What you can learn from Apple

Apple stock is at an all-time high.  And how inspirational is the story of Wozniak and Jobs working in their garage, inventing the home computer?

What is most exciting about Apple, however, is the way that Apple has almost eliminated the need for assets or fixed costs.

Think about the old record business.  (I’m old enough to call them records.)  As a kid, I remember going to Korvettes in West Hempstead, Long Island to buy records.  Looking for the latest Chicago or Elton John album?  It was hit or miss.  Either the store had it or they didn’t.  If they didn’t have it, we would trek out to Sam Goody in Valley Stream.

The record business must have been rough.  Each store would have to keep enough of the right albums in stock to satisfy customers (which means anticipating customers’ fickle tastes, ordering the albums in advance, and investing money in inventory). If the retailer doesn’t stock the right album, in the right format (LP, 8-Track, Cassette, whatever), for the right customer at the right time, then no sale can be made.

Plus, retailers had to pay the full range of fixed costs: rent, utilities, salaries and wages.

Apple rendered this model obsolete, selling millions of different albums and songs off a single website, and delivering the product over the Internet.  And to do this, Apple doesn’t need to stock anything.  It doesn’t need to pay rent, either.

Better yet, Apple has brought the same model to movies, TV, books and software (“apps”).  Textbooks are next.  Apple can sell millions of products, without risking any investment in inventory.  Now I can find whatever album (or movie or TV show or book) I’m looking for, without leaving home.  And the price, inflation-adjusted, is probably about a third of what old vinyls used to cost.

Build your business the same way.  Think productivity – how can you make more money, investing fewer assets?

[Image: Apple III computer by Alexander Schaelss at Wikimedia Commons]

About Mark P. Holtzman

Chair of Accounting Department at Seton Hall University. PhD from The University of Texas at Austin. Worked at Deloitte's New York Office. BSBA from Hofstra University.

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