Steve Jobs is a modern day, corporate equivalent of Ghengis Khan, and Apple was his horde. This is the story of how he did it.
If I asked you what business Avis or Budget were in you would probably say car rental. Although this is true it is not the most effective way to think of these companies. A far more profitable way to think about them is as mass producers of second-hand cars.
Most entrepreneurs and executives would have also answered car rental. That answer is driven by the obvious revenue source – rental payments for the use of the cars.
A deeper analysis leads to a second major revenue source and that is the disposal of the cars at the end of their useful life. The residual value of these assets turns out to be an important factor in the profitability of car rental companies. The actual details have been covered in an earlier article.
To see that insight shifts are not a one off phenomenon think about newspapers. If I were to ask you what business newspapers are in you might answer the provision of news to the buyers of these publications.
This answer is not unreasonable since if we follow the revenue stream we see that people pay for these publications, generating revenue for the media company, so that they may consume the news in the publications. But a clue as to whether this view is an effective one is to consider how much people pay for each issue. Whether it is the Wall Street Journal in New York, the Financial Times in London or The National in the Emirates each issue sells for at most a few dirhams. Can that alone cover costs?
With the media it is easier for the layperson to discern the main alternative revenue source — advertising. Once we understand that newspapers are simply delivery channels for advertising copy it becomes easier to develop successful business strategies.
Defining target audience for newspapers becomes a simple exercise of understanding the target audience of the advertisers. From that you can reverse engineer what content is necessary to deliver so as to attract this demographic. The mistake that far too many fledgling media outlets make is to define their target audience without reference to the needs of their major clients, the advertisers.
Car rental firms and media companies started off with a business model consistent with their actual business. Over time the realities of the business created slight shifts in interpretation of the business model that nevertheless led to massive potential profits.
The question becomes can companies proactively use these subtle differences in interpretation of business models to their advantage? I think that the answer is yes and that the greatest example is Apple who used it to devastating effect.
Many view Apple as an exciting company that innovates every year. Personally I find this hard to believe as creativity cannot be produced in a consistent manner. What I believe happened is that a genius tried to provide the world with the best product and when he failed, and he failed hard, he spent years understanding why and developing a master strategy that we have seen unfolding over the past many years.
I am of course speaking of Steve Jobs. The Mac in the mid-80s was a far superior product than Microsoft’s operating systems running on a PC in the mid-90s. Jobs the young entrepreneur probably believed that producing the best product would result in success. His disappointment at the failure of the strategy must have been bitter.
It is not hard to imagine Jobs spending a decade analysing what happened, trying to understand how Microsoft and the PC dominated the market. Could it be that he came to the conclusion that the key to Microsoft’s success was that a high demand platform was used to sell a low quality product?
I believe that Steve Jobs took this model one step further and decided to use innovative products to penetrate open markets and then use this penetration to deliver great products and services that circumvented competitive barriers.
The first iPods were expensive, but competed with the MP3 player market, not very lucrative. This certainly had nothing to do with telecommunications or music production. Were Nokia, Samsung, Sony or Warner scared? They probably did not even notice. Certainly Microsoft did not pay attention.
But once Apple created their distribution platform, they took the world by storm. This commercial blitzkrieg could not have been haphazard. Steve Jobs slayed half a dozen global corporate giants. By Thinking Differently.
Dedicated to the greatest misfit of them all, the one who saw it all differently.
This article was originally published in The National.