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apple ipod

Iconic, design-led, continual evolution of mutually reinforcing
product, service and business model innovation

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Profile: apple

Ask anyone to name an innovative company and odds-on they will mention Apple. It has had a reputation for leading-edge products since college dropouts Steve Jobs and Steve Wozniak first founded the company. Apple memorably unveiled the Macintosh in 1984 and proceeded to build a hard-core following of customers who appreciated good design and were willing to pay premium prices while overlooking any interoperability issues with Windows - a factor that Apple has subsequently addressed with its OS-X operating system. Amongst a wealth of innovations introduced over the years, the radical, all-in-one design of the iMac was one turning point, bringing colour and light to the drab world of computing. The same lateral thinking and attention to detail has been applied to products such as the original iPod in 2001, the PowerBook in 2003, Mac Mini in 2005 and, in 2007, the iPhone.

In its traditional computing market, Apple continues to maintain its position as a leading innovator, strengthening its range of high quality laptop and desktop products. This has led to total Mac unit sales growing to over 7m and delivering $10.3bn of core revenues in 2007 - an increase of 40% on 2006. Allied to this, the iPod range has been extended with the new iPod Touch and an increased capacity for the classic models. Despite the average unit price decreasing from $195 to $161, there was an increase in unit sales from 39.4m to 51.6m, and overall iPod sales generated $8.3bn.

The launch of the iPhone created global publicity and cemented Apple’s reputation as a company that continuously produces truly innovative, sector-disrupting products. With sales in the fiscal year of 1.4m units, the iPhone contributed only a small proportion of Apple revenues. However it created huge consumer pull. Additionally the iPhone demonstrated Apple’s ability to break through existing paradigms – it is sold at a fixed price, is linked to a specific contract and is only available through specific mobile operators. As with the introduction of iTunes, Apple has entered a new market and challenged existing business models. This is a key element of Apple’s approach to innovation: while many see the product as the focus, for Apple it is the interplay between the product and the service that allows it to fundamentally change the underlying business model operating in the sector. First it was music and now it is movies. Via its iTunes service, Apple has challenged the way the music industry operates and the company has now expanded its music videos, audio-books, television shows, movies and podcasts reportoire still further with major links to all the key studios. In 2007 iTunes had its three billionth download and this helped music related products and services account for a significant $2.5bn of sales. Of course customers also expect a suitably ‘Apple’ experience when they enter a store. And they get it. Apple now has 197 stores worldwide and this has redefined computer retail.

All of the above innovations have translated into corresponding financial success with Apple’s share price doubling in 2007. Total sales increased by 24% to just over $24bn while net income increased by a staggering 76% to just under $3.5bn. This is all ample evidence to highlight that innovation in Apple is not hype: Apple really delivers its goal to provide ‘innovative integrated digital lifestyle solutions’ and is a company that consistently demonstrates the power of innovation in driving profitable, sustained growth.

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