Tuesday, September 9, 2014

Apple Watch: Creative Destruction?

Apple introduced the Apple Watch, a timepiece that runs several apps such as calendar, messaging, phone, email, fitness, maps, etc. merging multiple technologies including crystals, display, accelerometer, GPS, wireless, microprocessor, touch sensors, LED sensors, and charging technology, all packaged in an innovative and attractive wristband.

Apple's CEO Tim Cook introduced the Apple Watch by first introducing its biggest invention; the Digital Crown. He compared the introduction of the Digital Crown to the introduction of the PC mouse, the iPod click wheel, and the iPhone touch screen: The Digital Crown lets you get your apps in the watch like the mouse lets get your programs in your computer.

The big question is:
  • Will this beautiful product create a new industry and destroy an old one?
  • Do you think the Apple Watch will destroy the traditional watch industry?
The watch industry is already negatively impacted by cell phones. Many people don't use a watch to tell the time, many look at their cell phones. This trend started with the first generation cell phones. Not everyone carries a watch anymore.

But that does not mean the watch industry is being destroyed by the cell phone industry. And maybe the Apple Watch will actually bring new life to the watch industry.

My answer to the first question is no: The Apple Watch is not a product that will destroy the watch industry. However, this is a product that will TRANSFORM it. The watch industry has evolved over time. This new product will represent a big evolution. People will continue to put a piece of jewelry on their wrists to tell time and a lot more. In fact, the Apple Watch will enhance the watch industry, not destroy it.

Maybe Tag Heuer, Rolex, and Omega will introduce similar technologies one day.

Maybe this is a case of creative reconstruction!

Apple Live Event, 9-Sep-2014: http://www.apple.com/live/2014-sept-event/
Apple Watch: http://www.apple.com/watch/

Tuesday, October 23, 2012

Innovation: Automobiles, Horses, Mules Industries

"We have fewer horses and bayonets, because the nature of our military has changed" -- President Barack Obama during the 22 Oct 2012 presidential debate.

President Obama gave us an excellent example of how innovation destroys old industries. In this case military innovation has diminished the industry that produces horses and bayonets for military purposes. While horses and bayonets still exist and may still be used in special cases, this industry no longer has a significant economic impact in our society.

Just about a week before the presidential debate, The Economist published an article describing the impact of automobile innovation in our society. The invention of the automobile has been described as a perfect example of "creative destruction," or what I would like to call a Schumpeterian event.

 The Economist article "Schumpeter: The driveless road ahead" (The Economist, 20 Oct 2012) describes:

"THE arrival of the mass-produced car, just over a century ago, caused an explosion of business creation. First came the makers of cars and all the parts that go with them. Then came the garages, filling stations and showrooms. Then all sorts of car-dependent businesses: car parks, motels, out-of-town shopping centres. Commuting by car allowed suburbs to spread, making fortunes for prescient housebuilders and landowners. Road-building became a far bigger business, whereas blacksmiths, farriers and buggy-whip makers faded away as America's horse and mule population fell from 26m in 1915 to 3m in 1960."

That value on the horse and mule population quantifies the impact of a true Schumpeterian event!

Friday, September 2, 2011

Tablets + Apps + Cloud to destroy the PC industry

The announcement of HP contemplating the departure of its PC business represents another event exhibiting the end of the PC industry as we know it. But the PC industry had already reached maturity a while ago; low margins, competition based on cost, and similar signs indicative of a mature industry. It should not be a surprise to refer to it as a dying industry. So why are we talking about it now?

There is a “creative destruction” event occurring right now; a Schumpeterian event. Apple’s iPad® is driving Schumpeterian forces leading to the destruction of the PC industry. While this is an invention of Schumpeterian magnitude, it did not occur in isolation. To destroy an old industry, significant industrial inventions are part of a conglomeration of multiple inventions or multiple events that give way to the new. Today’s conglomeration is composed of:

  1. The Tablet
  2. Application Markets
  3. Cloud Computing

The tablet is providing a delightful user experience: Once you start playing with an iPad® you can’t stop. Yet, the tablet alone would provide very little benefit to users without an apps market (e.g. Apple’s App Store™, Android Market, etc.), as well as cloud computing (e.g. Apple’s iCloud®, Amazon Cloud Drive, etc.) to keep the tablet nice and light. With cloud computing, computer functionality becomes a utility.

The apps markets allow users to download numerous applications to do incredible things. And cloud computing allows the tablet to work without needing a large hard-drive attached to it, allowing the tablet perform many computing functions.

Furthermore, there are other significant trends driving the industry:
  • New broadband networks available everywhere (4G wireless, cable modems, fiber to the home, hotels, airports, shops, restaurants, public places, etc.);
  • Rapid software development;
  • And massive eCommerce—pay for everything online using credit cards or PayPal.

The destruction of an industry happens when users no longer want to go back to their old habits and the old industry dries up. Schumpeterian events occur when multiple inventions and industry trends harmonize to give birth to a new industry.


Andreessen, Marc. “Why Software Is Eating The World.“ The Wall Street Journal: Essay. 20 Aug 2011. Web. 2 Sep 2011.

Helft, Miguel. “Apple Unveils ‘Cloud’ Music and Storage Service.” The New York Times: Business Day; Technology. 6 Jun 2011. Web. 2 Sep 2011.

Kopytoff, Verne, and Ian Austen. “As PCs Wane, Companies Look to Tablets.” The New York Times: Business Day; Technology. 19 Aug 2011. Web. 2 Sep 2011.

Loftus, Tom. “Tech Today: H-P Reaction: The Day After.” WSJ Blogs: Digits; Technology News and Insights. 19 Aug 2011. Web. 2 Sep 2011.

Sunday, February 6, 2011

Product Introduction in Super Bowl Commercial (1984): Apple Macintosh

How many of you watch the Super Bowl mainly for the commercials?

They are a big deal! The commercials are viewed by a big audience and people pay attention. Companies take this opportunity to introduce new products, innovation, and trends. For example: In 2006 Doritos utilized user-generated content; in 2000 the dot-com ads featured electronic commerce; automakers have introduced new models; and similarly high-tech companies like Intel and Motorola have used the Super Bowl ads to introduce new products, processors, phones, etc.

In 1984, Apple was battling an immense competitive threat from IBM (IBM-PC introduced in 1981). Apple had been offering its popular Apple II since 1977 and they needed to respond to IBM. Apple introduced Macintosh in 1984, a personal computer that people loved due to its friendly Graphical User Interface (GUI).

Macintosh (the Mac) was a gigantic innovative product; a Schumpeterian event. No other commercial personal computer had a GUI at the time. It took over 10 years after Macintosh for Microsoft to respond with a GUI based OS, Windows 95.

The Macintosh story is best told by Robert X. Cringley in the PBS documentary "Triumph of the Nerds." The Graphical User interface was invented by XEROX in their Palo Alto Research Center (PARC). But it was Apple, Steve Jobs, that made this invention into an innovative product breakthrough.

Here is the commercial:


Monday, January 17, 2011

The Invention of the PC

This story has all those “Creative Destruction” elements that were once outlined by Joseph Schumpeter: Innovation, entrepreneurship, business strategy, capital investment leading to the destruction of old products to give room to the new.

I am not going to retell the story of the PC here. This story is already told by Robert X. Cringely in the PBS documentary “Triumph of the Nerds.” It is a story about:

  • Entrepreneurship and the inevitable pursuit of success by those like Steve Jobs, Steve Wozniak, Bill Gates, Paul Allen, Ed Roberts, and others from the Homebrew Computer Club in Silicon Valley.
  • The important role of the banks and venture capitalists: How Steve Jobs, “the scruffy 19 year-old seduced the conservative world of venture capitalists” (R. Cringely).
  • The element of luck as exhibited in the time when IBM was looking for a third party to develop the Operating System for its new PC, lucky for Microsoft.
  • The importance of a sound Strategy because it takes more than luck: How Microsoft would stay on “the bear’s back [IBM] and the bear would twist and turn and try to buck you and throw you” (S. Ballmer).

Today, IBM is not anything like that computer giant it once was. It is still a very important company but not the same. Apple is a synonym of innovation. Microsoft is a synonym of industrial success. And Intel taught us Moore’s Law: How microprocessor technology advances by doubling performance every 18 months, creating a fascinating Economics problem.

Monday, October 25, 2010

User-Generated Content: Doritos Super Bowl XLI Commercial

In 2006, Doritos issued a contest to create a commercial for Super Bowl XLI.

The Super Bowl! Not just a sports event, but one of the most important advertising events of the year. Super Bowl commercials include: The introduction of Apple Macintosh computer (1984 Big Brother and screen explodes); Coke commercial with "Mean Joe" Green and kid ("Hey kid...Catch!"); Michael Jordan and Larry Bird shooting contest for McDonald's ("Through the window, off the wall, nothing but net"); and many beer, automobile, and other commercials putting millions of dollars at stake. And now Doritos decided to put their next commercial in the hands of regular people. Why?

This is why: Somebody saw the future. It was a magnificent Schumpeterian event.

Jonathan Hoffman (Twitter @jonphoff) back then told me that people were not just receiving content but were creating it. And that is exactly what the people from Doritos saw. This trend was exhibited in applications such as YouTube, Blogs, Facebook, MySpace, Twitter (born in 2006), Amazon (book reviews), IMBd (movie reviews), etc. Companies like Google saw this trend and acquired YouTube for $1.6b in 2006, coincidentally at about the same time when people were creating the Doritos ads.

The Doritos Super Bowl ads represent a tipping point for the arrival of user-generated content to the masses. It is a commercial splash. Today, more than three years later, user-generated content is no longer news. I find better entertainment and creativity watching YouTube videos from regular people than watching commercial TV. Blogs, tweets are part of the mainstream. And the new Google TV will allow anyone to develop content (starting in 2011 according to Google). It is just the beginning of a new era, an era dominated by user-generated content, creativity, collaboration.

Jose de Francisco Lopez (Twitter @consultaglobal) put it best: "I think that our society has shifted from Descartes' 'I think, therefore I am' to 'We create & share, therefore we are' which is more in sync with today's reality."

To prove further:

Thursday, July 22, 2010

One-to-One Services in Apple Stores

When you walk into an Apple store you think that you have entered a mega showroom, a place to see and to test the newest Apple products. It is an exciting hands-on experience. But Apple Retail Stores are more than that. Apple stores are a place where Apple professionals meet customers face-to-face, one-to-one to provide revenue generating consulting services.

The front-end of most Apple stores normally contains tables that showcase new products: Notebooks, computers iPods, iPhones, and their latest software. But the back-end of most Apple stores, or the second floor when the store has multiple levels, contains tables for the use of Apple professionals and their customers. Customers can buy consulting blocks of training time. Customers have the choice to come in for fifteen minutes one day, ten minutes another day, fifteen minutes another day, etc. until they complete their block of training time.

Apple continues to re-invent itself as a company. Through its history, Apple has been known for creativity and innovation: Computers (e.g. Apple Macintosh, iPhone) and software (e.g. iTunes, QuickTime). Apple is re-inventing itself today by creating a new business model based on consulting services delivered inside Apple stores.

This is not the first time that a large company looks to services as a new revenue opportunity. IBM may take the credit of being the first large company to look to professional services as a revenue strategy, though business to business. And companies in other retail industries have implemented training services within their stores: For example, William Sonoma sells kitchen items and offers cooking lessons within their stores. But Apple is doing it in a different way. Apple stores are trendy cool places where people want to be seen and at the same time customers find solutions to their individual needs; one-to-one.

That is the innovation Apple is introducing. That is the Schumpeterian event. To compete with Apple, companies will be pressured to find new ways to reach their customers face-to-face, one-to-one. The innovation here goes beyond the product. It is more than hardware, more than software, and it goes beyond customer training. It is a strategy that provides new revenue streams that also improves customer experience and satisfaction. It brings the customer back to Apple stores over and over again.


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