An Analysis of Digital Marketing through Disruptive Innovation of Apple Inc.

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An Analysis of Digital Marketing through Disruptive
Innovation of Apple Inc.
Kishore Prabhala, Research Scholar
Director, Prabhala PG College for Women,
Opposite ANU Mens Hostel, Nagarjuna Nagar – 522 510 Gutur Dist., AP
MSEE, Georgia Institute of Technology, GA USA-1989
BSEE, Purdue University, USA – 1981
prabhalapgcollege@gmail.com
Prof. T. Umamheswara Rao
M. Com., M.B.A., M.A.(Socio.), M.A.(Phil), M.Sc .(Psy.), B.L., Ph.D.
Registrar, KL University
Professor, KLU Business School
KL University, Vaddeswaram, 522 502, Guntur Dist., AP
Abstract
For generations novel ways and new products have disrupted the way people and
society runs. Penicillin had tremendous impact in the society over hundred years ago, a rare
innovation led to the beginnings of antibiotics. Telephone changed the way people
communicate, Television reshaped entertainment in much bigger way, home appliances made
many run better houses, flying has been astounding, but computers and internet has been lead
greater innovations very few would understand even now. Digital publishing has dominated
human life in last ten years. Mobile technology has leapfrogged the imagination of human
even in under developing countries into greater heights. Photos need not to be printed just like
in early 2000s as over 90% Indians have mobiles with a camera. The innovation process has
been leading disruptive product development such as Xerox Photocopier, Sony Walkman,
Apple iPod, IPL Twenty20, Nokia N Series, Apple iPhone etc. This paper examines the
mechanisms of disruptive innovation deployed through digital marketing by the biggest
public limited firm Apple Inc., USA.
Key Words: Disruptive Innovation, Digital Marketing, Computer, Internet, Mobile
Introduction
Information Communication Technology, ICT has been a great source of innovation
around the globe for past 50 years. Though Penicillin discovery by Fleming made a
remarkable impact in advances in therapeutic medicine but Bell discovery of telephone
created a new horizon very few imagined into early 1940s. Knowledge has been diffused
through the internet at much faster rate than many expected in early 1980s.
Computers industry had created a great resource of innovation in early 1950s as IBM
dominated the mainframe computer sector and Digital Equipment Corporation (DEC) through
VAX PDP 11/70 became a giant in mini-computer sector. DEC servers began to grow and
facilitate internet usage. Historically, The Internet Protocol sends data or packets from source
host to destination host with fragmentation and reassembly as defined by Vint Cerf and Bob
Kahn in 1974. Later this was called Transmission Control Protocol and Internet Protocol
(TCP/IP) and enabled the growth of Internet among defense, scientists and academia.
Source: Vinton G. Cerf, Robert E. Kahn, "A Protocol for Packet Network
Intercommunication", IEEE Transactions on Communications, Vol. 22, No. 5, May 1974 pp.
637–648
Personal computers appeared with a combination of players from Commodore, Apple
and Tandy Corporation through their Radio Shack stores, so called “Trinity”, as
microprocessors from Motorola, Fairchild, Zilog, National Semi Conductor, and Intel power
the personal computers with memory, monitor, keyboard, floppy drive and hard disk in 1977.

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Laptops began to appear in 1981, though very expensive, with internet connectivity.
Businesses flourished with advent of World Wide Web (WWW) and browser to entice
customers with their products through websites and email. Significant hardware and software
innovations enabled mass communications and even allowed consumers to have digital
subscriber line (DSL) to access internet by late 1999s.
Computer power, processing, storage and access have driven innovation in various
fields as advancements in microprocessor, memory and hard disk still getting better and faster.
The PC revolution created 267,000 employment with over 3000 firms flourishing in silicon
valley by 1990 from a less than 100,000 employment in growing 830 firms in 1975.
Source:http://www.spur.org/publications/urbanist-article/2010-08-01/waves-
innovation
By 1995 mobiles have processed information technology with phone calls as well as
Short Message Service (SMS). According to International Telecommunications Union (ITU),
mobile began grow from 91 million in 1995 to 740 in 2000. Digital camera has been a key
feature that drove mobiles penetration to a higher level even in third world country. By 2002
Mobile subscribers of 1,157 million outpaced the total users of fixed telephone lines of 1,083
million. In Indian, fixed line telephones have seen negative growth in last 10 years. Internet
penetration reached a modest 16 million in December, 1991 but raced to 248 million by
December 1999. By August 2001, world has seen a half billion internet users and one billion
plateau was reached in 2005.
Television programs were edited through computers, advertisement campaign was
made possible with computer animation. Movie or cinema industry has seen stellar impacts
through Computer, Internet and mobile usage. Digital Publication has led greater innovations
in Television, Print and Outdoor media as digital marketing began to shape the world. Storage
technology went from 8 inch floppy to 5¼ to 3½ and decimated by Compact Disc or CD
ROM which in turn dominate by flash drives. Cathode Ray Tubes (CRT) had been outdated
by LCD and LED display by early 2010 in developed countries. Mouse or pointers or virtual
key boards have become common input. Dot matrix printers gave away to Ink Jet printer to
black and white Laser printers. Colour laser printers established in a bigger way but low end
Ink Jet printer still surviving. Banner Printing has dominated through computer usage.
Smart phones and tablets along with feature mobile allowed explosion of
communication interface with social media. Facebook has more than 2 billion users and
Twitter has over a billion users.Photo printing had been decimated by the features of dual
camera mobiles. Video conference has been another greater innovation only few people in
India use on a daily basis.
Source: http://www.internetworldstats.com/emarketing.htm
Figure 1 show sale of personal computers (PC) at the initial stages by these before
IBM entered household innovation with IBM PC with 8086 microprocessor from Intel,
DRAM and DOS from Microsoft in 1980. Apple sold over 200,000 Apple II computers in
1980 and 1981. Atari had similar numbers but Tandy sold below 200,000 in these two years.
Others have sold over 200,000 in 1980 and over 400,000 in 1981. The figure clearly shows
how small IBM led PC in 1981, in blue colour n increase in the number of Valley firms, from
830 in 1975 to 3,000 in 1990, with an increase in employment from 100,000 to 267,000.
The new market of PC has reshaped the economies of US, Japan, Europe and some
developed countries. Access to internet through World Wide Web (WWW) by Dr. Tim
Burners Lee and browsers such as Netscape Navigator, Internet Explorer, etc propelled PC
growth and made the Graphic User Interface easier through Windows operation system in
1991 from Microsoft, a copy of Mac OS from Apple in 1984.
Source: http://www.retrocomputing.net/info/siti/total_share.html

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Figure 1: Sale of Personal computers in quantity of thousands across the globe
Table 1: Worldwide Computers-in-Use, in millions
1980 1985 1990 1995 1999 2000 2002 2005
5.0 35.2 105.6 237.6 459 543 7226 1044
Source: http://www.retrocomputing.net/info/siti/total_share.html & International Data Corp.
PC market defined by IBM, Intel, and Microsoft, so called “Wintel”, had created a
major product line and only MAC from Apple survived. As shown in table 1, more than a
billion PCs were sold worldwide between 1981 and 2000 but USA had a commanding share
over 50% which began to decrease from 2005.
As shown in figure 2, Commodore also captured over 40 percent market with C64
model by 1983 but the domination IBM based PC captured over 50 percent market by 1985.
Apple II had a market share around 10 percent even though it released a windows based Mac
in 19894 with mouse. Microsoft released a working model of Windows 3.1 only in 1991
which fueled PC growth into millions per month. The market share of IBM based PC shaped
the entire globe with diffusion of innovation because of applications like word processing,
spread sheet, presentation and database. Communication with email and browsing through
internet enabled faster information processing and exchange of ideas in society, academia,
government and business.
Figure 2: Share of Personal computers from various firms in globe

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Innovation
According to Howell & Higgins, 1990, it is a process by which entrepreneurs convert
opportunities into marketable ideas. Peter Drucker, “Innovation is the specific instrument of
entrepreneurs, the means by which they exploit change as an opportunity for a different
business”. There are several types of innovation. Incremental innovation is to take an existing
idea and make it faster, better, and/or cheaper versions of existing products. Incremental
innovator must understand specific customer needs.
Architectural innovation leaves core design concepts untouched but changes the way
in component linkage. Components remain unchanged, but the architecture of module
connection is the innovation. The essence of an architectural innovation is the reconfiguration
of an established system to link together existing components in a new way [Henderson and
Clark, 1990]. Modular innovation is focused on new components and modules. Not disruption
of the linkages between modules. Radical innovation or Disruptive innovation uses new
modules and new architecture to create new products. The Internet is an example of a network
system with new modules and new architecture. Disruptive innovation transforms the
relationship between customer and supplier, restructures markets, displaces current products,
and often creates new product categories [Leifer et al., 2000]. Disruptive products also
introduce a new value proposition [Christensen et al., 2004]. For example, e-mail is disruptive
application on the Internet and SMS is a disruptive application with mobile.
Disruptive Innovation
The recorded music industry grew in popularity even in India with vinyl discs until
about 1980. Innovation of cassette tape with cost, size and recording caused a massive shift
from vinyl records to tape. By the late 1980s, better sound quality, play many times and
instant access to tracks compact discs (CDs) decimated tape cassettes, even movie industry
used CD for storage or backup. The CD business had been greater growth since 1995 and the
Internet was gaining momentum in developed countries. Peer-to-peer music file transfer in
mp3 format reshaped the entire music industry with Apple launching the iPod in 2001 along
with online store called iTunes. These two are still standards in music distribution and sales.
In a dynamic economy, companies need to reinvent their business arrangements or end up
becoming irrelevant [Knopper, 2009]. Because of iPod, Sony stopped producing CD based
Walkman in 2008.
Joseph Schumpeter (1883–1950) described the new entrepreneurial process “Creative
Destruction” while he was a Professor at famous Harvard University in USA from 1932 until
his death in 1950. “Capitalism, Socialism and Democracy” was a great book in which he
discussed about dynamic disequilibrium, creative destruction, and irrelevant perfect

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competition. He argued that the firms’s focus should be on technological competition. He
argued that “Creative Destruction” revolutionizes the economic structure from within,
destroying the old structure and creating a new one. Over past 80 years, only IBM and
Hewlett-Packard have continued to be leaders of technology companies while many firms
were brought by others or decimated or products were discontinued
Innovation and Technology
Firms capitalize on changes, technology diffusion, and challenges faced in the society.
Technology diffusion includes devices, artifacts, processes, tools, methods, and materials that
can be applied to industrial and commercial purposes. For example, Semiconductor
technology and process was used to design and manufacture of microprocessors by Intel,
Windows operation system was created initially by Apple in 1984. It was imitated and
distributed by Microsoft in 1991 for proliferation of personal computers with software
applications in industry and the home. In late 1990s, mobile device was launched by Apple in
the Phone and reshaped the entire world with smart phone technology though Blackberry was
dominant.
Conclusions
The iPod—A Disruptive Innovation
The iPod was introduced in 2001 with an overall performance is better than CD or
cassette based electronic device. Eventually, the introduction of the iTunes store enabled the
iPod to succeed. The iPod became a music business, not a computer business. The online
music business took off on the positive cycle. The size, charm, and elegance of the iPod
device facilitated a rapid growth of the business. The growth has reached 100 million unites
by 2004. Anybody can produce music and put in iTunes with an agreement with Apple. As
sales grow they will get their agreed financial reap. Excellent portability and easy-to-use
controls also were a positive factor for success. In a way, the iPod became a modern, personal
jukebox. The iPod was a significant disruptive innovation
World is moving toward a destructive innovation of mobile technology as fixed
internet is going to be decimated as mobile users grow across the developing and under
developing countries in millions. There is only a penetration level of less than 50 percent. But
as shown in table 1, the mobile is growing enormousely among internet users and billions of
applications have been produced every year. Even mobile may be a huge storage point for
individuals as memory is going into tera byte era (1,000,000 meg bytes).
Table 1: Fixed and Mobile Internet users
Source: www.gsmaintelligence.com, 2016
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