Leaders of technology companies may need to look beyond the technology for sources of sustainable competitive advantage.
I’m reading Walter Isaacson’s biography of Steve Jobs (Isaacson 2011). In the early years, Jobs took Apple in a direction that was quite different to the rest of the personal computer industry. He understood the value of aesthetics and usability; he brought industrial design to computing. Jobs also understood the social context of the personal computer. You can see this in the iconic 1984 advertisement which positions Apple as the only alternative to the controlling influence of IBM (portrayed as ‘Big Brother’). Apple floundered after Jobs left in 1985, and then rebounded in a spectacular fashion when he returned to the company in 1997, ultimately becoming the world’s most valuable brand (Bloomberg 2013). This raises the question, how will the company fare after the untimely death of its visionary founder?
This is really two questions:
- How do companies create sustainable competitive advantage?, and
- What is the role of the CEO in creating and maintaining this advantage?
The resource-based view of competitive advantage (Barney 1995) holds that to be effective a company’s resources and core competencies must meet certain criteria:
- They must have Value in addressing current market opportunities and threats.
- Rarity – not many other companies have these valuable resources.
- Inimitability – competitors that try to obtain the same resource, either by replication or substitution, find that they are either unable to do so or that it is very costly.
Barney explores the idea of inimitability in some detail. How does his analysis apply to Apple?
The Importance of History
Jobs took his company on an unusual path that reflected his own interests and experiences. He attended a liberal arts college and developed a strong interest in design, particularly Bauhaus, with its emphasis on simplicity and geometric purity. Apple’s products were beautiful and ergonomically designed at a time when most of the PC industry was producing grey metal boxes that presented customers with the hideously unusable DOS prompt!
Cultural influences were important too. Jobs grew up in California in the sixties and seventies and was strongly influenced by the counter-culture movement: he took LSD and travelled to India for seven months seeking spiritual enlightenment. One aspect of this subculture was the concept that access to tools could enable the individual to shape society. The Whole Earth Catalog was a manifestation of this idea. The 1984 advertisement that launched the Apple Mac seems to be strongly influenced by the ‘access to tools’ concept: the Mac is portrayed as a tool that will enable the individual to stand up to an oppressive centralised authority.
The ‘Big Brother’ campaign of 1984 and the ‘Think Different’ campaign of 1997 illustrate how Apple chose a very different path to rest of the PC industry, a journey that was strongly influenced by the personality of its founder.
The Importance of Numerous Small Decisions
Barney describes how a company called The Mailbox achieved competitive advantage, not through big strategic decisions, but by many small decisions, and how it is very difficult for competitors to pinpoint exactly how they did it. The ‘many small decisions’ are informed by the organisation’s values, beliefs, accepted behaviours and taken-for-granted assumptions (Schein 1992). In other words, the culture of the organisation.
Design and innovation are deeply embedded in Apple’s culture. This is a resource that competitors find difficult to imitate: Apple produces design icons; Dell counters by offering laptops in eight colours!
The Importance of Socially Complex Resources
Apple has a culture of innovation and a brand with a cult following. These resources have been cultivated over many years and are ‘socially complex’, making it difficult for competitors to imitate them.
Technology companies often have a strong product orientation – they are more concerned with technical features than they are with human factors and social context. Jobs shaped Apple into an organisation that is very different to the rest of the personal computer industry, and in the process created socially complex resources that confer long-term competitive advantage on the company.