Apple’s recently launched new phones, iPhone 6 and iPhone 6Plus, have received highly favorable reviews. Apple’s foray into the field of larger smart phones and phablets through these two phones, long after Samsung pioneered this segment (followed by a host of other companies), has been much appreciated. There has been no evidence that Apple has suffered any of the launch and sales blues that a late follow-on competitor in a crowded market space typically suffers. Rather, the market reception makes it appear as though the fragmented field has been only waiting for Apple to come and conquer. The new phones do not necessarily offer, in individual departments, features that are superior to those offered by other noted competitors. Yet, the verdict seems to be that the phones would be winners as a total package.
The new iPhones, accompanied also by iWatch (where too competition has been ahead of Apple in time), indicate a case of sustainable success; success that is not necessarily dependent on any single traditional sustainability factor such as first mover advantage, competitive specifications, lower price, brand loyalty. Apple’s success is often linked to its core competencies, from design elegance to supply efficiency. It is also linked to its leadership and people; the personal imprint of the late founder-CEO Steve Jobs and the current CEO Tim Cook on one hand and the expertise of functional leaders and their teams on the other. The theory on the whole is that Apple’s success is one of core competencies. This blog post examines if the phenomenon at hand lends itself to a simple competency explanation, or indicates the need for a more robust explanation.
If products and services are the bridge between organizations and markets, competencies are the driving force for products and services to be successful. The triad of customer, product (or service) and the organization is an ecosystem by itself where the boundaries and functionalities of the three elements seem to be physically defined but practically are overlapped. The collection of competencies that exist in that ecosystem defines the entry barriers and mobility barriers relating to the ecosystem. For a firm to dominate such an ecosystem, the set of competencies must be relevant and honed. There are usually limits to which an existing ecosystem can be expanded to integrate new products and services. There are also limits to which existing competencies can be honed and kept relevant. The theory of core competence needs to be revised as the theory of competence based delivery.
Structured competence set is very specific to the strategic direction. Apple has earned envy for the elegance of its product design, capabilities of its hardware and software, and for the unique formatting of its retail stores. Yet, Apple has been on a hiring spree over the last two years, bringing in some top-notch talent from related and unrelated fields. Tim Cook, the current CEO, himself has an addition for supply chain efficiency under Jobs. Angela Ahrendts, CEO of Burberry brings retail and marketing experience of a different kind to Apple. Paul Deneve, CEO of Yves Saint Laurent brings the experience of fashion and luxury goods. So does, celebrity designer, Mark Newson In terms of multi-product internal and external design elegance. Yet, it is not only a new found passion for fashion that dominates Apple’s competency diversification. Kevin Lynch, the CTO of Adobe and Ari Partinen, Nokia’s PureView technology camera guru have been inducted to add technology power to Apple.
It is one thing to bring together a set of competencies with an eye on the future, and even realize them as specific product or service attributes but it is entirely another thing to realize sustainable profits from such products and services. Sony, the electronics giant, was determined to assert itself in the smart phones business. It brought in ownership alignment by buying out Ericsson’s stake in the joint venture. Thereafter, Sony has evolved an exciting new design philosophy with its Z series smart phones and T series phablets. It has its famed camera technology with some of its highest mega pixel count. It brought in its Bravia and Triliminus display technologies. It also brought the industry pioneering dust and water-proof construction to its smart phones. It increased the renewal frequency of flagship models to twice a year compared to the annual frequency of Apple, Samsung and LG. It priced its products cheaper than competition while not pulling any stops in advertising. Like Samsung, it became a full range product provider, each with superior features.
All this has been to no avail. At a time when Apple continues its smart phone dominance even with limited products and late stage diversification Sony has admitted to huge losses in its well updated and widely diversified smart phone business. Clearly, the whole of Sony’s formidable competencies has been lower than the sum of its parts. High competencies can create outstanding products and services but they may encounter either fusion inertia or translation loss as the firm aspires for commercial success. This is by no means confined to electronics. IT majors that set up consultancy verticals with highly competent business professionals have found it difficult to drive into such new businesses. FMCG companies which diversified into water purification products failed to compete with the established water purification giants such as Kent and Aquaguard despite the formidable brand power and retail network reach that the FMCG companies have. More than an assembly of competencies, alchemy of competencies could be a sustainability driver.
Alchemy versus assembly
In the physical world of management, assembly of competences is just an assembly of functions, with divergences reduced and alignments enhanced by cross-functional collaboration. To achieve sustainable success with industry pioneering or industry dominating features, organizations require alchemy of competencies. Alchemy, in a medieval sense, related to a form of chemistry pursued in the middle ages which tried to discover methods to change ordinary metals into gold. In a more modern sense, however, alchemy reflects a mysterious power that can change things or provide exceptional longevity. Addition of new people competencies certainly helps firms develop new products and services. Without hiring of Sumatran and Pawan, with their experiences of international automotive development, Tata Motors and Mahindra & Mahindra would not have been able to diversify into passenger cars and utility vehicles as they had been able to. That said, such successes have not been sustainable and repetitive leading to a question as to whether more than assembly of competencies is involved in sustainable success.
The concept of alchemy becomes relevant in the perspective. One hears of teams that tick; like the Indian cricket teams that won laurels in the World Cups, from 1983 onwards. One also hears of dream teams that deliver beyond expectations; many Hollywood blockbusters are shaped by dream teams. Such teams are shaped by alchemy. Alchemy in an organizational sense is neither mysterious or mystique; it represents complete emotional and professional bonding between members that ensures an ecosystem of creative ideas, open conversations, considered discussions and aligned executions. Teams empowered by alchemy continuously examine how the existing competencies are reinforced by the new competencies and vice versa. Alchemy is about everyone, and not the just new ones. It is not about one’s capability alone but everyone’s mutually fortified. As the examples of induction of new capabilities and the development of dream teams demonstrate, alchemy needs more than just those two elements.
Principles of alchemy
The challenge, therefore, is retaining alchemy in organizations as an all time phenomenon, irrespective of who comes and leaves. This blog post suggests a few principles of organizational alchemy. The first is organizational refresh. Staid organizations can produce only average solutions. By addition of new talent or upgrading of existing talent, organizations must refresh themselves constantly. The second is continuous collaboration. Typically organizations focus on collaboration based on projects. The more complex and more cross-functional or cross-border a project the more is the exhortation for collaboration. In organizational alchemy, collaboration has to be perpetual. It is neither issue based nor project based; it is a way of life. The fourth is technological flair. Alchemist organizations have the ability to create technological solutions to human problems; generating a satisfaction of pushing the horizon. Everyone in the organization understands technology even though only the defined ones may practice it.
The fourth principle is to look beyond the ordinary. The miraculous power to transform gets harnessed only when extraordinary goals are set. Alchemist organizations believe in growth as a way of life. The final principle, that also enables the prior principles, is organizational chemistry. Personal chemistry works usually bilaterally or at best in limited teams. Organizational chemistry wherein every member of the organization is emotionally and professionally bonded is the essential element of alchemy. As Apple embarks on a new journey transforming Apple as a life companion with a slew of new products such as watches, wearable computers and health devices to supplement its smart phones, tablets, laptops and desktops, and as it inducts new talent from related and unrelated fields, the watch will be on if Apple would be the one company that moves from assembly of competencies to alchemy of competencies. Apple would be an interesting iWatch for students of management and leadership in times to come.
Posted by Dr CB Rao on September 21, 2014