To me as the Marketing strategist, this year was full of learning. I have focused more on researching and applying timeless marketing principles instead of just tactics. When we become strong in the fundamental principles and put it in action, we become a powerful force in the industry.
80/20 is one such principle. I . Here, I have tried a case study which Sri Krishna, Founder of Open Designs ( a Design firm in Chennai) asked after reading the earlier post. Please read and share if you think it would benefit others.
Here we go..
After Steve Jobs returned to Apple as an interim CEO in 1996/97, the company was struggling and was starting at bankruptcy around this time with overburdened product portfolio. The product line was a labyrinthine with dozens of models across four vague categories (Macintosh, information appliances, printers and peripherals, and “alternative platforms.) operating in a commoditized market (with no product differentiation and stiff competition). On February 5, 1996, BusinessWeek put Apple’s famous trademark on its cover to illustrate its lead story: “The Fall of an American Icon.”
In short Apple was in mess in 1996.
Did you know what Steve Jobs did after his comeback to Apple?
Many observers and analysts thought Steve Jobs would develop advanced products; he did an unexpected thing which any CEO would dare to do.
The following are the observations of Richard Rumelt, a business strategist on Apple’s turnaround in his book Good Strategy/Bad Strategy
“Within a year, things changed radically at Apple. Although many observers had expected Jobs to rev up the development of advanced products, or engineer a deal with Sun, he did neither. What he did was both obvious and, at the same time, unexpected. He shrunk Apple to a scale and scope suitable to the reality of its being a niche producer in the highly competitive personal computer business. He cut Apple back to a core that could survive.
Steve Jobs talked Microsoft into investing $150 million in Apple, exploiting Bill Gates’s concerns about what a failed Apple would mean to Microsoft’s struggle with the Department of Justice. Jobs cut all of the desktop models—there were fifteen—back to one. He cut all portable and handheld models back to one laptop. He completely cut out all the printers and other peripherals. He cut development engineers. He cut software development. He cut distributors and cut out fi ve of the company’s six national retailers. He cut out virtually all manufacturing, moving it offshore to Taiwan. With a simpler product line manufactured in Asia, he cut inventory by more than 80 percent. A new Web store sold Apple’s products directly to consumers, cutting out distributors and dealers. What is remarkable about Jobs’s turnaround strategy for Apple was how much it was “Business 101” and yet how much of it was unanticipated. Of course you have to cut back and simplify to your core to climb out of a financial nosedive.”
(The underlined area in the above paragraph illustrates 80/20 Thinking by Steve Jobs)
Here we can observe 80/20 thinking at work.
– Steve Jobs knew that only few products were making profits. So, he retained those products and stopped manufacturing others which made losses.
– Most of the products in the Apple’s inventory at that time were making huge losses, so he cut distributors and reduced them from six to one.
By doing so, he saved Apple from the brink of bankruptcy and also brought the renewed focus and energy back in the company.
You can observe 80/20 thinking at work even now in Apple’s Marketing Strategy;
80/20 product portfolio
– Their product portfolio is very simple and with a clear market segmentation. Broadly, the company has just 4 product categories
iPhone (Smart phone market)
Mac (Desktop market)
iPad (Table market)
Apple Watch (Smart watch market)
80/20 Profitability
This focused and simpler product portfolio has helped Apple to cut down its costs (manufacturing, distribution) and improve its profitability. (According to Fortune magazine 2017, it is the most profitable company in the world ($45.6 billion).
80/20 advertising
Observe their advertisements for iPhone (Benefit based simple message. No clutter). They believe only 20% of the ad copy in advertisements interest most of the buyers, so they avoid all unwanted stuff and made it clear. Again 80/20 at work
If applied, 80/20 thinking and analysis can bring breakthrough results in your business.
