Here, as described by Sam Gustin in DailyFinance.com is a nice problem to have:
“Tech juggernaut Apple (AAPL) handily beat earnings and revenue expectations last quarter, but supply constraints prevented the company from reaching its full potential. In other words, Apple literally cannot produce enough products to meet consumer demand.”
I don’t care what industry you’re in; being referred to by the hypercritical business press as a juggernaut is an impressive endorsement.
The Wall Street Journal’s article on Apple’s most recent earnings report ran under the headline Apple Profit Muscles Past IBM. The article starts: “Apple Inc. posted a 70% surge in quarterly earnings, again eclipsing the profit reported by [IBM] Corp., in the latest sign that CEO Steve Jobs’s gamble on consumer gadgets is paying off.
Again, not bad – despite the backhanded compliment. What the Journal seems to be missing is a pretty big point: Steve Jobs’ game plan goes well beyond gambling on consumer gadgets. He’s built an incredible success story around some of the principles of Next Generation Management.
For example, a few years ago, when computer manufacturers routinely packaged their products in boxes the size of a small SUV, Apple was thinking about sustainability – developing packaging so minimalist and attractive that it went beyond a meaningful reduction in paper and plastic, almost becoming a selling point in itself.
Apple also manages an efficient supply chain – quickly responding to changes in product demand and delivering goods of consistent quality and competitive cost. While it does seem to experience shortages every time it launches a new product, it also manages to deliver enough product before competitors are able to get into the game. Consider the iPad; while many manufacturers are planning to release similar products, it’s three weeks before the all-important Black Friday shopping day, and the iPad is still the only thing like it that’s actually available. Readily available.
True, Apple products sell for premium prices, but that’s got less to do with its supply chain than with Apple’s fixation on another Next Generation strategy: customer-focused innovation.
Simply put. Apple makes products that are fresh, satisfying, and – with surprising regularity – revolutionary. That’s how Apple got its start and, with the exception of a few dark moments in its history, that’s what Apple continues to do.
According to a chart that’s been flying around on Twitter, Apple currently brings in 60% of revenues from products that didn’t even exist three years ago. In the Next Generation Manufacturing study, less than 9 percent of companies claim such kind of results from customer-focused innovation; 30% achieve no more than 5% of revenues from products introduced within the last three years.
According to Asymco.com, 60% of Apple’s revenues come from products that didn’t exist three years ago.
So don’t misunderstand Apple. It’s not gambling on consumer electronics. And while its closest competitors – companies like Dell, Microsoft, HP and Motorola – are busy adding features to their own well-accepted products, Apple is doing everything it can to render today’s top sellers obsolete.
For that it is being well-rewarded.
By Bob Rosenbaum, Editor, The MPI Group