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.
Competence set
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.
Translation loss
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
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