Best Practices

Best Practices


In my October 2016 column for LubesnGreases, I discussed Growth Lessons from Apple, remarking that our industry may wish to monitor Apples strategies to grow in an industry that is slowing down due to market maturation, if not saturation, in cell phones. To refresh your memory, here are the key Apple growth strategies that I referred to at the time:

Build curated design improvements into the regular cell phone upgrade cycle.

Focus on services (which at the time were growing 19 percent year-over-year).

Increase geographic penetration, such as into China and India.

Innovate into new devices and markets, such as wearables, while building on consumer brand loyalty.

While some pundits in 2016 were declaring that Apples best days might be behind them, this has not proved to be the case. Apple stock in 2016 was around $100 per share and by this year it has doubled. It is timely to revisit the Apple story and see what we can learn that is relevant to our industry.

Since 2016, Apple has continued to focus on evolutionary design improvements to the iPhone, and in 2017 they launched the iPhone models 8, 8Plus and X, followed by the XS and XS Max in 2018. What is striking is the considerable price increase that they have achieved over time with the iPhone: The average iPhone price was $793 in fourth-quarter 2018 versus $618 a year earlier. It has been argued that perhaps the iPhone top models have gotten too expensive, and this has led to Apple introducing some lower-priced models (such as the XR).

I think the lesson here for our industry is to take full advantage of pricing power where it exists due to premium technology and customer loyalty. Lubricants on their own may not be able to create an Apple-like ecosystem, but there are certainly situations where the technology is so superior or entrenched that it should be priced accordingly. Of course, it is also wise to be prepared with the back-up, more modestly priced product should the customer eventually decide that the superior product is not worth it, or if competition enters the space with a reasonable alternative. I would also note Apples focus on packaging as a worthwhile area for differentiation and attention to detail.

Also take note that Apples increase in iPhone pricing over the last several years has not actually translated into margin improvement, largely because they have channeled rising expenditure into research and development. We cannot ascertain exactly which projects are being funded as they keep this confidential, but it is likely that some of the funding is going into areas that have been telegraphed such as the connected car, wearables and healthcare initiatives, 5G cell phone development and services-all of which are part of their growth strategy.

This may also be instructive for our industry. Rather than reduce R&D as part of your efforts to maintain or grow profitability, consider maintaining or increasing R&D but redirect it to those parts of your business that have the most potential to grow your top line.

On the services front, Apple has ramped up activity, and this March they announced the introduction of a new streaming video service, a news service, a gaming service and a credit card. This builds on their continued success in increasing services revenue, which grew 27 percent in fourth-quarter 2018 over the same period in 2017.

Everywhere you look in 2019, there is evidence of growth in subscription services of various types. I believe this trend is relevant to the lubricants industry as well, but it is hard for me to identify the best opportunities in this space, especially due to the wide array of companies and markets in which readers of this publication participate. I suggest that you set up a brainstorming session in your company specifically to address what service or subscription opportunities may exist for you. Pay particular attention to the changing nature of vehicle ownership and what opportunities this may present for service offerings.

Geographic expansion remains an Apple objective and similarly for the lubricants industry. China, India and other growing economies should be a focus for global players or those who want to develop an export business. Like Apple, you should concentrate on increasing your brand presence in some of these growing markets. With the focus on improving air quality in these countries and the associated improvements in vehicle standards, there is a substantial opportunity to upgrade lubricant quality and improve margins.

Readers who are at the largest multinational oil companies should consider how well Apple has done to create an ecosystem-which creates considerable customer loyalty and stickiness-and go on to discuss what options you may have to build your own ecosystem beyond just lubricants.

Apples final strategy of innovating with regard to new devices and markets is particularly interesting, especially with their entry into the wearables market and more broadly into healthcare. This strategy has tremendous potential and could be a game-changer for Apple. Notably, they are also focusing their communications heavily on their respect for consumer privacy and trying to differentiate themselves from others in the social media space. The respect of consumer privacy is paramount if their devices are going to be obtaining or managing peoples private health data.

How is this relevant to the lubricants industry? First, consider what if any innovative projects your company has underway that are potential game-changers. If you are a medium to large company in a slow-growth industry with significant potential for disruption, you should be investigating a few such projects. Also note that consumer trust is an important trend to pay attention to. Consider what steps you are taking to protect your brand quality and customer information, and whether your corporate communications adequately portray this to your customers.

While Apple has had challenges in its history, I regard it as a highly successful company with a tradition of innovation and customer satisfaction. It is worthwhile to reflect on their strategies to grow and change in a slow-growth market.

Sara Lefcourt of Lefcourt Consulting LLC specializes in helping companies to improve profits, reduce risk and step up their operations. Her experience includes many years in marketing, sales and procurement, first for Exxon and then at Infineum, where she was vice president, supply. Email her at or phone (908) 400-5210.

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