Beyond Basketballs

What We Can Learn From Apple's Spectacular Success

February, 2011 - Vol 1, Issue 2

"Entrepreneurs looking for dramatic growth can learn an important lesson from the success of Apple. The company's record $6 billion quarterly profit is not just an amazing success story, it points the way for entrepreneurs who want to compete and thrive in today's competitive global marketplace. Apple's success is based on its adoption in 1998 of a relationship-first business model, an approach fully explained in my new book Beyond Basketballs. To get you started, I've written a detailed article about how Apple used this model to become one of the biggest companies in the world, and how you can use their approach to achieve greater success for your company in the 21st Century. "

"Back in 1998, less than a year after Steve Jobs returned to Apple Inc. as CEO, the company reported a first quarter loss of $120 million on revenues of $1.6 billion. The company had sold 635,000 computers, and its share price was hovering around $18 a share (US). When these results were announced, it appeared that Apple was headed for bankruptcy even though many consumers considered the Mac to be the best computer on the market.

Fast forward 13 years. In January 2011, Apple announces a record $6 billion quarterly profit on revenues of more than $26 billion. During the quarter, Apple Inc. sold 7.33 million iPads, 16.24 million iPhones, 19.45 million iPods, and 4.13 million Mac computers. Not to mention, sales of music, movies, TV shows, and iApps at the iTunes online store of $1.1 billion. The share price?: About $345.

Apple’s resurrection has been spectacular. It is now one of the biggest companies in the world, and in spite of Steve Job’s health problems, its future prospects are bright indeed. The question is: What can entrepreneurs and business people learn from Apple that they can apply to their own businesses?

You could say Apple’s success demonstrates the importance of creativity and innovation: That companies should put more resources into research and development and that they should invent new products and services. All of these bromides are true, true, true, but they miss the most important lesson we can learn from Apple.

When Jobs returned to the company in 1997, it was headed for dissolution, even though it had great computers and a loyal customer base, albeit representing a mere 2% share of the PC market. And yet within 13 years, it became one of the biggest companies in the world. So what happened? Did the people at Apple suddenly get a lot smarter, or more creative? Did they work harder and become more productive? Maybe, but the turnaround really happened because they made a revolutionary, yet simple shift in their mindset and business model. They shifted from what I call The Product-First Trap to The Relationship-First Formula, conceptual terminology I introduced in 1999 in my book The Strategic Enterprise, now re-released in January 2011 in a new updated edition re-titled Beyond Basketballs: The New Revolutionary Way To Build A Successful Business in A Post-Product World.

Unbeknownst to me in 1999, Apple was applying the same principles I was writing about in the same year. They were making the transformation from a company focused on a particular product or service (in their case, computers) to a company committed to growing relationships with their customers by providing a steady stream of new value components (computers, plus, plus, plus).

To state simply, Apple is a powerhouse today not because they are smarter or more creative than the competition, they are successful today because they adopted a completely different attitude towards their business. They even changed their name from Apple Computer Inc. (product-focus) to Apple Inc. (relationship-focus).

By adopting in 1999 a post-product attitude (shifting from computers-only), the people at Apple made a quantum leap in creative freedom and expression. They no longer had to limit their thinking to making a better computer, they could now think about what else their customers might want or need. Suddenly they gave themselves permission to create and sell new things that didn’t look like a computer such as the iPod (2001), the iTunes store (2003), the iPhone (2007) and the iPad (2010).

With this new relationship-first mindset, Apple could venture into new industries (consumer electronics, music, tele-communications, movies, and television) without any sense of shame or hesitation. While the players in these industries decried their new competitor, consumers had no qualms about it. When Apple introduced the iPhone, consumers loved it. They didn’t care that Apple wasn’t a traditional phone company, the same way they didn’t care that Apple wasn’t a traditional music company when they downloaded their first song from iTunes. The customers didn’t say “Hey what are you doing?” They said “Thank you. Here is my credit card number.”

You see, you can learn the most from the success of Apple if you honestly look at your own mindset. You need to ask yourself if you are product-first. Is your mind stuck on a particular type of product or service? Are you caught inside the narrow constraints of a particular industry? If so, you are doing yourself and your customers a disservice. By limiting yourself to a particular type of product/service, or a particular industry definition, you are limiting the value you could provide to your customers. You are also in danger of going out of the business. (Imagine where Apple would be today if they had continued to focus solely on computers.)

You would also be doing a disservice to your country. While the product-first economy is experiencing the worst recession since the 1930s, there is no recession in the relationship-first economy, demonstrated by Apple’s recent financial results. Let me say that again: In the middle of a recession, Apple is experiencing record growth. Why? Because they are using a relationship-first model.

Ironically, Apple’s relationship-first approach, which has led to all of their amazing innovations that go beyond the bounds of the computer industry, have nonetheless dramatically increased the sales of their computers (4.13 million computers sold in 1998 vs. 638,000 sold in 1998). In other words, by expanding the development of products and services outside their traditional industry, they have actually increased the sales of their traditional product.

So how can you change from a product-first company to a relationship-first company? Start by choosing a particular type of customer, and make that type of person the central focus of your company. For example, if have a financial service company, you could pick Business Owners as your customer type. You would then say: “We are no longer in the financial services industry, we are in the industry of helping business owners. Then you would say: “Well we already have financial products and services, what else could we do? What other value components could we provide?” By giving yourself the freedom to think that way, you will likely come up with all kinds of products and services that your customers would want that are not normally provided by a financial services company. But remember, your customers won’t say: “Hey what are you doing that for?” They will more likely say: “Thank you. Here is my credit card number.”

At first, this type of thinking is very threatening to people because it takes them out of their comfort zone. “We don’t know how to do these new things,” they say. That’s all true and understandable, but it can’t be used as an excuse for inaction. Apple didn’t know much about the music industry when they first thought up iTunes. But they put their mind to it, and figured it out. The fact is: Most product-first companies today are struggling. They have too many competitors and their market is saturated. The relationship-first shift is not only an opportunity, it is frankly an imperative for survival.

Consider Microsoft. Now, Microsoft is in no danger of going bankrupt, but the company has not grown like Apple over the past decade. While Apple’s share price has gone up almost 2,000%, Microsoft’s share price has gone up 0%. Why? Because Microsoft is caught in the product-first trap. They think of themselves as a software company, so if it doesn’t look like software, they aren’t interested in it. That’s why Microsoft has not made a successful leap into other industry segments, such as the music, telephone, or consumer electronics business. It’s not because they are less smart or less creative than Apple, it is simply because they have been using the wrong mindset.

So don’t make the same mistake. Stop thinking product-first, and start thinking relationship-first. You might end up making a lot more money.

If you found this article useful, pass it on.

In today’s economy, we need all the BIG Ideas we can get."

Bill Bishop
February 1, 2011
The concepts presented in this article are
more fully articulated in
Bill Bishop’s newest book Beyond Basketballs. 

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