BUSINESS STRATEGY

Nine Business And Strategy Lessons From Apple And The iPhone 5c and 5s

Apple CEO Tim Cook (Image credit: Getty Images via @daylife) As always, Apples launch of the iPhone 5s and iPhone 5c were must watch events, not just to see the latest smartphones from Cupertino, but to take a look at Apple, their strategy, and their thinking behind the technology they create and sell. What can we take away from Apples event on September 10th? 1. Take Charge Of Your Destiny Apple defines the market, its as simple as that. By sweating the small details, by thinking about the experiences and how to achieve them (as well see over the next eight points), by being so cheery and forceful, a single voice can change an entire ecosystem. And that makes the ecosystem fit to Apples world view. Speak with conviction and belief, backed up by accuracy, and the world changes to your view. Otherwise you end up trying to define yourself against someone elses standards, which weakens you while strengthening their position. Be proud to be yourself. 2. Choose Your Strategy And Go All In Microsoft is focused on market share. Samsung is focused on market share. BlackBerry is focussed on market share (and trying to survive). Read any coverage of the smartphone wars and the key metric is market share. Apple is measuring itself in another way margins.

Yes, they could release a bargain basement handset, and thanks to the efficient code in the OS and a solid grip on the supply chain, theyd likely sell millions of handsets, and make about $5 per unit. And it would sate the demands in the press. But it wouldnt match with the idea of Apple being a luxury brand, and it would mean shifting even more boxes every year to make the same gross income. Theres more to value for money than a low price. Know your income strategy, and stick with it. 3. If It Looks New, It Is New. The clinical analyst will note that apart from some very slight improvements to the camera and the battery capacity, the iPhone 5c is just an iPhone 5 with a plastic case. Im sure that people who sell the iPhone took one look at the 5c and decided that it was going to sell like hot cakes. its the first new iPhone in the US to be labelled as a $99 handset previously that price point signified last years model. Thats no longer the case, and throw in the multiple colours for the fashion market, and the iPhone 5c is the cheapest new iPhone on the market. The appearance of new means something is new, no matter what came before.. 4. Dont Be A Makeweight, Make A Difference If you cant change the market, dont bother being there. Simply making up the numbers is not a good enough reason for Apple to be in the market. The MacPro 2010 could have been updated countless times to bump the spec numbers up, but only when it was able to make a difference was the new cylindrical hardware announced with a huge amount of flair. Always aim high and aim to change the world with any endeavour you undertake, especially in the hardware market. 5. Tease The Latest Technology There is a lot of hardware that Apple could potentially explore, both on the smartphone platform, and on the wrist. Lets take the smartwatch, which everyone has been predicting to come out of Apple for some time. If Apples smartwatch had been released last month in August 2013, I would have found it hard to see how it would improve on the offerings from Sony and Samsung. Physical issues such as battery capacity, screen size, and user interface would have a similar solutions. But ask me to predict Apples smartwatch after the presentation this week, and I can see where they are going. Tim Cook must love Checkovs Gun. If youre going to use something in Q3 2014, then announce it in Q23 2013 and use it in a very small way in the hardware as a huge public beta test. Im expecting the M7 chip to power any Apple smartwatch, and Im expecting developers to have very limited access to the fingerprint sensor at next years WWDC.

Always build with spare capacity and potential, test in the real world, and then open up the access and capability. 6. Delegate, Delegate, Delegate. Even when the media perception was Apple is Steve Jobs, the presentations and announcements were shared out around the executive team. When the time came for Tim Cook to take over, there was continuity on stage to match the continuity and shared knowledge of Apples direction. If youve chosen a strong team to help run your company, operating division, or even a single team, theyll be strong in every respect. Share the good and the bad with them, share the limelight, share the rewards. Let them become the stars. Trust your team and let them reward you. 7. Listen To All The Voices, Not Just The Loudest. Everyone seems to be demanding Apple do just one more thing. Invariably Apple doesnt deliver what the worlds market and media expect them to. The iPhone 5 is a case in point. Perceived by many commentators to be little more than an iterative device that did little to advance Apple against the high-specced assault from Samsung, the iPhone 5 went on to become the fastest selling iPhone. Ever. There was clearly an audience for the iPhone 5, they just didnt have popular blogs or newspaper columns to tell the world. Listen to everyone, never ignore the silent majority. 8. Promote Real World Issues, Not Numbers Having the latest processor with a bigger number is no longer enough to sell a smartphone. Arguably Apple did mention the increased performance of the A7 chip, but it was immediately followed by the reason why this was important it allowed Infinity Blade 3 to run on the latest handset. Nokias 41 megapixel camera in the Lumia 1020 isnt about a big picture, its about reframing and zooming a picture after it is taken. Problem solving, rather than promotion. The specification wars are over, and while there may be some sniping at the top level over 64 bit CPUs and 8 core processors, the majority of smartphones out there are now at the good enough levels. Putting aside blanket advertising to simply push a company name, new and innovative ways to market smartphones need to be found. Marketing has to move on from the bigger/better approach weve seen up until now. 9. There Is Nobody More Important Than The Customer

And for Apple, that means the end user, rather than the networks. While other handsets and operating systems seem to make huge compromises to get their handsets listed with the providers (pre-installed apps that cannot be removed, reduced functionality, and branding on the hardware), Apple are known for their laser like focus on the customer experience, and when you couple all of the details and touches they provide and mix it with the respect and trust of the customer, you have a winning combination. Listen to your customers needs and issues, overcome them, and present them a solution. Its a basic lesson, and one that many companies will follow, but sweating the small details, as Apple does, and the rewards will become tangible.

Japan's Samurai CEOs (1) Panasonic's Tsuga Kazuhiro

The lot of a Japanese CEOlike that of samurai of oldis hard indeed. greater than in Europeand unimaginable in the U.S.the demands and To a degree even

Image via CrunchBase constraints placed on big company CEOs by Japanese society and government (and, coming in a distant third, by shareholders), are so onerous and conflicting as to ensure that they can never be fulfilled, even in good times. When times are not goodas they have not been for Japans electronics industry in recent yearsfailures are inevitable, and shareholders who wait for a turnaround suffer big losses. While the (until recently) historically strong yen is partly to blame for the electronics companies and their CEOs abysmal performances, a more fundamental cause has been the constraints felt by CEOs on their authority or ability to act to restructure company operations, especially when it involves reducing headcount. It is highly probable that one of Japans big three electronics makers, Sharp (PINK:SHCAY ), will finally go bankrupt, or at minimum be broken up and resolved. But indications are that the two other behemoths, Sony (NYSE:SNE) and Panasonic (NYSE:PC) are getting in front of their structural problems.

Especially Panasonic, and a big part of the reason is 55 year old Tsuga Kazuhiro, CEO since June 2012. Panasonics stock in Tokyo closed April 12 at 711 yen. Since hitting a 10 year low of 376 yen on November 6 of last year the stock has doubled. With a price-to-book ratio of 0.91, the market is discounting Panasonics business value much less than with Sony (PBR of 0.84) and Sharp (PBR of 0.59). Tsuga was installed as CEO in what, by Japanese standards, was a corporate coup dtat. The previous CEO Ohtsubo Fumio (67) who led the company to two consecutive years losses topping JPY 750 billion (USD 8.8 billion) annually was kicked upstairs to chairman. Last month it was announced that he is resigning and will become a senior advisor effective June as a way o f assigning responsibility for the losses suffered by the company. Replacing Ohtsubo will be Nagae Shusaku (62), currently a corporate vice president and subsidiary company CEO. In an interview published in the April 13, 2013 Nihon Keizai Shimbun CEO Tsuga describes Panasonics operations at the time he took the helm as chaotic. Senior management had little insight (visibility) into what was happening Panasonics sprawling worldwide operations. His job started, he says, with steps to restore visibility. Panasonics 2011 Annual Report describes a massive reorganization plan worked out before Tsuga became CEO. The plan converts the 2010 a structure of five business segments based on technology platform to one of three business sectors based on business model. Specifically, the former five business segmentsdigital AVC networks, home appliances, Panasonic Electric Works (PEW) and Panahome, components and devices, and SANYOare being reorganized into three segmentsBtoC consumer business sector, BtoB components and devices business sector, and BtoB solutions sector. According to the plan, group employees were to decline from 385,000 (Japan 153,000/overseas 232,000) in March 2010 to 350,000 in March 2012. Tsuga has downsized corporate headquarters from 7,000 staff to 130. By all accounts Tsuga is implementing this reorganization, which is proving exceptionally costly. Its restructuring budget over the next two fiscal years is JPY 250 billion (USD 2.7 billion). To my point above about conflicting demands on Japanese CEOs, Tsuga apologizes for having made domestic operations take the brunt of restructuring.. He pledges to strive to avoid further domestic restructuring and not simply to quickly sell what is easy to sell. At the same time, to group employeesnotably those from PEW and SANYO that were converted into 100% subsidiaries last yearwho are complaining about wage cuts imposed due to losses in the groups television business, Tsuga subtly demands that they show loyalty and solidarity to the group. If they cannot, they should quit. Speaking of how he differs from his predecessor, and reflecting on the disastrous JPY 600 billion (USD 6.3 billion) invested by Panasonic in panel television manufacturing, Tsuga averred that the business model of Ohtsubos generation was making big capital equipment investments to

build big businesses. My approach is to reinvest business earnings. Also, to compete in the business-to-business market, not just mass consumer. For the fiscal year just ended March 31, estimates are that the Panasonic lost some JPY 765 billion (USD 8.1 billion). For the first time in 63 years the company will pay no dividend. Tsuga is apologetic, recalling the a year ago he annouced that all the puss had been squeezed out. He is emphatic that Panasonic must regain growth momentum. He is a crusader against a defeatist mentality, but admits the company has lost credibility. Tsuga is placing big hopes on the home building materials and white goods sales in the near term and auto industry sales further out. The company is targeting a JPY 50 billion (USD 532 million) profit for the current fiscal year. Financial results will be announced in May. An operating profit of JPY 350 billion (USD 3.7 billion) has been set for FY 2015. Last week the company announced on April 11 that it will delist its American Depositary Shares (ADSs) from the New York Stock Exchange on or about April 22 of this month. It will maintain its ADR program to allow trading of ADSs in the OTC market. There is no more iconic brand and monument to Japans formerly world-beating electronics industry than Panasonicthe former Matsushita Electric. Can CEO Tsuga Kazuhiro lead the company through and out of the present existential crisis? The market is beginning to think he can. I agree.

5 Things Ron Johnson Did Right At JC Penney

(Photo credit: Fortune Live Media)

Hindsight is 20/20. In retrospect, it will be obvious that Ron Johnson, arrogantly wanting to become the Steve Jobs of retail, made terrible mistakes at JC Penney which caused the embattled retailer to further lose out in a very tough environment (secular decline of the department store; the internet; a weak consumer economy). Yes, mistakes were made. But reading this timeline of Johnsons tenure by Business Insiders Jim Edwards and Charlie Minato, I was struck by how many things Johnson did right. After a total collapse, its easy to count the things that went wrong, so let me write about the things Johnson did right.

1. Focused layoffs on middle management. The caricature of the fatcat CEO who lays off the workers while giving himself a bonus is often a caricature, but its also based on reality. In most bloated organizations, the bloat is mostly at the middle. People at the top are often out to lunch (more on which below), but people at the bottom are often trying their best and stuck in a bad organization. Yet they too often bear the brunt of layoffs, simply because theyre easier (and cheaperless severance) to cut. Maybe the layoffs could have been better executed (they hit morale pretty hard, it seems), an easier thing to say than to do, but the idea was right.

2. Fired all the top execs. This is good for a few reasons. First of all, as I wrote above, in ailing organizations, the trouble often starts at the top. Second of all, Johnson did it right away, signaling the appearance of a new regime and that even the top is better off. And third of all, as Business Insider writes, [i]t created a situation that [made] it impossible for Johnson to avoid credit or blame. Johnson was all in. He knew ahead of time that if his turnaround plan failed spectacularly, he couldnt blame his senior team. And it did. It was brave, and it was right.

(Image credit: Getty Images via @daylife) 3. Took sales people off commission. There is ample research evidence that commissions dont work to motivate sales people. It motivates them to optimize their own bonus instead of the well-being of the firm and their own customers. This is particularly true in retail, where it sends a powerful message to customers that sales people will be looking out for them, not their own commission. This has worked spectacularly well for Apple retail, and it was the right decision.

4. Took a small golden parachute. Johnsons exit package was tiny. Golden parachutes exist because when youre trying to lure a top CEO, particularly one to take on a risky turnaround, that CEO has leverage to demand downside protection, ie that if he fails he will still get money. Hence, golden parachute. So golden parachutes exist for a more complex reason than just naked greed, but theyre nonethelessand not wronglywidely seen as immoral. Theres little doubt that if Johnson had asked for a big golden parachute before joining JC Penney, he would have gotten it. Instead he chose not towhich made it easier (less expensive) to fire him when the time came. That was right, and even admirable.

(Image credit: Getty Images via @daylife) 5. Focused on the long term. Johnsons plan was all about the long term. Completely changing the department store concept. Taking sales people off commission to turn them into advisors. Weaning customers off sales. Taking a very middle America brand upmarket. These were all audacious ideas that, if they could have paid off, would have paid off over the long term. You can reasonably argue that given a bunch of factors, the plan was always doomed to fail. But you can also reasonably argue that if Johnson had been allowed to stick it out for a few years, it had a real chance of paying off. The stubborn fact of the matter is no one knows, and theres no way to know. Even if Johnsons

plan was all wrong, it was all about the long term, and that was right. (This poses the old question of whether public companies can ever be focused on the long term. If youre in the Johnsons-plan-could-have-worked camp, the fact that he was summarily fired so soon is disheartening for corporate America in general.) In sum, the fair appraisal of Johnsons tenure at JC Penney is probably that of an extremely talented executive who was probably too arrogant that he had all the right answers, but was also dealt a very bad hand. As Fashionistas Lauren Sherman writes, Johnson is talented enough to do create a retail environment todays consumer will want to visit. [] A few savvy investors should throw Johnson some money and let him create a new store identity. Something thats not weighed down by its unfortunate past.