As if the release of the new iPhone 5 weren’t enough to jolt smartphone users of the world into action, Apple preceded its debut with an operating system upgrade. iOS6, unveiled two days before the slimmer and longer iPhone 5, left consumers and the media polarized. But one update everyone seemed to agree on was the subpar functionality of the new Apple Maps application.
As everyone now knows, iOS6’s developers replaced Google’s Maps application with Apple’s proprietary mapping utility, developed through company acquisitions and with help from TomTom. Initial reviews noted the lack of integrated transit directions (a default in Google’s Maps), location inaccuracies, missing landmark information, and imperfect (even melted!) 3-D views.
While the critical backlash hasn’t dented sales of the fifth-generation iPhone, we can apply this misstep to a larger enterprise issue: How should companies evaluate which functions are better outsourced and which should be maintained in-house? These often mission-critical decisions—when made out of haste or hubris—can be enough to put brand reputation and loyalty at stake.
Why do firms decide to bring otherwise outsourced functions in-house? In the case of Apple, clearly this was a message to its competition. Google’s Android devices are one of Apple’s top opponents in terms of market share. And at face value, giving its main competitor prime real estate on the home screen of tens of millions of iPhones and iPads everywhere seemed like an egregious concession of free, competitive advertising. But when it came time to execute on the strategy of bringing a previously open-sourced application in-house, it would appear that Apple’s product development team had neither the time nor skill set to be successful, thus propelling the brand into an unwanted spotlight.
Considering your company’s competitive landscape undoubtedly has a rightful place in any business-strategy decision, but in order to be effective, a strategy needs to incorporate other factors.
Beyond the inherent desire to keep competitors out of your product offering, there is a brief but crucial two-point checklist that business managers and C-level executives should use to successfully evaluate the potential to outsource or internalize: cost and competency.
Tackling the money issue may appear straightforward. A concise analysis of expenditures for building a product or service internally (talent acquisition, resources, technology, etc.) can be compared side by side to the same list for outsourcing prices, and in many cases, outsourcing is the cheaper option. But as we move from the textbook definition of "cost" to its real-world meaning and consider risks of quality control and undesirable outcomes, a more complex metric presents itself. What is the cost to the brand equity to deliver an inferior product or service?
This brings about the second and arguably more significant point of evaluation in these decisions: knowing the core competency of your company—"core" meaning a singular (if not more than three or four) strong point that differentiates your brand and maintains its competitive edge. If executing a particular strategy requires certain labor capabilities or technical proficiencies that do not fall within your core competency, outsourcing is the safer, more sensible route.
Apple’s strong point arguably is, and has always been, creating an elegant aesthetic and a user-friendly experience. The inner workings of digital cartography don’t directly fall under either of these camps. Based on the public’s consensus of the revamped maps, that much is clear.
There is no perfect theorem or quantitative test that accompanies this step. Gauging your business’s competency is as simple as recognizing what it is that you do best and consistently taking measures to highlight and build upon those strengths. Brands that excel at one thing in particular can charge a premium for the value-added; this becomes less true when product quality decreases. Before stepping beyond the boundary of your organization’s strength, managers need to ask themselves, "Does this make sense for us?"
Apple has not been the only household name to wrestle with a corporate identity crisis. Last June, Google came under similar heat for the launch of Google+, the social network touted to go profile-to-profile with Facebook...except it didn’t. Adding connections to "circles," navigating the pseudo-wall—none of it was seamless or innovative enough to compel nearly one billion existing Facebook users to switch.
In order to maintain brand consistency, a fundamental principle of corporate strategy is that you can’t be all things to all people. It’s simply not practical from an execution perspective, and it muddies the message of how customers view your identity in the marketplace. This harks back to recognizing the key strengths of your business, but it also hints at the easily neglected divide between operational capabilities and customer-facing strategy.
Whether it was a looming deadline, an understaffed development team, or missing information, Apple—despite being a company that has historically exceled at delighting its end users—wasn’t able to deliver on its customer requirements with Apple Maps. And this particular case illustrates the outcomes that can result when companies choose to embark on strategies that are inconsistent with their operational capabilities to execute.
Ultimately, Apple, like Google before it, will not crumble from the backlash; surely Apple has new builds of the app already under development, and it’s unlikely that fans of its products will defect due to the shortcomings of Apple Maps 1.0. But in other circumstances, similar decisions can have much higher stakes, and companies of any size would be wise to learn from this faux pas.
Choosing to bring a new capability in-house is an exercise in honesty and objectivity, in terms of evaluating your own corporate identity and value proposition. And it is a decision that is best executed by taking personal pride (and even impatience) out of the formula. While some strategic moves may seem like a quick way to win a battle, presenting the best offering will ultimately win the war.
Liz Larsen is director of consulting services at Navint Partners.
[Image: Flickr user Simon Grubb]