Subtle Innovation: Apple's Incremental Improvement Strategy

| About: Apple Inc. (AAPL)
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When the iPhone 5 launch took place, I read a lot of articles about a lack of innovation and how the loss of Steve Jobs had sounded the death knell for Apple (NASDAQ:AAPL). The conversation was one-sided, since iPhone 5 fans had no shining, dazzling update to point to, or new exciting feature like Siri (whether Siri turned out to be useful or not can be debated below) that differentiated the iPhone 5 from its increasingly robust and able bodied competition. I was happy with the release, however, and still think they will easily break sales records over the next few months, and may even touch 10 million units before September close. The following two items explain why I believe that, and why I think Apple still has the ability to innovate and dominate the mobile sphere.

Loss of Steve Jobs: A Stronger Apple This Time Around

First of all, a company never recovers completely from the loss of a pioneer like Steve Jobs, and to say that Apple is better off without him would be pure insanity. However, unlike his last temporary exit, when Apple was more of an afterthought in tech than anything else, this Apple is more likely to handle the loss. They are the largest power in tech, on the cutting edge of the proliferation of mobile technology. They are well equipped to milk their cash cows for years to come. The leaders are used to operating in a certain way, and following the Steve Jobs credo. They have battled to the top, and know what it takes to stay there. This is a different company.

That is not to say that other leaders within the company are not going to need to step up their game; more meager improvements on products, such as 4S and 5, could open the door for competitors to eat into their core market group. However, the numbers do not lie, and Apple hasn't slowed down in terms of popularity by any stretch of the imagination. All they need is one or two simple improvements to their already accepted and appreciated lineup to stay ahead of the competition. Sure, Android devices are gaining a larger share of a growing market, but Apple clearly leads in terms of the allegiance factor; I don't see Samsung selling 2 million phones during their presale.

Innovative Simplification vs. Disruptive Innovation

Back to the iPhone 5, which I believe will be a massive success. I was okay with the release, and I think that Apple will continue to innovate in the way that has made Apple so great in the first place; their innovation is subtle, and if they hope to continue to succeed they will keep it that way. Apple has never been a disruptive innovator. They have taken the ordinary, and made it into something extraordinary through an effort that also somehow simplifies the product. The Macintosh computer is an example of that.

They haven't invented anything crazy, but they have improved on inventions previously made. Think about it: the iPod was an extension of the MP3 player, the iPhone was an expansion of our expectations around the cell phone, and the iPad improved on heavy, clunky attempts at a tablet made by competitors. This is what makes their innovation repeatable. Most disruptive innovators stumble upon a breakthrough once, maybe twice, and then have significant troubles matching that innovation moving forward. Some would attribute a fair bit of luck to some of these innovations. Apple takes devices that we use every day and deftly turns them into devices that we can't live without through subtle improvements over time.

That is why Apple is able to repeat their process of innovation. They don't need a breakthrough to destroy their previous sales records, all they need is to keep on keeping on. Meanwhile, the competition will always be compared to the iPhone, and will strive to be the best in some category, whether it's the thinnest, the fastest, the brightest or the craziest, all phones are measured by the same yardstick: the iPhone. Apple just needs to keep making their products a little faster, a little better and come up with an improvement that no one sees coming every few years. I hear everyone grumbling about how the products are getting stale. If that is the case, then who is buying them?


I know that a lot of people are diehard Apple fans, and a lot of people are the opposite of that. I've seen articles touting "Apple to $1100??" and see some that think the iPhone 5 will be the beginning of the end of their reign as king.

What I'm saying here is that their innovation has continued because of subtle improvements made by a team of players that is still together. They don't focus on the incredible or the dazzling, but rather innovative simplification. Jobs introduced this concept and guided it, but he didn't design the schematics or weld the parts together. His guidance has been imparted to every employee at Apple, and I believe sincerely that they can continue to do what they need to do to grow. The markets they are in will only increase in popularity. Although the tablet market is becoming more competitive, it is growing at a breakneck pace and no one has the name recognition that the iPad does. The mobile sphere will be more difficult for Apple to penetrate globally, but there are plenty of attractive markets. The fact is, Apple is far from the lame duck that I've seen them accused of being.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.