In this week’s reading article “Reinventing your Business Model” by Johnson, Christenson, and Kagermann, the first and arguably the most important principle highlighted was Customer Value Proposition (CVP), which was described as a “model that helps customers perform a specific ‘job’ that alternative offerings don’t address”. According to the authors, a successfully reinvented business model revolves around a good product that answers to the needs and desire of customers. Such a product will undoubtedly sell well, albeit at the appropriate price point. Of course, whether or not it will generate the desired amounts of profits for the company depends on its profit formula. In addition, there is another important aspect – key resources and processes – that defines if the product can meet supply demands with a certain level of product quality.
The Apple iPhone needs no product introduction. Before we even drill down to the details, it is undeniable that the iPhone is widely accepted by many analysts as a successfully reinvented product based simply on the revenue and sales figures alone. Yet, if one bothers to dig deeper into the issue, one would begin to ponder if the iPhone’s success was owed indeed to a superior product or an expensive but effective marketing strategy by Apple?
According to Apple’s first official iPhone press release on Jan 9, 2007, the iPhone’s killer features are:
1. Big touchscreen for greater usability.
2. Widescreen iPod for enhanced multimedia functions.
3. Wi-Fi and Edge capabilities for ready Internet access.
4. Accelerometer that automatically customize user experience and extend battery life.
5. 2MP Camera for photo-taking capabilities.
6. Good pricing and availability.
In terms of CVP, the iPhone was not the only product to offer these features. In fact, the Eten Glofiish X500 smartphone, which was introduced a year earlier than the iPhone, had mostly similar and even some better features such as GPS support! As such, it would be inconclusive to state that iPhone fulfilled this principle. The only areas where the iPhone were significantly better than its competitors were in the area of storage capacity and integration with its music retail service – iTunes.
In the area of pricing and availability, the iPhone was priced rather well in the smartphone category. It was not the cheapest, but neither was it the most expensive. As a result of Apple’s good pricing strategy, sale volumes were higher than expected. In fact, Apple had great difficulties meeting the level of demands for its iPhone, iPhone 3G and iPhone 3GS models. The key problems were shortage of parts such as CPUs. Thus, while Apple has done well in its profit formula, the same could not be said for its key resources and processes.
Having analyzed the four principles of the reading article, we have seen that Apple truly succeeded in only one of them – profit formula. Yet, why do people still pursue such a technologically-average product with long stock-out periods? Clearly, it was due to Apple’s strong marketing efforts. The iPhone was perceived by the general public to be a technologically superior product, even though it was not. In fact, it had a short one-day battery life, and there was no way to remove and pop in a standby battery! It was merely able to contain more songs and videos, and was linked to their iTunes media library. At that time, the iPhone App Store was still premature, with limited useful apps and games available. Yet, people were willing to bear the wait for it.
The true potential of the iPhone was unleashed when the apps scene took off. In this respect, Apple foresaw this and poured in large amounts of capital to jumpstart this new engine. In fact, the Apps Store was the real invention; not the iPhone itself. Thus, by integrating and marketing the various components (i.e. iPhone, iTunes and App Store) together, Apple was able to achieve overall success. Would the iPhone succeed if it was marketed by itself? I highly doubt so.