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Innovation, Supply Chains & Flexibility: Observations on Apple

July 4, 2012

I very much enjoyed an article on Logistics Viewpoints that outlined Apple’s approach to its supply chain. Author Steve Banker sought to answer the question of whether Apples\’s approach is ‘the best in the world’. He concluded that the answer is no (though following his interesting and impressive analysis, I was not sure quite why he had reached that conclusion).

However, his final comment was: “Apple’s new CEO, Tim Cook, is a supply chain guy with a  strong reputation. He is working to improve the company’s reputation  for social responsibility. But if I were Apple, I’d rather have another  product development guru like Steve Jobs. To drive continued growth and  margins, the company needs to continue to excel at product development,  but only needs to be competent in supply chain management.”

I agree that competitive advantage is more typically driven by product innovation. However, to be sustainable, it must be supported by the ability to deliver against market demands and expectations. And there are in fact many instances where the delivery capability actually trumps the innovation. If we look back at the history of great inventors, it has often been the imitators – not the innovators – who have made a fortune. Typically, that is because the inventors lack the infrastructure to exploit their ingenuity. It is the people with strong supply chains and access to markets who actually benefit.

Perhaps the most unusual thing about Steve Jobs was his ability or willingness to assemble a team that could take advantage of his innovations. Apple executives also appreciated the importance of keeping things simple. For example, their decision not to sell directly to corporate customers has resulted in a far simpler business model and removed the need for much of the complexity of market and supply chain management faced by other large corporations.

One of the first signs that the Apple innovation machine is in trouble will be when they start to introduce incremental commercial complexity into the business model. Truly leading-edge businesses are led by demand and have no need to offer contract or commercial flexibility. It is only when that demand starts to wane that new markets and special deals need to be found.

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