September 26, 2016

Third Wave Strategy in Practice: What is the strategic thinking behind the Apple Car Project?

Apparently, Apple’s ‘next big thing’ is a car, but no one can confirm what it will do or look like. Amidst a sea of speculation, journalists have typically resorted to hearsay, opinion and gossip as a means of reporting this new venture. No one has offered any insight from a logical, strategic perspective. In the face of solid evidence - an estimated budget of $US7b+ per annum and some 900 people assigned to the car project ‘Project Titan’ - there does seem to be substance to the conjecture. We provide here a commentary on the strategic aspects of such a venture.

In conducting our analysis, we apply a structured approach to strategy, one which we treat as a system and operates within the construct of a fully integrated Strategic Management Framework. The system starts with Vision and Mission and an articulation of Long Term Strategy which is presented in the form of a Strategic Architecture (illustrated below).

strategic-architecture-small

The center piece of the Strategic Architecture is a Strategic Intent. It describes the underlying purpose of firm specific strategy. In Apple’s case this is purportedly “to make products that make a better world for the users”. Stakeholder Outcomes that appear at the top of the Strategic Architecture describe the desired financial and non-financial outputs from a long term strategy. In Apple’s case this is unlikely to be anything less than a product that meets the philosophy described in its strategic intent, and delivers a revenue stream that is in the $US Billions. It is though, the other elements of the Strategic Architecture that provide us with the greatest insight into the current status of Project Titan.

As with all entrepreneurial ventures, we find that in this early stage of the product life cycle Apple has most likely been focusing on activities deemed essential to build the resource base upon which its car production competences can be based. As illustrated, we describe these as Transforming Activities. These represent the projects and programs that are undertaken to establish a strong and sound resource base. Just as Steve Jobs worked with Steve Wozniak to build a competency in computer manufacturing, so too is Apple now deploying nearly 900 Steve Wozniak’s to design and develop the first Apple car. Once established, Apple will not only need to possess a competency in car manufacture, it will also need to maintain its Transforming Activity capability in order to maintain and grow that competency over time.

It is not in Apples DNA to consider any form of product and service offering that is not encapsulated within the dynamics of an ecosystem, one that Apple alone can control. We saw this with the iPod and iPhone which were both much more than a sound device or mobile phone. Apple is though, happy to outsource the operational components of manufacturing if that leads to greater efficiency and effectiveness. Right now therefore, Apple appears to be teetering on the edge of that critical juncture where it must decide exactly what the design of the ‘car’ will be. Just as importantly, it must decide how it will retain control over its resources; that includes a competence in the manufacture and distribution of cars.

All this takes time, especially when it is being conducted on the brink of the Third Wave, Super Technological Revolution; in an era of digitization. These are the areas we believe that Apple is seeking support, advice and a possible joint venture with established car companies. Examples of advanced, digitized technology that a combined Apple and automotive company would understand between them would include:

  • 5G Mobile technology: this will deliver a significant improvement to the quality of mobile communications that relate to entertainment and autonomous driving capabilities.
  • The internet of everything: similar to the internet of machines, integration with transportation technologies will readily transform our everyday lifestyles and work practices.
  • Three-dimensional printing using advanced forms of carbon fiber composites and ceramics (of which McLaren is a specialist): this will transform costs of production, ease of part manufacture and strength and durability of vehicles.
  • Robotics and Artificial Intelligence: To be deployed to both the production process and
  • Advancements in renewable energy AND driverless cars: this will transform the way we view car ownership, there will no longer be a need to buy a car, but rather, rent it by the hour.
  • Shared transport: Maybe Apple is considering the development of a mini bus/van? This would allow trip optimization and could be more useful to consumers than a traditional 5 seat car.

Returning to the Strategic Architecture, we can now conclude that at this stage, Apple will be very concerned with, and focused on Inside Out strategies and less concerned with the Outside In strategies of Market Positioning and Differentiation that are depicted in the illustration. Although a potential merger or joint venture with BMW or Mercedes sounds logical from a marketing perspective, we know that Apple already has a significant reach into its consumer focused markets through its current strengths in that area. Although Apple’s market position for its ‘car’ would no doubt look a little fuzzy at the moment, clarity will be realized once decisions regarding the adoption of some of the things we discussed above are finalized. Assuming Apple is the first to adopt and deploy some of these features, there will no doubt be a number of points of differentiation that they will be able to offer further deploy in order to hopefully ‘stun’ their customers.

Where does the foregoing take us? While we suggested that reporters and analysts don’t appear to have an understanding of Apple’s strategy with regard to Project Titan it is our contention that Apple probably hasn’t much of an idea either, at least not at the moment. There is nothing wrong with that, they are still engaged in the design process and can’t be expected to know. What would be useful is for Apple to acknowledge that and engage in broader based communications helping all stakeholders to appreciate the challenges they face at this period of the Apple Car life cycle.

If we understood the general direction of Apple strategy better, we would not be alarmed about discussions with Mercedes or BMW. After all, it is likely that all Apple is seeking to do is to build a production capability at the lowest cost and greatest efficiency. This would be one that includes advanced technology in the form of those listed above. Similarly, McLaren is an expert in parts and automotive manufacture and the use and application of carbon fiber composites – all good stuff for Project Titan. Regrettably we don’t know that is the purpose of their discussions for sure. We do at least have access now to a more structured approach to the analysis and insight generated through the format of the Strategic Architecture.