Consumer Behavior

Topics: Innovation, Percentage point, Economic growth Pages: 5 (1422 words) Published: January 12, 2013
The perils of best practice: Should you emulate Apple?
Outliers are exactly that. Duplicating their performance is harder than we might wish. SEPTEMBER 2012 • Marla M. Capozzi, Ari Kellen, and Sven Smit Source: Strategy Practice

It’s no mystery why companies emulate their most successful peers. Tried-and-true approaches often seem preferable to starting from scratch, whether for developing new products or running efficient supply chains. The quest for such methods went global during the 1980s and 1990s as European and US companies sought to retool their operations by transplanting Japanese factory practices, such as kanban and just-in-time production. Management consultants—ourselves included—naturally facilitate the process by extolling successful companies as models from which others can learn proven practices that reduce risks. However, perils abound when truly exceptional companies morph into ever more ubiquitous examples. Observers and management theorists alike, blinded by star power, eventually assume that everything these companies do should be regarded as best practice—often without examining the context in which they derive their success or without parsing the true nature of their accomplishments. Managers tempted to distill universal insights from what are in fact exceptional companies put their own businesses at risk for strategic or operational missteps.

Others before us—notably Bob Sutton and Jeffrey Pfeffer at Stanford, Adrian Wooldridge at theEconomist, and Phil Rosenzweig at IMD—have issued warnings about best-practice traps and management-theory fads.1 Yet the desire to emulate is often stronger than mere rationality, even in the face of repeated evidence that most companies won’t achieve the anticipated outcomes and that some will suffer a hard fall. Research by our colleagues, for instance, has shown that lockstep benchmarking may lead to “herding” effects that, over time, diminish emulators’ margins.

Apple is today’s all-purpose innovation icon. 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.2

This approach, at its core, entails disaggregating the sources of growth into three categories. The first is to compete in the right markets and harness their momentum to expand sales of current products and services. The second uses M&A to, in effect, purchase growth. Finally, companies can grow organically, through market share gains from existing or new products and services.

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.3 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...
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