Lessons from Apple—what can small manufacturers learn from Apple’s success?

Posted by  Alex Gammelgard on  Apr 6, 2011 in Business Strategy, Cool Products, Manufacturing, Product Design, Supply Chain

We saw the bill of materials (BOM) for the iPad 2 last week and were impressed by the low costs Apple was able to achieve for its newest version of the tablet, which is considerably improved over the original. With iPad 2 sales reaching almost a million units in the product’s debut weekend, Apple has once again established its dominance as a leader in consumer electronics.

Taking manufacturing tips from Apple can seem like a futile exercise—its unique position in the market affords it privileges other companies simply don’t have. Apple’s manufacturing strategy requires volume, power, adamant control of the supply chain and attitude—for smaller manufacturing organizations with limited resources, it’s an impossible strategy to replicate. But no matter how small your organization, there are lessons to be learned from Apple’s progression as a leader in consumer electronics.

Design, execution and volume set Apple apart

When tracing Apple’s path as a manufacturer, there are clear differentiators that have led it to success, including a strong and focused design aesthetic, perfectionism in execution and unparalleled dominance over its supply chain.

Apple established its brand, style and ideals early on, and stuck to them through failure and success. The strong adherence to the brand is clear—you know an Apple product the moment you see it. Though its aesthetic and artistic sensibilities have clearly matured over the years, Apple has always driven toward simple design, minimized modes, low part count and cohesion across versions.

Additionally, Apple has extremely high standards for product development and won’t release a product until it works seamlessly with other Apple products. In many cases this means leveraging parts already in Apple’s library, or creating parts that can be integrated into new releases across other product lines. If an expensive prototype doesn’t fit the Apple mold, it is eventually scrapped. Not many companies in an industry as fast-paced as consumer electronics allow this kind of design inefficiency on the path to innovation. Even if a product flops once it hits the market—like the notorious clear cube—Apple engineers have no problem scrapping months, if not years, of design work to go back to the drawing board and make it right.

Because of Apple’s adherence to a specific design aesthetic and philosophy, the limited products that actually make it to market have a lot in common. The unique parts used across multiple product lines are purchased in extremely high volumes, so although Apple incurs a large initial expense to have these parts custom-designed, the overall cost is low. For example, the A4 processor was used in both the iPad 1 and the iPhone 4, while the new A5 processor (which is basically two A4s working together) will be used in both the iPad 2 and the iPhone 5. So as millions of products are sold, Apple buys millions of the same parts, making it a desirable customer for any supplier. As Apple’s reputation and purchasing power grow, its control over the supply chain increases as well. When a new product needs to be created Apple has the ability to design a its form factor and have its suppliers make parts that fit—unlike most companies, who need to design their products around available parts.

Apple’s ability to purchase uniquely designed, high-quality parts in bulk has created a barrier to entry for other manufacturers in the space. The barrier is not just Apple’s unique technology and design, but also the volume of products the company sells. Competitors in the space have a difficult time finding comparable parts for a similar price and are unable to replicate Apple’s unique form factors, so it’s nearly impossible to enter a market dominated by Apple and effectively compete.

So what? I’m not Apple.

Don’t worry—not everyone needs to be. For example, Google has become wildly successful creating low-cost, sharp-edged technology that can be implemented in a number of ways—a direct contrast to Apple’s strategy of using high-end, high-volume parts. The point is, it’s a big mistake to try and be Apple if you’re not Apple. To be Apple is a luxury that requires a unique attitude, focused design aesthetics and large scale purchasing, and depending on your industry that might not be a realistic strategy. But you can emulate Apple (or Googe for that matter) by using your own internal biases, culture and personality to determine what competitive differentiators will inform your strategy.

Apple has a uniquely profitable combination of traits—purposeful waste, intelligent product selection, clear vision, low part count, excellence in design—these are all things you can try to replicate, but only if it makes sense for your product, culture and industry. Perhaps your strengths are different. Maybe you have a geographic advantage or a highly efficient purchasing team or good relationships with your customers—if you can identify what your differentiators are, you can choose a manufacturing strategy that makes the most of them.

Determining your strengths and embracing a clear vision in line with them won’t necessarily make you a $200 billion company, but it will help you develop the most efficient and effective strategy for your team. And that is something even the smallest of manufacturers can drive toward.