Apple and Amazon Do Platform Innovation--And Succeed in a Recession

Posted by: Bruce Nussbaum on October 21, 2009

Amazon just announced that people are reading more and more books on the Kindle days after Appple announced that people are downloading more and more applications on the iPhone. And profits rose 47%. It’s no secret that these two companies are among the handful that have kept up revenues and profits throughout the worst recession since the Depression and are poised to do even better as the economy begins to growth again.

The reason is simple—but not simple enough apparently for most managers in most global companies to comprehend. Apple and Amazon have created disruptive platform innovations that change the game for consumers. And they have done it within a price range ($300 to $400) that reduces the cost and risks to people even in a recession.

Let’s take this strategy apart. First, a game-changing BIG innovation—a platform innovation. Second, a price for consumers that is low enough to entice them to take the leap into the new, disruptive innovation. Third, a multitude of applications and “stuff” (products, services, experiences) on the platform that provide value (information, insight,entertainment) to people.

That’s it folks. It is that simple. Or that complex. It takes a special type of culture, organization and leadership to make it happen.

Reader Comments

Steve Portigal

October 21, 2009 4:38 PM

Bruce, people are BUYING more books on the Kindle. There's absolutely no data that says they are reading more. In our Reading Ahead study, an ethnographic exploration of the future of the book and reading (http://www.portigal.com/series/reading-ahead/) we definitely saw Kindle owners responding to the easy purchasing feature. But people are strapped for time and while Kindle may streamline or organize their reading, there's little reason to believe they are actually reading more. Of course Amazon et al will emphasize sales, but I don't think these companies have invested in studies like ours that get more deeply at the reading experience.

I'll point you to a specific post in our series, the results of our research findings (including a narrated PowerPoint - http://www.portigal.com/blog/reading-ahead-research-findings/), also be on the lookout for the results of our design contest with Core77 - http://www.core77.com/blog/featured_items/new_1_hour_design_challenge_launches_today_the_future_of_digital_reading_14577.asp

amolpatil2k

October 22, 2009 3:30 PM

Now we knew among the boys who the men are. Or are such things fixed. In my opinion, Amazon is doing well because online shopping saves more and Amazon is king. Also Apple is doing well because they allowed third parties (something unheard of till recently). And both know how to take their pound of flesh alright.

Jonathan Firestone

October 23, 2009 4:36 PM

It's more than just offering the platform at $300-400, in fact there was a huge increase in iPhone sales as the entry cost of the product began to drop even lower ($199 and $99) Apple and Amazon are offering the "Stuff" that feeds the product and the consumer for a low price point. The 99 Cent (and in some cases less) model, With most Apps selling for $0.99-$2.99, it's not hard for a consumer to buy a game that once sold for $30.00 or more on the software market. There's no packaging, there are just bits, bytes and limited support.
Amazon comes in with books running from $7 to rarely more than $10 a book, and there was nothing to print, leaving more profit per release to share around.

Given all of that -- It's a recession/depression. Historically once everyone's really emotional about the economy and pinching their pennies, they want to fill it with entertainment, music, reading material, anything to take their mind off how bad off they are.

These customers realize the iPhone/Kindle experience gets them close to the things they crave, it's a relatively low cost investment, and some things are available for these devices for Free or even a $1.

Gearhead Gal

October 23, 2009 4:53 PM

Integrating the system for discovering, acquiring and consuming content is the thread with these companies. People are CONSUMERS and they do it more often when it's easy, convenient and works like expected. Consumers will never walk into a store and ask for a "platform". But they love products that simplify complex tasks, allow instant gratification, and provide reward for little effort. Product designs that encompass a system of interactions will often enable remarkable customer experiences because things appear to happen "auto-magically" for the user. Like Amazon and Apple, Tivo simplified the system for discovering, recording and consuming televised and VOD entertainment Now all cable providers offer the DVR capability as standard, mainstreaming one of the great disruptive innovations of our time. Here's my take on the value of system design in creating compelling consumer experiences. http://gearheadgal.net/experience-design/2009/6/11/does-a-great-consumer-product-experience-require-a-system-vi.html

Dennis Van Staalduinen

October 23, 2009 5:32 PM

You missed # 4: Brand equity, Both companies built strong consistent brands in the good times that are carrying them through the bad. (see also: Google)

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Want to stop talking about innovation and learn how to make it work for you? Bruce Nussbaum takes you deep into the latest thinking about innovation and design with daily scoops, provocative perspectives and case studies. Nussbaum is at the center of a global conversation on the growing discipline of innovation and the deepening field of design thinking. Read him to discover what social networking works—and what doesn’t. Discover where service innovation is going and how experience design is shaping up. Learn which schools are graduating the most creative talent and which consulting firms are the hottest. And get his take on what the smartest companies are doing in the U.S., Asia and Europe, far ahead of the pack.

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