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Apple's Ecosystem: A Sustainable Model for Innovation

10/6/2011 --

Iconic CEO Steve Jobs was a "global brand for innovation," says Ross professor.

ANN ARBOR, Mich.—Few modern-day executives embody the spirit of their company like Apple Inc.'s Steve Jobs. Under his leadership, Apple revolutionized personal computing, music, telecommunications, and even retail.The iconic leader's death Oct. 5 comes just weeks after he stepped down as CEO, leaving Timothy Cook, who ran Apple in the past while Jobs was on sick leave, to run the day-to-day business. While some are concerned for the company's future without serial innovator Jobs at the reins, Ross professor M.S. Krishnan expects Apple to endure. The popular image of Apple's success is that of Jobs introducing the latest gadget. But Apple's real strength is its growing ecosystem of partners, application developers, and content providers, says Krishnan, the Joseph Handleman Professor of Information Systems and Innovation, and faculty director, India Initiatives. And he's confident that ecosystem is getting stronger.

How would you describe Steve Jobs' legacy?

Krishnan: Unbelievable. He was unique and always broke the convention. His approach was that you can't assume customers know what they want. So you have to understand that completely and take educated guesses. He was into risk-taking and coming out with products designed to enhance the customer experience. Right from his Macintosh days, he always took the alternate route. Sometimes it didn't work, but many times it was a phenomenal success. I can't think of anybody else who has transformed multiple industries — computers, music, telecommunications, and with the iPad the media and publishing industry. That's going on right now and already is changing the rules of the game for publishing.

When you think of how many industries he revolutionized, even film with Pixar, would you put him on the level of a Henry Ford or Walt Disney?

Krishnan: Certainly he was different. Henry Ford and Walt Disney were known for one theme. They did it so well, and it was transformative. What's different about Steve Jobs was this continuous innovation — coming out with the next big thing and never being satisfied with what he had. Many people would have taken the phenomenal success of the iPod as an accolade and a badge to wear. But he didn't because Apple moved on to the iPhone, then the new iPhone, then the iPad. In a way, Steve Jobs was a global brand for innovation.

One commentator said Jobs' strength is that he knows now what people want three years in the future. He also was somebody who did not place a lot of faith in market research. How did he do that? What was his process?

Krishnan: Typically, companies start with market research for any new product, and do surveys and focus groups to learn from that. He said he didn't do that. In fact, when one Apple product was introduced, Jobs was asked what market research he did, and he said, "none." But he meant not market research in the traditional way. He did spend a lot of time deeply understanding the customers. For example, think about the other industry the company revolutionized — retail, with the Apple stores. The sales per square foot are among the highest. At Apple, they deeply understood the experience of buying; what a customer goes through; how you can make it easier for them, and at the same time use it as a platform for branding and learning through customer interactions. Jobs didn't do market research the traditional way, but of course he had a gift for seeing things. That was unique to him. He also had a unique way of deeply understanding customers, in terms of what works and what may not work.

Is that something that can be institutionalized at Apple?

Krishnan: Usually, organizations are much bigger than individuals. But there are some exceptions. It remains to be seen how they will cope. My own take is that he'd been there long enough and he'd been working with a team of leaders long enough that they understand how he functioned. They certainly will do that as long as they stick together as the same group and take that culture forward. A couple of things are in Apple's favor for continuing this momentum without Jobs as CEO. First is the long product cycle. They're already working on products that will launch two to three years down the road. Second, they have evolved not only products, but an ecosystem. That ecosystem is powerful because an iPhone or iPad is not just a product by itself. It is an experience ecosystem of partners and suppliers, products as devices, application developers, and content providers to serve each of us as unique customers. That ecosystem is getting very powerful right now, and that concept will help Apple carry forward. Certainly the new executives have to work out how to continue the brilliance of having good ideas. But Apple has a lot of gas in the tank. When you think of the iCloud they've announced recently, that's about building the experience around one customer at a time. It enables you to take what you want and put it on your device so you have the same experience no matter what device you may be using or where you are. They're adding to this ecosystem, building more experience, adding more features, and at the same time making it easier for you and me. That will make them sticky. It's not about episodic products anymore. In fact, Apple is one of the best examples of ecosystem innovation. If it were just product rollouts, then you would question whether they can continue this momentum. But they're intelligently adding to this ecosystem, and that makes Apple more likely to stick around at the top.

From a strategic standpoint, what should new CEO Tim Cook's first 100 days look like?

Krishnan: I would continue doing as is. He had run the company when Steve Jobs was out on medical leave, and they have a process in place. I hear he is a great operations guy. He's meticulous in planning and execution. The place where they will miss Jobs is if you think about a product five years from now, what could it be? That's where they need to get right the process of learning how to think the way they did before. That's the place I'd put attention on, to make sure they keep that capability. Other than that, continue as they were.

How do you think Apple'ís competitors will react to this?

Krishnan: I think it may give competitors a little opening — companies like Google, RIM, and Nokia. Not to say Apple won't deliver the same kind of innovation, but some people will have the perception that they should look at the company's products more critically. That means competitors' products might get a better look. There might be a slight pullback among some people who have said before, "I need to have this Apple product and that's it." Some may have slight doubt because of the aura this iconic person has. That's what Apple might have to manage. People may look at the next product that is announced with different expectations. Right now very interesting stuff is happening in the ecosystem space, such as Google's acquisition of Motorola's mobile business. A lot of acquisitions and trading have been going on in the last few months in the wireless and mobile space. Mobile and tablet technology will fundamentally alter every industry. Mobile platforms are going to be a critical piece in creating value, and it's just now accelerating.

How about Apple's long-term future? Should the company eventually bring in another visionary to lead it, or at least its product development?

Krishnan: I don't think you can bring in someone like that. It's very difficult to find another Steve Jobs. Try to create capability inside the company for doing that, rather than looking for another Steve Jobs.

-Terry Kosdrosky

For more information, contact:
Bernie DeGroat, (734) 647-1847,