Should You Emulate Apple?
McKinsey experts say it’s no mystery why companies should want to emulate successful peers, but they caution when it comes to outliers like Apple as such practices may result in more agonizing frustration than competitive gain. Can one be blinded by star power?
September 19 2012 by ChiefExecutive.net
Pursuing best practice is widely thought to be an unalloyed good thing, but as Marla Capozzi, a senior expert in McKinsey’s Boston office, Ari Kellen its director in the New Jersey office, and Sven Smit the firm’s director in Amsterdam attest, lockstep benchmarking may lead to “herding” effects that, over time, diminish emulators’ margins. “Apple is today’s all-purpose innovation icon, “ say these McKinsey experts. “In the past three years alone, more than 1,500 published articles have mentioned both “Apple” and “innovation” (a Google search displays hundreds of millions of results). As of this writing, Walter Isaacson’s comprehensive biography of Steve Jobs has held a place on the New York Times best-seller list for over 40 weeks. Nearly 40 books on Apple and Steve Jobs have been published since his death, in October 2011—celebrating the company’s can-do culture, breakthrough product designs, global supply chain prowess, and legendary cofounder. A unique confluence of leadership, talent, strategy, and technology has brought Apple extraordinary success and raises the question of how relevant a model the company can be for others as they chart their own innovation course. To answer the question of how exceptional Apple actually is, we analyzed its growth using the analytic technique that underpins the 2008 book The Granularity of Growth.
“Since 1999, the more than 750 companies in our database have, on average, derived a negligible portion of their growth from organic share gains of any kind. Apple, by contrast, has grown almost entirely through share gains. And that’s just the beginning of its uniqueness. Of the companies that have expanded through market share growth, only a few have created new markets from whole cloth, either by being the first to enter entirely new geographies or through “disruptive” innovation that creates completely new products, services, or business models. In fact, our research shows that from 1999 to 2008, Apple was the only global incumbent to create entire new markets, repeatedly, from disruptive innovation. This analysis, it should be noted, does not consider industry attackers or start-ups—only incumbent companies and their efforts to create new markets.”
The authors point to an alternative strategy. Instead of the headlong pursuit of disruptive innovation, they advocate what they call an “innovation at scale” strategy. This is one that is repeatable and sustainable organic growth across the organization from new products and services is based upon growth that builds on the foundation of a company’s core business. McKinsey analysis of more than 300 companies indicates that from 1999 to 2007, companies that showed positive organic share gains, year over year, for 70 percent or more of that time frame were, on average, twice as likely as other companies in their sector to outperform competitors as measured by total returns to shareholders. Companies that innovated at scale successfully at least 50 percent of the time were also more likely to outperform, but to a lesser degree.
The data suggest that identifying ways to exploit existing assets, including technology, organizational capabilities, or business model strengths, is within the reach of many more incumbent companies than might succeed in creating new markets, as Apple and few others have done.