Disrupting Apple’s Tao

on June 22, 2014
Reading Time: 7 minutes

Clay Christensen’s Disruption Theory has been subjected to severe criticism this past week. If one’s aim is to criticize the predictive power of disruption theory, one of the best ways to do it is to point out Clay Christensen has consistently been wrong about Apple.

Christensen’s Apple Predictions

— In a January 2006 interview with Businessweek, Christensen predicted the imminent demise of the iPod. ((“During the early stages of an industry, when the functionality and reliability of a product isn’t yet adequate to meet customer’s needs, a proprietary solution is almost always the right solution — because it allows you to knit all the pieces together in an optimized way.”

“But once the technology matures and becomes good enough, industry standards emerge. That leads to the standardization of interfaces, which lets companies specialize on pieces of the overall system, and the product becomes modular. At that point, the competitive advantage of the early leader dissipates, and the ability to make money migrates to whoever controls the performance-defining subsystem.” ~ What Clayton Christensen Got Wrong)) Didn’t happen.

— In a June 2007 interview, again with Businessweek, Christensen reiterated the iPod was doomed and further predicted the iPhone would not be successful. ((The iPhone is a sustaining technology relative to Nokia. In other words, Apple is leaping ahead on the sustaining curve [by building a better phone]. But the prediction of the theory would be Apple won’t succeed with the iPhone. They’ve launched an innovation that the existing players in the industry are heavily motivated to beat: It’s not [truly] disruptive. History speaks pretty loudly on that, that the probability of success is going to be limited. ~ What Clayton Christensen Got Wrong)) REALLY didn’t happen.

— In a May 2012 episode of the Critical Path with Horace Dediu, Christensen again announced his pessimism about the iPhone. ((Christensen’s second concern is that although integrated approaches in technology can be quite successful for a period, in the end modular approaches to technology always defeat integrated approaches. Christensen said:

“The transition from proprietary architecture to open modular architecture just happens over and over again. It happened in the personal computer. Although it didn’t kill Apple’s computer business, it relegated Apple to the status of a minor player. The iPod is a proprietary integrated product, although that is becoming quite modular. You can download your music from Amazon as easily as you can from iTunes. You also see modularity organized around the Android operating system that is growing much faster than the iPhone. So I worry that modularity will do its work on Apple.” ~ What Clayton Christensen Got Wrong)) Really, really, really didn’t happen.

So, Is Disruption Theory Wrong Or Is Apple The Exception That Proves The Rule?

Well kinda sorta both. As I discussed yesterday in Disruption Corruption: What Disruption Theory Is And What It Isn’t, when Christensen created Low-End Disruption Theory (as opposed to his other theory: New Market Disruption) he may have focused a bit too much on business buyers and not enough on consumers. Business buyers tend to make cold, hard, rational decisions that over value cost cutting and devalue the end user experience. Consumers tend to make warm, soft, emotional decisions that under value long term costs and over value experience. As I put it yesterday:

We never desire strongly, what we desire rationally. ~ Francois De La Rochefoucauld’s

The PC Was Made For Businesses. The iPhone And iPad Were Made To Be Loved

The old, pre-Nadella Microsoft wouldn’t have know a warm fuzzy emotion if it had smacked them in the face. And when IT departments were the primary consumers of PCs, this served Microsoft well. As Microsoft’s near 95% market share attested, Microsoft was the near ideal company to make a product that appealed to the sensibilities of IT departments. Nearly everything about the PC played to Microsoft’s strengths.

However, as PCs became smaller with the introduction of notebooks and then became WAY smaller with the introduction of phones, Apple’s design strengths became more and more important. First, consumers purchased iPods from Apple, then they purchased iPhones from Apple, and then they started to insist the computer equipment they used at work be as good as the computer equipment they owned at home. IT departments — Microsoft’s unassailable bastion — were blindsided and the Bring-Your-Own-Device (BYOD) movement wrested power away from IT and put it in the hands of the less rational, less penny-pinching, more emotional, end user.

If Microsoft was the ideal company to sell PCs to IT departments, then Apple may have been the ideal company to appeal to the sensibilities of consumers. Why? Because Apple prioritized the end user experience above all else.

The Innovator’s Dilemma

If you’ve heard this story before, don’t stop me, because I’d like to hear it again. ~ Groucho Marx

Let’s recap. Disruption theory eloquently explained why great companies that worked hard to serve their best customers ended up over serving — and over charging — the vast majority of the remainder of their customer base, thus making it possible for challengers to steal those customers away with products that seemed to be only “good enough” but which were, in reality, great in some way that really mattered.

The incumbent is faced with a dilemma – an unsolvable problem, as it were. If they maximize product benefits for their best customers and maximize product profits — which after all, is their job — they lose in the long run as hungry startups steal their low-level customers and, eventually, their mid-level customers with disruptive “good enough” products.

(A) strategy that seeks to maximize revenue and profits – i.e. the sort of strategy at which Ballmer excelled – necessarily precludes the creation of significant new products. ~ Ben Thompson

The Innovator’s Impossible Solution

There is always an easy solution to every human problem—-neat, plausible, and wrong. ~ H. L. Mencken

The innovator’s solution is unbelievably simple and simply unbelievable:

      1) Invent the future…before your existing competitors — and the competitors that don’t yet exist — do; and

2) Prioritize future profits over current profits.

Even if it were possible to predict the unpredictable and create a disruptive product within one’s own company, it’s tantamount to committing suicide to do so. I mean, what’s the point? Who wants to create a disruptive product that destroys the profits of an existing cash cow and replaces it with a seemingly inferior product that doesn’t generate nearly as much profit as the old, highly respected and highly valued product did? That’s just crazy talk.

The Innovator’s Dilemma, Redux

And that’s why it’s a dilemma — there are simply no good solutions, only choices between equally bad alternatives.

Doodle yin-yang symbol

Steve Jobs’ Attempt To Resolve The Innovator’s Dilemma

Do not go where the path may lead, go instead where there is no path and leave a trail. ~ Ralph Waldo Emerson

In order to overcome the Innovator’s Dilemma, Steve Jobs created a radically new way to run a company, structuring it entirely differently than any large company of the 20th century. Apple put the customer at the center of their business. Profit is viewed as necessary, but not sufficient.

We believe that we’re on the face of the Earth to make great products, and that’s not changing. ~ Tim Cook

Apple’s primary objective is to make a great product, to build the best, to delight the customer and provide a great experience. Apple reinvents existing markets by making the user experience easier, richer, and more pleasant. Each time, they begin at the beginning and start with the user’s experience first, then drive back through their infrastructure to make that a reality.

You know, we want to really enrich people’s lives ~ Tim Cook

Apple absorbs the complexity and presents the simplicity. They’re obsessed with details and sweat the small stuff so the customer doesn’t have to.

We try to make tools for people that enable them to do things that they couldn’t without the tool. But we want them to not have to be preoccupied with the tool. – Jony Ive

If it disappears, we know we’ve done it. ~ Craig Federighi

The Expected Result: Fanatical Customer Loyalty

Apple_Yin Yang_1

If user experience is Apple’s number one priority, it should come as no surprise Apple generates fanatical customer loyalty.

Innovation

Design is where Apple products start,” writes Lashinsky. “Competitors marvel at the point of prominence Apple’s industrial designers have. ‘Most companies make all their plans, all their marketing, all their positioning, and then they kind of hand it down to a designer,’ said Yves Behar, CEO of the design consultancy Fuseproject. The process is reversed at Apple, where everyone else in the organization needs to conform to the designer’s vision. ‘If the designers say the material has to have integrity, the whole organization says okay,’ said Behar. In other words, a designer typically would be told what to do and say by the folks in manufacturing. At Apple it works the other way around.”

Fanatical Customer Loyalty

A satisfied customer is the best business strategy of all. ~ Michael LeBoeuf

Apple’s customers love Apple. For some reason this baffles Apple’s critics. Apple’s critics are always referring to the ‘cult’ of Apple, or to Steve Jobs’ ‘reality distortion field’ or to Apple’s marketing prowess as if Apple has some mystical, Svengali-like power over their customers.

Worship

Why fall back upon supernatural explanations when the natural explanation so obviously explains the phenomenon?

If Apple’s first priority is the user experience, then OF COURSE Apple’s customers are going to be loyal to Apple. It’s not an enigma or some great mystery. Just the opposite. Apple’s high customer loyalty numbers are the logical and all-too-obvious result of Apple’s policies and priorities. Apple puts the customer first. Customers respond in kind. It’s that simple.

Appreciation is a wonderful thing: It makes what is excellent in others belong to us as well. ~ Voltaire

So What Does All This Have To Do With Disruption Theory Anyway?

Let’s re-review how Low-End Disruption is supposed to work.

(A)n integrated approach wins at the beginning of a new market, because it produces a superior product that customers are willing to pay for. However, as a product category matures, even modular products become “good enough” – customers may know that the integrated product has superior features or specs, but they aren’t willing to pay more, and thus the low-priced providers, who build a product from parts with prices ground down by competition, come to own the market. ~ Ben Thompson

Here’s why low-end disruption doesn’t seem to apply to Apple. Christensen was right when he said people aren’t willing to pay more for superior features or specs they don’t need. But consumers ALWAYS want and need a superior experience. And many of them are willing to pay top dollar to get it.

Conclusion

One of Clay Christensen’s great insights was that a business can OVER SERVE the vast majority of their customer base without even knowing they’re doing it. While over serving sounds like a great idea in theory, in practice it leads to massive disaffection as customers are made to pay for products and services they simply don’t want or need.

But here’s the thing — and this is the crux of the matter — while it is all too easy for a company to provide their customers with too many frivolous and unnecessary features and specs, it is impossible to over provide a great experience.

[pullquote]A company can not over serve their customers by providing them with too superior a customer experience[/pullquote]

Let me say that again. A company can not over serve their customers by providing them with too superior a customer experience. Too much is simply not enough. And since Apple is laser focused on providing the customer with a superior experience, the customer is not over served and Apple can not fall prey to Low-End Disruption.

Think of it as a game of Rock, Paper, Scissors. New integrated solutions beat old modular solutions. New modular solutions beat old integrated solutions. But superior customer experience beats new modular solutions. The theory is easy. It’s the execution of the theory that’s hard.

Excellence is never an accident. It is always the result of high intention, sincere effort, and intelligent execution; it represents the wise choice of many alternatives – choice, not chance, determines your destiny. ~ Aristotle