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A summary of Gary Hamel’s analysis of the secrets of Apple Inc.’s success March 9, 2010

Posted by Alan Yu in Management.
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In two blog entries in the Wall Street Journal over the past couple of weeks, management guru Gary Hamel has taken a stab at analysing the success of Apple Inc.  You can find Part I here, and Part II here

He begins by going through a set of surprising statistics about Apple: 

          It’s the market leader in computers costing more than $1,000 – in one month, its share in this segment exceeds 90%

          It makes more money from its 3% share of global handsets than Nokia makes from more than 30%

          It’s the world’s largest music retailer

          Its stores generate four times more revenue per square foot than big box competitors; with its store on Fifth Avenue, New York, being the most profitable retail outlet in the world

          Its market value is three and a half times that of Nokia, and more than 60% higher than Hewlett-Packard’s, which has three times Apple’s revenue 

He runs through a laundry list of strategies to which many would attribute Apple’s success: 

          Heavy focus on design

          Fusion of hardware and software

          Integrating a broad array of complementary technologies

          Captivating customers with great end-to-end user experience

          Harnessing the talent of independent software developers

          Leveraging core competencies into new markets – Steve Jobs describes Apple as the world’s large “mobile devices company” 

But, Hamel argues, while the above list is logical, it is also unsatisfying, as it reveals the “how” but not the “why”. 

With a disclaimer that he has neither spoken to Apple’s senior executives, nor done thorough research into the company, Hamel offers “unstinting devotion to a particular set of values” as the secret behind Apple’s success.  According to him, these values are “as rare as a rose in winter” among Fortune 500 companies: 

Being passionate – although Apple doesn’t always pioneer a new product category, it always sets out to radically redefine a category with a distinctive product or business model. 

Aiming to surprise – the company’s penchant for pre-launch secrecy is simply the way you produce the same sort of gee-whiz delight that any parent aims for on Christmas morning. 

Being unreasonable – Apple regularly challenges itself to do the impossible, producing products that are as sexy as Ferraris and as practical as Hyundais, and its lean and agile supply chain gives nothing away to Wal-Mart or IKEA.

Innovating incessantly and pervasively – innovation infuses everything Apple does, in products, services and business models. 

Sweating the details – “it just works” because hundreds of people sweat the details. 

Thinking like an engineer, feeling like an artist – a company can’t produce beautiful products if the bean counters win every argument: Apple’s executives know that something lovely and sleek and unexpected can provoke a visceral reaction in a customer – a reaction that may not be easy to quantify but can nevertheless be monetised.

To the above, I would personally add: meticulously making the look and feel "hang together".

Of course, Apple also has its flaws.  According to Hamel, Jobs is said to be “an egomaniacal control freak” and it has "all the monopolistic tendencies of its competitors".  “Apple will one day fall prey to the same sort of arrogance, nostalgia and denial that has destroyed other once-venerated companies”, Hamel concludes.  But for him the case of Apple “is just a convenient and plausible vehicle for driving home a fundamental truth: you can’t improve a company’s performance without improving its values”.

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