best-practices, some of the knowledge gained won't be applicable to your situation. Plus, can anybody really vouch that they know Apple's true best-practices? Find a way to create an experience and success that is unique for your enterprise.
Apple's prime and unique charactristic is its stupendous innovation capability. It is very difficult to immitate this. On other hand they are too big an organization with very few products in consumer market. So it also does not help to be like them.
But there may be few discrete points to be learned from Apple.
Speaking for myself, I believe newcomers or compertitors need to focalize their strategy in trying to be different, instead of trying to "simulate" a "totem" as Apple is. It is not mandatory that newcomers bring on the market exactly the same features Apple provides endusers with; the point is about the value added, not basically in the list of functionalities. Being different could be potentially the key of success.
Dont try to copy someone or some process since it will not do any good to your business. It will only distract your mionde and will be thinking only within the frame of which you copied from. You will never be able to think how it can be applied to your busienss or going beyond of what you copy. Its always good to follow someone since then you know what is needed and what is not and how to improve by adding the extra details.
@nimantha.d: it's the right approach in my opinion; if you aim to copy by learning, it make sense, a lot, but at the end, you need absolutely to put on top your value- added, if you want to become a real competitor / player in the market.
MBertozzi, Exactly. Unfortunately, there are hundreds of CEOs right now trying to learn the "Apple Way." Classes are being offered in business schools on the "Apple Model" and the Internet is chock full of seminars offering the "Secret to Apple's Success." If these teachers really know how to duplicate Apple's success they would be out there duplicating it for themselves.
@Bolaji: there are hundreds of CEOs right now trying to learn the "Apple Way"
it should be one of the reasons related to market's crisis; each one of us needs to learn, but the real key is on the value and ideas that we are able to bring, not to copy; maybe a new generation of CEOs is needed...
_hm, The best lesson Apple's recovery and subsequent domination of its market offers any company is the need to review closely the markets you operate in, understand your market segment and then target them with distinct products. Even this doesn't guarantee an Apple-like success.
Other way of looking at this is the first 10 years of Apple, not the last 15 years. If one can put effort similar to one Apple did in its first ten years, it is good effort.
Other way of looking at this is the first 10 years of Apple, not the last 15 years. If one can put effort similar to one Apple did in its first ten years, it is good effort.
Lots of great responses and the points about understanding what strategies worked (or didn't) for Apple are certainly useful for brands in any market sector. HAVING a clearly differentiated strategy or a direction which eventually creates that, would be a major breakthrough for many companies in and out of tech.
"Being like" is perhaps the first and biggest mistake many marketers make. Someone looks at a company and says, "Hey, we can make money doing the same thing." Me too isn't typically a great strategy. Apple hooked itself to trends not to what other companies were doing. Jobs was outspoken about not listening to customers for product innovations and figuring out paths not taken or even seen by others. Their slogan: "Think Different" wasn't just about Apple products.
Citing Marketing gurus Trout & Ries in their "22 Immutable Laws of Marketing," laws number 7, 8 and 9:
7. The strategy to use depends on what rung you occupy on the (category) ladder
8. In the long run, every market becomes a two-horse race
9. If you are shooting for second place (a follower), your strategy is determined by the leader.
Exactly Ford, I agree with you, definitely; I have only one topic to point out: who is / are in charge for managing the company. We could absolutely discuss about market's strategy or how to move on for increasing sales, but (speaking for myself) executives need to play their key role in defining them - being responsible for them, avoiding any responsibilities' scrolling out, since the beginning, instead of trying to simulate others.
Ford, I wonder what a company should do if it can't be No. 1 or even No. 2. This scenario is playing out in the mobile phone market. Perhaps it will take time for the winnowing to sort out the survivors (as in the PC market) but the best marketers learn not just how to win but also how to be truthful about their chances when they have a losing hand.
Bolaji - The answer is create a niche or market where you can become #1. Perhaps you've heard about "Blue Ocean Stategy." That's complex but many companies have zigged when others zagged and found a place where they can become dominant.
Apple started long ago creating a faithful customer base. The range of compatibility problems faced by PR users certanly helped Apple. They ceded schools with their products and created brand familiarity and preference among young users. As a market share underdog with obvious, positive differences, many people adopted the brand in contrast to mainstream but look-alike PCs. Recall the 1984 Big Brother ad? The preference for a valuable difference, which might be defined as elegant simplicity, as well as industry-leading technologies, has been consistently built on. That's how a cult-like customer base is built. It doesn't occur overnight.
Are cult-base behavior past from father to son? Will Apple become so mainstream that kids will need a "Apple in the 80s/90s" effect and go for a new brand?
After a cult is built, they only need to deliver good products or how is it maintained?
You wish! Some people have said Apple has created a new dynamism in consumer electronics and that its future is guaranteed. That's a fantasy. In time, even today's most modern and desired products lose their shine. The idea that future generations will be as hooked on Apple as today's befuddled generation runs counter to history. Believe me, something better than Apple is getting cooked up.
Well IMO, I feel that copying things will not work for anyone. Get the best out of Apple by studying them and then try to implement it to yours. If you try to copy their model will definitely not match with the business process of yours since they are different from each other.
Bolaji - There's two questions in your comment. If a company can't be #1 or 2 in a market, Jack Welch, a rather estute businessman who drove General Electric to greatness, would say, "Get out." Alternatively, develop a new business plan that will lead you to a new market where you CAN lead. See Law #2 in Trout & Ries' 22 Immutable Laws of Marketing
The second question seems to be about being straigntforward (new buzzword in play: "transparent") that your business is tanking and you're taking a new approach. That requires management to admit mistakes. (Not something our culture is real great at.) However, having a plan for what's next and how you can win against competitiors is a great business story that people will want to hear about. Guess the answer is whether the management team has thought through their new game plan and also has the guts to admit errors. "We didn't exactly nail this market but here's how we're coming back and going to become successful." (Plan B)
As likely you know, the history of Silicon Valley is full of great business people who have failed and failed again and then gone on and done great things. The unique value of the Valley's business ethic is that prior failures aren't held against business people. Typically, everone has been with a company that faiedl. Then we move on to the next gig...a lot wiser!
We can't escape from the fact that Apple, with Jobs at the helm, did a lot of things right. Any business stands to profit by at least studying the lessons of Apple's recent success. McKinsey is absolutely right, though, to point out the perils of an half-baked imitation of the corporate juggernaut, and this makes the report a welcome one.
Stochastic, Executives face a new challenge to be "like" Apple. Shareholders want to invest in companies that are quite as successful as Apple has been and they directly or indirectly pressure executives to become like Apple in sales growth and market valuation. I see one problem here and that is the fact that there isn't room in the wireless market, for instance, for many companies like Apple. The likelihood of a firm like Apple popping out again is limited.
@stochastic, it is true that Jobs did many things right to put company back to the forefront of consumer electronic but we should never forget that he also made blunders. The only difference is that last decade had everything right for Apple. One of the reason that Jobs could articulate things right was because of the sheer passion and love for the craft. We can find examples of individual excellence in other industries or sports or arts etc.
I agree that approaching the success of Apple is not about performing similar steps of the key players. You really have to look in a sober and open-minded way at your own capabilities and the capabilities of the organization in which you operate. Perhaps there are opportunities to think out of the box and launch a wildly profitable initiative.
I highly recommend a book by Guy Kawasaki called The Art of the Start. Kawasaki was "Chief Evangelist" for Apple during the launch of the iMac. The book is evidence that Apple didn't achieve success by following certain steps, but by being wedded to excellence.
Imitatating Apple is akin to watching Michael Jordan on the TV over and over again in the vain hope of being able to do a double pump backward slam. You need to have the physical attributes, the skill, the flair, the desire, the right court conditions and above all, the tens of thousands of hours of dedicated practise.
Thanks for the apt analogy. The ingredients must all be present to get the type of success Apple has had. Then, as in any any chemical reaction, the correct environment is critical and the right mix. Does your company have all these before you set out to duplicate Apple's success is the question companies need to ask.
Bolaji: one point cannot be emphasized enough: we really don't know, and never will know, all of the factors that went in to creating Apple. As you point out, there are articles, books, anecdotes and Jobs'/Cook's own words. That's just the tip of the iceberg and for anyone to profess to be "in the know" about Apple is hubris. In the wake of Jobs' death, we've glossed over some of Apple's failures (in retrospect, the 'Lisa" was too advanced for its time, rather than simply being a limited an awkward product.) Is there a lot to learn from Apple? Absolutely. Will there ever be another Apple? Nope. There may be another wildly successful consumer electronics compnay that blows the door off all preconceived notions of the market--but it won't be "Apple."
"Why shouldn't other enterprises strive to emulate such an exemplary company to similarly climb to the top of their industry segments?"
To be honest I don't think Apple has a secret formula that should follow if you want to have a successful company. In every final product we have a unique Idea so even if you copy the idea doesn't mean that will lead you to the same successful product.
If I were a CEO of today one simple lesson I would learn from Apple is the conviction that your product is going to surpass all the competition in terms of its innovative features, quality , robustness and aesthetics.
I have seen a couple of examples of such conviction in my country where , a company looked like it was doomed , when it introduced its first indigenous car, survived and won the hearts of the consumers just because of the conviction of its CEO that he had made the right product for the right market.
Prabhakar, How do you create such a product that is so compelling it leaves competitors in the dust and how do you ensure it is well marketed? What Apple has done is bring everything together and created not just an ecosystem that brings out the best products and the best marketing.
By moving to the core of the industry and offerings services that keep the system humming, a group within the electronics market has rendered irrelevant the question of ownership and control of the supply chain.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
Where are these people? Are universities properly preparing the next generation supply chain professionals? How do train your existing workforce for these new, demanding positions?
Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.
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