Relationship between Apple’s Financial Analysis and Benchmarking
Apple’s incredible growth from 2007 through to the present day mirrors the popularity of its mobile line of products starting with the iPhone in 2007, the iPod Touch in 2008, and the iPad in 2010. All these products are benchmarks in their own categories. As previously mentioned the majority of cash re-investment in 2011 went to iCloud, the physical embodiment of this ecosystem. Although both Microsoft and Google have also invested in cloud computing, for Apple it is part of a unique file sharing system for iLife, and other components such as Address Book, Calender, iPhoto… and even office documents. “With iCloud, when you take a photo on one device, it automatically appears on all your other devices. No syncing. No sending. Your photos are just there. Everywhere you want them” (Apple marketing, Photo Stream, April 22nd, 2012). This type of closed ecosystem, or cloud, makes Apple products simple and desirable, worthy of their benchmark status. Apple’s investments would seem to back up this belief.
With every new product Apple’s ecosystem grows stronger allowing the company to set new benchmarks in other industries. Wikipedia defines benchmarking as “The process of comparing one’s business processes… to industry bests or best practices from other industries” (as of April 21st, 2012). Relevant to Apple, it is the design and development of a better computer interface by drawing upon the design applications within other industries. The iPad may be a perfect example for the evolution of benchmarking the furniture and jewelry industries. Apple’s production process itself may also fit within that definition.
Benchmarking Apple’s Product Line. Sir Jonathan “Jony” Ives, Apple’s lead industrial designer draws upon the benchmarks set in a variety of different industries. Many believe that the MacBook line evolved out of a concept taken from Jony’s office chair, along with Ive’s minimalist principals of industrial design (Citing John Brownlee, Cult of Mac, August 23rd, 2011). He was inspired to leave the Royal College of Art to join Apple because he felt that computer design could take a great lesson from the world of art and minimalist industrial design.
Apple’s Operations. Tim Cook, Apples ex-COO and current CEO turned Apple’s inventory around, which was “measured by the amount of time it sat on the company’s balance sheet, quickly [falling] from months to days” (Adam Lashinski, CNN Money, November 10th, 2008). ”There are two basic ways to get great profit margins: Charge high prices or reduce costs. Apple does both.” Prior to Tim Cook, Apple’s manufacturing efficiency was atrocious. Tim came to apple after a long career with both IBM and Compact bringing with him the benchmarks of production efficiency that were well established, in part by him, at his previous employers. Essentially Apple did what many companies do and that is to buy their benchmarking by hiring competing specialist in a specific field of expertise.
Apple is defined by its consumers as having achieved its benchmark success through the industrial design and ease of use systems for its entire line of products including but not limited to; tablet computing, smart phones, mp3 players, desktop and laptop computers. In fact Apple products are so well benchmarked or branded that many of these product categories are better defined by the name of the Apple product itself such as iPad, iPod and iPhone. Behind these amazing products lie a production process which has been benchmarked by the best in the industry to provide unparalleled profit margins.
It is that interconnection between Apple’s financial strategy and its benchmarked product line that defines Apple’s success. More specifically it is the re-cycling of company profits which has allowed its benchmarked products to flourish. Apple’s success is about focusing in on making a limited product line, and drawing upon the success of others in other industries. Apple has used this strategy to organically evolve from the brink of bankruptcy to become the world’s largest company in not much more than a decade.