Innovation Success and Failure in America By: Christian Hammerdorfer and Tori Churchill

Innovation FAILURE

Borders: The Beginning 1971 – Tom and Luis Borders open the first store in Ann Arbor, Michigan 1992 – Kmart acquires Borders and merges it with Waldenbooks 1997 – Borders goes international 1998 – Company launches Borders Online, establishes Borders (UK) Ltd 2001 – Borders outsources online operations to Amazon 2004 – Company agrees to have Seattle’s Best Coffee operate cafes in its U.S. stores

The Last Years 2006 – Borders turns a profit for the last time 2007 – 2008 – Company closes or sells all foreign stores 2009 – Borders offers free Wi-Fi in stores 2010 – Company creates eBook store 2011 – Borders files for bankruptcy, closes stores, liquidates assets

Positive Moves By Borders Large inventory Excellent inventory system Borders Online Self-service kiosks Borders Reward Card Agreement with Seattle’s Best Coffee Free Wi-Fi

Borders Focused on variety Used software to determine which books to sell Invested in CDs/DVDs Third party e-reader Expanded physical plant Refurbished stores Outsourced online sales operation to Amazon Barnes and Noble Focused on lowest price Sold best-sellers and bargain books Invested in online sales Developed own e-reader (Nook) years before Borders hopped on board Handled own online sales operation Offered eBooks almost one year earlier Offered free Wi-Fi 6 years earlier

So why did they fail? Product Delayed introduction of e-readers, website and online retail, Wi-Fi Mistake of focusing on CDs/DVDs Price Higher than prices of competitors Place Outsourced online sales operation to competitor Amazon Too many stores that were too large Promotion Lack of promotion

Other Reasons for Failure Targeting Mass marketing No direction Positioning More for more Differentiation Products didn’t stand out from Barnes and Noble or Amazon products Borders didn’t pay attention to the changes in the market until it was too late to introduce new and successful products.

Innovation Success

Apple Inc. One of the most successful technology companies worldwide. 60 million Mac users worldwide, 23% market share for personal computers iPod has 78% market share for portable music players, with over 300 million sold iPad has 75% market share for tablets iTunes is the number 1 music store in the world Apple has not always been so successful, though.

First Rise and Fall of Apple In 1985, Jobs was relieved of his management duties. The introduction of the Macintosh in 1986, and the PowerBook in 1991 made Apple very successful. For a time, Apple was the market leader in personal computer technology After 1993 though, Apple began to slip, launching a long list of failing products, and losing market share to Microsoft In 1996, the company was on the verge of bankruptcy, and Jobs was brought back into the company.

Return to Profitability Between 1997 and 2005, Jobs returned Apple to a profitable state. The iMac, featuring modern technology and modern design, was released in 1998 Purchased several companies in digital production on the professional and consumer level. In 2001 the first Apple Retail Store and iPod were announced, followed by the iTunes music store in 2003, which has become the largest music store in the world. In 2006 the switch to Intel processors was announced, boosting Apple’s market share of Personal Computers to 8%, but still far behind other manufacturers using Microsoft.

Massive Success The iPod marked the beginning of the Apple revolution In 2010, Apple surpassed Microsoft, valued at $222 billion and $219 billion, respectively In 2005, Apple Computers Inc. became Apple Inc., shifting focus from computers to mobile devices Windows is still the most widely used operating system, but through product differentiation, Apple has put their products into the hands of 1 in 3 Americans –iTunes –iPod –iPhone –iPad

Why has Apple been so successful?

Marketing Strategy Empathy: Maintain an intimate connection with customers feelings, understand their needs better than any other company Focus: Focus on main goals, eliminate unimportant opportunities Impute: People DO judge a book by its cover. – Make sure packaging, design, and everything else supports the superior level of the product.

Marketing Mix Product –Focus on select products –Focus on perfection Price –Premium pricing strategy –Sells to upper quintile of consumers –Focus on a superior product, not on competitive pricing Place –Apple Retail Stores –Authorized Retailers –iTunes Store Promotion –Less is More advertising –Communicate –how product is –used

Product Development No market research. Apple hires a small group of incredibly smart people to develop their products. Small design team Cooperation between Engineers and Designers 1. Brainstorming Meeting 2. Production Meeting 3. Pixel Perfect Mock-ups

Vertical Integration Apple owns it’s entire system, OS, Software, and Hardware, keeping them completely independent. A single executive calls the shots for every single aspect of every product, allowing for the seamless user experience.