2. Apple: More Than a Pretty Face

Apple: More Than a Pretty Face

Consumer electronics companies need to do more than pare product lines and make cool stuff. What Apple offers is a complete ecosystem
by Sohrab Vossoughi

Gadget lovers take note: Consumer electronics (CE) companies are cutting back their product lines. Gone are the days when manufacturers created a dozen in-line products to cover every price point. Rather than spreading chips across the table, CE brands like Sony (SNE) and Samsung are following Apple's (AAPL) lead by stacking more chips on a few well-placed bets. Sony, for example, now offers just three models of ultra-slim point-and-shoot cameras in its CyberShot line. But will such paring enable Sony and others to succeed the way Apple has? Will this mean more products we love or more dross on the shelves?
Maybe you're thinking, "Not more Apple hype." But it's hard not to think of Apple as the innovator in the CE space. Apple is driving digital lifestyle on a global scale, and it's doing so in the face of economic adversity. The National Retail Federation reported that consumer spending on Black Friday dropped 3.5% compared with 2006. According to a MasterCard (MA) Spending Pulse report, sales of electronics rose just 2.7% from Thanksgiving to Dec. 24, 2007, over the same period a year earlier. Meanwhile, Apple anticipates holiday-quarter sales of $9.2 billion, a 29% increase over 2006, while the Mac operating system hit a record 8% market share in the closing days of the year. With the annual Consumer Electronics Show fast approaching, Apple is once again sure to be the talk of a trade show it doesn't even attend.
Design Alone Isn't Enough
To succeed like Apple, CE brands need to do more than create cool-looking products that are rich in features and intriguing behaviors. A cool object may be at the center of the experience, but as others have noted, surrounding a successful product like the iPod is a complete ecosystem that includes content and services, software and interfaces, retail experience, Web site experience, and an army of accessories. Imagine competing with NASA by designing a better space shuttle—but ignoring the launch pad, ground control in Houston, or the facilities at Cape Canaveral. Apple is successful because all of the elements of its ecosystem are in place—and are consistently meaningful and relevant to its target consumers.
According to the latest NPD report, Apple has secured over 70% market share for MP3 players. What's less well known, and more impressive, is the ratio of Apple's investment in the iPod platform relative to its return. Since 2004, Apple has added just one item to the iPod range, the iPod touch, making four pieces of hardware in all. In the same period, the catalog of available content (songs, TV shows, films) has increased 600%, to 4.1 million items. And—here's the pièce de résistance—the number of iPod accessories has increased tenfold, to 3,000. Apple collects fees for most, if not all, of those accessories, with third-party vendors and manufacturers paying to add the "Made for iPod" logo to a package or, in the case of connected accessories like speaker docks, a fee to use the proprietary Apple connector.
Many companies have tried to replicate Apple's success by imitating at the product level and focusing on the design of the object itself. Creative Technology has designed media players with simple geometric shapes, high-end details, and a polished look. Speaker docks from Altec, Logitech, JBL and Bose have tried to match (and keep pace with) the Apple color palette.
The makers of other music players have also used smart design to try to stand out—case in point is Microsoft's (MSFT) latest Zune media player, an inspired object with intriguing design, cool behavioral features, beautiful details, splendid packaging, and a compelling interface. A number of accessory providers have mimicked the look of Apple's fresh, uncluttered packaging. But none of this is enough.
Mind Share
Take Sony. It's an amazing company with a powerful brand. Innovative product platforms like the portable transistor radio and the Walkman set the stage for the digital lifestyle era. Yet it has struggled to transpose that success to the 21st century. In 2005 it outlined a strategy to reduce its SKU count by 20% by 2007, detailing a desire to focus on "champion" products and avoid having to battle competition on many fronts. So while four years ago, Sony offered a dizzying array of digital cameras that recorded on all kinds of media (floppies, MemorySticks, DVDs), now it has just three lines (ultra-slim, compact, SLR). That's better for consumers, most of whom don't care that Model 1 has a 2MB cache while Model 25 has 4MB. In December, 2007, CEO Howard Stringer announced that Sony's efforts were beginning to pay off. It is close to achieving a 5% net margin for 2007.
Apple ended its fiscal year on Sept. 30, 2007, with a net margin of nearly 15%. To succeed like Apple, companies need to understand more deeply the consumer they are targeting. Apple recognizes that it can't have everyone as its customer. It is willing to alienate some segments by appealing to a strong core of people that sociologists refer to as the Cultural Creatives. These are the people who wait in line overnight for the latest iPod or MacBook. Focusing on the Cultural Creatives in turn attracts followers who might not otherwise trust the brand.
Observe the next 10 people you see on the street with an iPod and ask yourself how many of them represent the Cultural Creatives featured in Apple's advertising. One, maybe two? Address your core audience. The rest will follow. That's how you sell 10 million iPods in one quarter.
In the hands of an artful company like Apple, design is the vehicle for driving meaningful, relevant experiences that are authentic to the brand. It's not about paring product lines or making cool stuff. Done right, design can add value to the bottom line and the brand. Design done right goes beyond the appearance and behavior of the object itself. It takes the entire product ecosystem into consideration. Design done right sees technology as an enabler, not the solution.
Apple creates holistic experiences that inspire strategic partners like accessory manufacturers and content providers to build up the platform. Apple understands: It's not about market share. It's about mind share.
Ziba Account Director Bob Sweet contributed to this article.
Sohrab Vossoughi is Founder and President of ZIBA Design, the company he started in 1984. The recipient of more than 30 patents and over 200 design awards, Vossoughi was named BusinessWeek's Entrepreneur of the Year in 1992. He continues to direct projects for clients including Nike, Microsoft, Xerox and Hewlett-Packard.

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My opinion/summary:
Apple is probably one of the most respected and well-known for its innovative and simple designed products. Many people like this writer have attempted to analyze the whole “Apple phenomenon.” Some people say that Apple was just opportunistic, in other terms, “lucky.” They made beautifully designed, easy to use products that appealed to the masses of a time in which people craved for something more than just a product. They wanted to converse with a company and feel like it was a part of something bigger; hence, the huge network that is involved with iTunes. They were also able to make other companies make items that were for their products, such as the iPod series. They only have four key products they offer, yet it has been an instant success thanks to Apple’s innovative thinking. In the beginning, a problem with Apple was that they had too many functions that the masses didn’t know how to use. This didn’t keep the company from developing into one of the best techno gadget offering companies. Apple has used its mistakes to make products with simple design and basic functions that many can relate to.
Many companies are now following the footsteps of Apple. They are trying to integrate this idea of coming up with that one perfect product and building an empire around that instead of making a whole bunch of products that no one is going to use. Sony, which is well-known for its easy to use techno gadgets, has always made a lot of different kinds of products. Now it has three basic lines. In 2007, Sony was very close to achieving a 5% net margin. Although Sony has been quite successful mimicking the likes of Apple, Apple is still on the top with a net margin that is close to 15%.
Apple has been successful in tapping into its target market – the Cultural Creatives. These are the people that are totally into the next “big thing.” Because of its huge success in focusing on and delivering the requests of this group, Apple has been successful in gaining the trust of the other potential users. Apple has truly been triumphant in thinking like the common user. Perhaps in the future, different users with different needs may arise. I hope that Apple will be continuously successful in analyzing its users and providing satisfactory experiences with its products every time.

Resource = http://www.businessweek.com/innovate/content/jan2008/id2008014_858681_page_2.htm

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