Skip to Content

What Apple Can Teach Business About Disruption

Apple Starts iPhone 6 Sales In GermanyApple Starts iPhone 6 Sales In Germany

The launch of Apple’s iPhone, announced 10 years ago this month, is a classic example of technology disrupting an industry. It ended Nokia’s dominance of the mobile phone market and created the first smartphone worthy of the name.

It is typical of the so-called ‘Fourth Industrial Revolution’, a theme of the World Economic Forum meeting starting on 17 January. This revolution is being defined by the vast increases in computer processor power, storage capacity and Internet connectivity that we are experiencing.

Apple is harnessing this technology and the iPhone’s launch was a key point in the revolution. But long-term success for companies is not about one disruptive invention like the iPhone. The companies that thrive in this new revolution will be the ones who constantly refine what they do.

Apple itself is one of the best examples. It is one of the world’s most valuable companies but its success is not built on one product. It created the iPod before the iPhone and, in doing so, reinvented the personal audio market. They would later reinvent the way that people bought music with iTunes.

Apple also created a market for things that people didn’t really think they needed. They were not the first company to consider apps but it once again reinvented a market when it launched its App Store in 2008. There are now about 2 million apps on the App Store. The iPad was met with some initial cynicism when it was announced. They saw it as an unnecessary bulky big brother. It was in fact a roaring success and in spite of appearing to have been spawned from the iPhone, was actually in development before the phone. In other words, Apple’s success as a disrupter is because it continues to disrupt by adapting.

Other technology companies show another way that companies keep disrupting: buy the new disrupters. Facebook has acquired WhatsApp, Instagram and Oculus VR in recent years. Each has been an attempt to expand the influence of Facebook. Apps like WhatsApp allowed Facebook to reach a rapidly growing base of younger users than Facebook’s.

Others are pretty big bets. Oculus is a virtual reality company and no one knows whether interest in the technology will prove durable or just a fad. But buying an industry leader will help them dominate this new medium if it really does take off.

Instagram gives Facebook access to another set of users, and their information, and a platform on which to compete with companies like Snapchat (which it tried to buy). The challenge for Facebook is to stay on top of the competition, with a clear purpose in mind that it pursues tirelessly.

It is this ceaseless drive to do one thing persistently well that has helped other disrupters to remain leaders in their market. IKEA has changed the way that much of Europe consumes furniture. It was founded in 1943 and is now a sprawling business but has consistently done one thing very well: produced simple, flat pack design led products.

IKEA is a product of constantly listening and refining the way it does one thing to ensure that it does it very well. This focus is reflected in the company’s museum, where school children can learn about the entrepreneurialism, technology and history that the company considers to be its bedrock.

Much of the disruption in recent years has been down to the invention of the Internet and rapid increases in computer processing power. Financial services have not been immune. Rowdy trading floors have been replaced by the hum of bank computers; smartphone apps have done away with a great many bank tellers and cheque books are a thing of the past.

The asset management industry is changing, too. Index and passive strategies are providing investments much more cheaply than traditional active management. This has led to predictions that the days of active management are over.

But active management is not dead. When it is done well it produces returns in excess of what passive strategies are capable, and that comes with a price. Clients understand that and simply have more choice now. Our business has adapted to this shift by offering both active and passive products.

The business of financial advice is changing too. Predictions abound that online platforms will put traditional advisers out of business. But the future is never black and white. The reality is that new online technology presents an opportunity for advisers to offer something more compelling to clients. Technology can add to, rather than detract from, what they can offer.

It is easy to get starry eyed about how things used to be. But change is happening. The Fourth Industrial Revolution is transforming peoples’ lives all around the world. Anyone resisting new technology should remember that it usually thrives when it improves the lot of customers. Something takes off because there is demand for it. Provided the source of new competition is ethical and legal, it should make every business leader sit up and pay attention. No one can rest on their laurels. The Fourth Industrial Revolution will not be televised. But it might be streamed on your smartphone.

Martin Gilbert is CEO of Aberdeen Asset Management.