Apple’s iPod/iTunes Business Model - ETR 500 Week 4

The IPod/ITunes business model isn’t new but what Apple has tapped into is a market that needed an overhaul.  Apple also isn’t the first company to sell you one product by lowering fees and then try to entice the customer into acquiring additional but more expensive product.  It’s a blueprint that has been implemented within many different markets.  The thing that Apple did with both the IPod and ITunes was appeal to both producers (music industry) as well as the customer base while reaping some huge financial benefits. 

The Apple concept of offering the ITunes software for free to subscribers and owners of the IPod allowed them the ability to create a one stop shop store for music and Apple product upgrade.  By partnering with an industry that was seeing its profit margin decline at alarming rate as a result of other websites ability to download their music for free, Apple saw ITunes as the prefect intermediary to the music industry and growing its IPod product line.  The decision to charge a nominal fee to customers wanting to download a variety of hand-picked music as oppose to buying an entire CD was the bases for the music industry to stop their financial bleeding.  Apple was not only able to integrate the ITunes with their growing selection of IPod models but it was also able to include other products such the IPhone.   ITunes started as a music store and has increased offerings of movies, videos, television episodes, games and apps which are only compatible with certain Apple products.

A Review of Michael E. Porter's Strategy and the Internet

Michael Porter’s five forces analysis as it pertains to the internet’s influence on industry structure within the article “Strategy and the Internet” continues to provide excellent thought provoking points.  The internet is a powerful tool that when utilized correctly can aide a company in delivering its core competencies to the market place and build on its current customer base.  “Integrate Internet initiatives into your company’s overall strategy and operations so that 1) complements, rather than cannibalize, your established competitive approaches and 2) create systemic advantages that your competitors can’t copy.”¹   The internet has become far more important business tool that many have initial thought. In reviewing Porter’s five forces, the internet has help to change in some respect the landscape of the way business is done but it hasn’t rendered the five principles obsolete.  In fact it has help to reinforce its vitality in the market place influences. 

The internet has lowered the barriers to entry standards in most markets allowing many who may not otherwise be able to gain access due to lack of finance to acquire physical assets, sales force and general access to channels such those located globally.  As more and more companies enter the market, the price of the products and services can be affected.  Another byproduct of that effect is also the quality of said products and services. All these effects makes things somewhat challenging for brick and mortar business that have been well established but not as difficult as the keeping applications that are a part of the internet proprietary.

Efficiency is another positive which the market place has seen as a result of the internet and it has also allowed for its expansion.  Sometimes there is a bit of bad that comes along with the good and in this case it is the threat of substitutes.  With the growth potential of this new tool has brought with it imitation services and products from new and unassuming companies.

One of the areas the internet has intensified is in rivalry among existing competitors.  It has widened the demographics of the competitive bases globally and has made pricing an essential requirement.  It has also allowed the gap between them to close by reducing the differences between their products.  The competition on price is not what most company’s desire because it lowers the profit margins by reducing variable cost.

The supply base has also felt the effects of the internet.  It provides better access to most suppliers and the ability to gather real time data that can help to enhance their business.  The procurement process has translated into bargain power over suppliers as well as allowed for them cut of the middle man and reach the customers themselves.

Buyers have seen their bargain power increase as a result of the internet. 

The internet may have initially leveled the playing field to the market place but it’s those companies that choose to maximize its abilities that will differentiate them from the competition.  The internet is just another way for companies to reach its customers, suppliers and promote its business.

1)      “Strategy and the Internet” by Michael E. Porter, HBR Articles, Mar 01, 2001.

Triz 40 Principles Blog #2

The 40 Triz principles concepts were very intriguing and are based on the premise that problems within the creative process stems from contradictions.  The information from those principles could help within the innovation process.  There are many applications within existence that if those principles were applied too could potentially yield product upgrades or even creation.  It is not hard to believe that these principles were derived as a result of researching some of the many techniques past innovators developed in solving problems within their own efforts to be creative.  For example, principle 13a says try to invert the product from cold to hot and also the reverse could be true.  Another principle, 14c indicates that one can change a product from a linear model to a rotary and the opposite could also work.  These are just some of the things that many creative thinkers have done in the past in seeking alternatives that can produce the same or better results.  In reviewing these principles during the creative process could unlock and help move a project beyond any barriers that may exist.  Triz is similar to having a group brainstorming session which can aide in simplifying the problems and devising a range of strategies in determining practical resolutions.  It can also be used as a tool that inexperience team can utilizing in finding ways to work together and a process in helping teams to not just settle for the obvious solutions but executing a deep dive analysis in deriving a more robust answer.  Triz can also be applied in working on developing general solutions. More often than not, most people go through a step by step process in solving general issues such 1) defining the problem, 2)  formulating potential solutions, 3)  selecting the most appreciate solution and 4) implementing that solution.  Finally, it can be an entrepreneur’s dream in helping to identifying and developing a product idea.

Creative Abrasion and Hiring in Divergent Pairs - Week 1 Blog # 1

The concept of “Creative Abrasion and hiring in divergent pairing” by Hirshberg seems to be a very good way for companies to get the best of both worlds.  Having two completely different views and being able to select the best parts from both of them can be very beneficial to any company including the one I currently work for.  The organization for which I now work doesn’t apply methods such as divergent pairing.  During the creative process, especially if cultivated such companies could develop their own version of the divergent pairing to meet their needs and capitalize on it.  However, the issue for my industry is that change through the creative process whether it’s by divergent pairing method or not it is very slow.  I’ve always compared my company and its industry to a barge moving through a river. 

Divergent paring and creative abrasion seems to be more applicable for industries where change for commercial marketing is necessary to stay competitive such as automotive.  Within the aerospace environment changes are done via the scenic route.  It’s cultural; it is the way they have been doing it for years, even decades.  There are many of the old school practices still in place when it comes to the creative process.  Even though divergent paring is not a difficult concept to grasp, most would see it as the latest fad, like many other concepts before it, it too would fade away.  Unless my industry has a culture shift which could very well happen within the next decade, creative abrasion and hiring in divergent pairing is just another interesting concept.