This week Steve Jobs, the iConic CEO of Apple said iQuit. This is as good a time as any to pick up one lesson we can learn from the man’s life & reflect on it. I know he isn’t in the dock yet, and will be around for some time…but why wait longer to learn a few lessons from the man.
If you have seen his commencement speech he delivered at Stanford in 2005, you would know that his biggest message is: “Don’t Settle.”
Not seen Apple CEO Steve Job’s commencement speech delivered at Stanford in 2005, yet? Watch it below before you move forward.
If you translate Steve Job’s message of ‘Don’t Settle’ into corporatese, it means don’t rely on your past glory. Instead, create more glory. If need be, cannibalize yourself….don’t settle on one product.
Though I have never met Steve…not even seen him in flesh & blood from kilometers away….I know one thing: I know that he never wanted his competitors to eat his products away – even if it meant he ate them and pushed them hard to become obsolete. He believed that if his customers were going to move to a different product, they better be moving to his own product which was better.
How Gillette cannibalizes its products
The only other company that I know which is doing this is Gillette (I know from observation only). In case you didn’t know Gillette is estimated to own 70% share of the Razor blade market Globally (this estimates could vary, but you get the idea).
How did they reach here? Answer is simple: Like Apple, Gillette also cannibalize their own products.
I think it was 2005 when I first saw Mach3 (and I first bought one in 2006). Mach3 Razors were followed up with their Gillette Fusion series two years later.
Many of the users who were buying Gillette Mach3 started buying Gillette Fusion, but Gillette didn’t care for the Gillette Fusion razor cost more! Increasing size of the market is one objective but not the only one…. increasing profit margins is another. And the best way to increase profit margins is by cannibalizing your own products.
Gillette didn’t even leave it to its customers to decide between Gillette Mach3 or Gillette Fusion….they went full-hog goading their customers to shift to Gillette Fusion. See the Gillette commercial below (Notice the text below which says ‘Why Fusion is better than Mach3):
Still not convinced? To see a Gillette advertisement where Roger Federer, Tiger Woods and Derek Jeter push Gillette Mach3’s from other’s hands and hand them Gillette Fusions, Click Here
How Apple cannibalizes its products
Coming back to Apple, this is precisely what Steve Jobs mastered. He had a knack for disrupting his own product lines.
In June 2010, Apple launched iPhone 4 and it has barely been a year and we are already getting confirmed reports that iPhone 5 is on its way. And all of this when the going has been so good – Apple only recently toppled Nokia as the most successful handset manufacturer based on revenues. See chart below:
And what has the series of iPhones cannibalized? iPods, of course. At the end of 2008, Apple had sold 22+ Million iPods and in the first three quarters of 2011, they have only sold 8+ Million iPods. But is Steve Jobs complaining? Not at all – so what if iPhone 2, iPhone 3, iPhone 3GS & iPhone 4 have cannibalized iPods and also each other? As far as Apple is concerned, they have always walked away with higher profit margins than before.
And what did iPads cannibalize? Low-end Mac Books. Again, Steve Jobs wasn’t worried.
When iPhone 5 comes out, iPhone 4 will get cannibalized. Steve Jobs might not be around to see the cannibalization happen but I sure hope Apple continues the tradition and doesn’t miss the plot in Steve’s absence.
View an excellent Apple cartoon strip here which captures the essence of Apple philosophy, albeit in a funny way