Saturday, June 11, 2016

Apple's Blue Ocean

The Blue Ocean Strategy article does a great job of explaining one of the strategies for a successful business. By focusing on an existing market, blue oceans are created based on demand of a certain service or feature within that market. The article looks at automobiles, computers, and movie theaters as examples of red and blue oceans. Being that we're in a very mobile world these days, it reminded me of when Apple first introduced the iPhone.

The red ocean included brands such as PalmOS, Windows CE, and Blackberry OS. After Apple announced the iPhone with iOS, they were able to create a blue ocean for smartphones. Nowadays, Android and iOS control the smartphone market share. Apple's iOS was a blue ocean because it made an unattractive sector into one that you can't live without. Only a small percentage of people had smartphones in 2006. Only 64 million smartphone were shipped globally that year (http://www.canalys.com/newsroom/64-million-smart-phones-shipped-worldwide-2006). Compared to 1.44 billion smartphones shipped in 2015 (http://9to5mac.com/2016/01/28/iphone-global-shipments-marketshare/), the growth of the market has been astronomical.

"Incumbents often create blue oceans". For Apple, that doesn't seem to be the case. They had no previous smartphones or iOS related operating system until the release of the iPhone. This is what made Apple so special. Their innovations were to make existing products better and more usable, rather than to invent something brand new. As the article pointed out, the Apple computer was a blue ocean created based on its all-in-one simplified user interface. For the iPhone, Apple defined their own characteristics. While other smartphone manufacturers complied with mobile carrier demands, Apple only worked with one carrier wiling to change their infrastructure. AT&T allowed Apple to institute a different method for voice mails. Each message was saved and the user can select the voicemail they wanted to listen to. Users had the ability to skip messages. Apple didn't play by "traditional rules". Apple also made the competition irrelevant. From 2005, Windows CE, PalmOS, and Blackberry had control of the smartphone market share. Nowadays, they have become irrelevant or disappeared completely.

Apple phones are expensive. They have a higher reseller value than competing smart phones. Apple has created demand for their phones while justifying their high costs. The value/cost trade-off is in Apple's favor (http://www.techarp.com/articles/why-apple-iphones-are-so-expensive/).
From the article, the imperatives for a blue ocean strategy has been met by Apple in their launch of the iPhone. When looking at previous Apple innovations, many also meet the blue ocean strategy imperatives. This is one of the most important reasons why people are wiling to pay a premium for Apple products.

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