This document discusses strategic innovation at Apple and Google in the smartphone market as well as value-creating versus value-enhancing strategies. It also examines Apple's innovation network for the iPod and how Starbucks defines the coffee industry differently than traditional definitions. Blue ocean strategies are contrasted with red ocean strategies and examples like the early auto industry, PC industry, and tablets are analyzed. Finally, potential new innovations in personal computers, umbrellas, refrigerators, airplanes, transportation, and converging industries are contemplated.

1. Strategic Innovation
Page 1

2. Google vs. Apple
Apple Google
• Launch iPhone
• Android operating system
• Improvement
• Improvement • Improvement
• Improvement
• Launch Nexus One
• Launch iPad
• Pull back Nexus One
Page 2

3. Innovation and Organic Growth
• Emphasis on:
– Top-line revenue
– Customer-centric, customer value
– Internal and external social interactions
– Cross-functional and cross-experiential teams
– Empathetic, high EI people
– Experimentation, learning
– Entrepreneurial culture, boldness, audacity
• Value-creating strategy vs. Value-enhancing
strategy
Page 3

4. Value-creating vs. Value-enhancing Strategy
Profit
New Product Competition
Plateau
Profit Introduction Erodes
Profits
Product1 Product2 Product3 Product4
time
Page 4

5. Apple iPod
Page 5

6. Value-creating vs. Value-enhancing Strategy
Profit
New Product Competition
Plateau
Profit Erodes Value-creating Innovation
Introduction
Profits
Product1 Product2 Product3 Product4
time
Value-enhancing Innovation
Profit
Product1 Product2
Introduce Windows iPod WiFi Price iPod iPod +
iPod compatible Photo iPod Cut Video Nike Shoe
BMW iPod
iPod iPod +
iPod Wireless
Mini Timex Watch
Adaptor Remote
Page 6

7. Alliance Network and Innovation
Apple’s iPod Innovation Network
10 parts create 85% Samsung (Korea) – Mobile
SDRAM memory
of the iPod’s cost
Toshiba (China) – Hard Drive
Toshiba-Matsushita (Japan)-
Display Module Nike Disney Timex
Broadcom (Singapore)-
Multimedia Processor
PortalPlayer (US) Apple
Portal Player CPU
iPod
Inventec (Taiwan)-
Assembly, Testing
Renesas (Japan)
Display Driver
Digital GM Ford Delta
Unknown Music Airlines
Battery Pack Group
Unknown
Mainboard PCB
Unknown
Back Enclosure
Source: Portelligent, Inc. and
400 additional inputs with values from $2 to Linden, Kraemer & Dedrick, 2007.
fractions of a penny, with an average value of $.05
Page 7

8. Alliance Network and Innovation
Apple Computuer
High Level of VC + VE
Apple – alliance network in 1995 Apple – alliance network from 1995-1997
Page 8

9. Unique Perspective
Page 9

10. How do you define the coffee industry?
Leisure,
Coffee
Enjoyment,
Social Interaction
• Packaged
• Convenience coffee
• Café/restaurant drinking
Caffeine Source
Food &
Beverage
Fashion Item
Page 10

11. How does Starbuck’s define coffee industry?
Page 11

12. Red vs. Blue Oceans
Red Ocean Strategy Blue Ocean Strategy
Compete in existing market space Create uncontested market space
Beat the competition Make the competition irrelevant
Exploit existing demand Create and capture new demand
Align organization towards strategic Align organization towards pursuit of
choice between low cost or low cost and differentiation
differentiation
Page 12

13. Coffee’s Next Blue Ocean?
?
Strategic Dimension 2
Strategic Dimension 1

14. Early U.S. Auto Industry
Page 14

15. Blue Oceans and The Auto Industry
Company / Product New/Incumbent Industry Char.
Ford Model-T New Entrant Unattractive
Toyota Corolla Incumbent Unattractive
Chrysler Minivan Incumbent Unattractive
Toyota Prius Hybrid Incumbent Unattractive
Page 15

16. Strategic Map: PC Industry
(Pre-MacIntosh)
Fast/
High Capacity
IBM
Apple II
Wang
Slow/
Low Capacity
Low Price High Price

17. Strategic Map: PC Industry (Post-McIntosh; Pre-Dell)
User Friendliness
• GUI Apple
• Drop & Drag MacIntosh
• Mouse
• WYSIWYG
Wang IBM
DOS-based
Operating System
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Low Margin High Margin

18. Strategic Map: PC Industry (After Dell Enters)
Dell
High Quality &
Dependability
Apple
H-P
Lenovo Low Price
Adequate
Quality
High Price
“Regular” Supply “Efficient” Supply
Chain Management Chain Management

19. Tablet PC
IBM Wearable PC
IBM Mainframe
Compaq Laptop
Apple II
Apple iPad
IBM PC Apple MacIntosh
Compaq Portable Page 19

20. Personal Computers …what’s the next big thing?
Strategic Dimension 2
?
Strategic Dimension 1

21. What’s the next big thing?
Strategic Dimension 2
?
Strategic Dimension 1

22. Umbrellas…innovation?
Strategic Dimension 2
?
Strategic Dimension 1

23. LG Internet Refrigerator
Page 23

24. Airbus A380
Page 24

25. Segway Personal Transporter
Page 25

26. Tooth Tunes
Page 26

27. Converging Industry Advantage
Entertainment
Music, Movies,
News, Sports
Palmtop Wireless
Computing Telephony
Books
GPS
Page 27