Closed and Open Source Innovation Cultures in the Global Consumer Electronic Industry

Apple vs. Samsung – Analyzing Closed Source and Open Source Innovation Cultures in the Global Consumer Electronic Industry
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Apple vs. Samsung – Analyzing Closed Source and Open Source Innovation Cultures in the Global Consumer Electronic Industry
1. Introduction
Innovation is a fundamental source of growth in businesses. Organizations engage in innovations to extend growth lifecycles by offering new products and services to customers with value propositions. Innovation is not limited to products or services. Progressive organizations perform innovation in the business processes and models to maintain competitive advantages in an industry. Some innovations are sustaining, which improves business processes. However, some businesses introduce disruptive innovation that changes industry market practices and product needs (Boyles, 2022). Successful companies follow both innovations to secure market leadership and a customer base collectively.
Innovation is essential for businesses for adaptability, growth, and competitive advantages. The recent outbreak of COVID-19 worldwide is an example of innovation-based growth for the retail industry. Organizations changed business models and practices by introducing knowledge-sharing innovations for continuing operations under COVID-19 constraints. Most organizations fail to sustain the paradigm shifts in the initiative introduced by the pandemic due to a lack of innovation in the business processes and controls. Innovation offers customers desirability, feasibility, and visibility when making a purchase decision (Azeem et al., 2021). The retail industry is progressing towards growth and economic viability by introducing innovative practices in the products, services, and process controls to retain customers.
This paper will examine the innovation process in the global retail industry. The report will review the innovation practices exhibited by Apple Inc. (Apple) and Samsung Electronics (Samsung), two leading brands in the global consumer electronics sector. The analysis would further create an innovation roadmap for Apple by performing environmental scanning and identifying firm-level strategies.
2. Discussion
2.1 Apple Inc. and Closed Source Innovation
Closed source innovation (CSI) is an internal innovation process developed by a team. CSI would engage companies to define boundaries, build an innovation roadmap from the initial phase, and execute to practice. Companies with the CSI framework are likelier to avoid knowledge-sharing space in the business ecosystem. The system dynamics and business model simulation remains exclusive for the company instead of sharing with other supporting stakeholders and professional collaborates throughout the process controls (Yuana et al., 2021). Apple is a leading example of practicing CSI in its products, services, and business model.
According to Podolny and Hansen (2020), Apple is an organized company when practicing CSI in business processes. The innovation practices made Apple a USD260 billion company in revenue until FY2019. The company followed a conventional leadership process and business structure to embed the CSI system throughout the process controls (Podolny & Hansen, 2020). Apple follows a functional innovation process that eliminates external support for building product features, design, and value innovation. The company applies CSI by centralizing innovation and creativity at top levels, passing product designs and community management to middle levels, and delegating operational responsibilities to lower levels. Apple also exhibits zero manufacturing tolerance towards the value chain partners, which increases the CSI culture within the company (Podolny & Hansen, 2020). The overall process indicates that Apple is organized when practicing CSI in product development, service rendering, and process control management.
2.2 Evaluation of Innovation Cycle and Innovation Practices
Innovation is a strategic process for organizations to secure leadership and make future developments in the product and services. Organizations operating in a competitive business environment use innovative ideas and product creativity to achieve superior performance during industrial saturations and environmental challenges in a fiscal period. The top-management teams (TMTs) would collaborate with other hierarchical levels to influence innovation in the business processes (Cortes & Herrmann, 2020). Apple follows a systematic approach internally to nurture CSI practices for product development, design, and innovation during a business lifecycle.
First, Apple leaders and TMTs would exhibit deep expertise and attention to detail towards innovation while engaging in collaborative debate with middle-level teams. Communication would remain an integral function during CSI implementation. The middle-level team would provide market speculations and feedback from technological disruptions (Podolny & Hansen, 2020). The research and development (R&D) leaders would acquire market knowledge and conduct cost considerations to initiate the innovation design under feasibility. The R&D leaders are responsible for providing attention to details in the product design to justify the product price in the marketplace. The Chief Executive Officer (CEO) and Senior Vice Presidents (VPs) would approve the final product development based on the feasibility and deep expertise in the innovation (Podolny & Hansen, 2020). The overall innovation process indicates that Apple follows the CSI culture strictly without engaging external collaborators or support from the industry.
Apple would channel the CSI culture into the innovation cycle and integrate it into the product development process. For example, the R&D department would explore market gaps and areas for value creation to design upcoming models for iPhone and MacBook. The R&D department would gather facts, examine existing resources, and channel cost considerations by interacting with manufacturing facilities. The R&D process would increase product feasibility further by introducing new features, such as new software functions and Operating System (OS) performances, followed by considerations for environmental sustainability in the new products. The manufacturing facilities would operate under close coordination with the R&D department to avoid delays and glitches in the production process (Apple, 2022). Collectively, Apple would develop and introduce a new product in the consumer market, offering persuasive value propositions to customers for retention.
2.3 Samsung Electronics and Open Source Innovation
Open source innovation (OSI) is another approach to embedding creativity and innovation in products and services. OSI drew on internal and external knowledge acquired by a company. OSI is affordable for businesses and prevents complexities during the design phase. Innovators would perform detailed market research and build feasibility while gaining knowledge about innovation in the final product. The final product would be more relevant to industry practices and design features, removing commercial challenges for a company (Arsawan et al., 2022). Samsung follows and promotes OSI while innovating product and service designs to maintain relevance in the industry and avoid technological disruption in the long run.
Samsung initiated OSI by introducing the Open Compute Project (OCP), which gained support from leading tech companies like Facebook, Microsoft, Google, and International Business Machines (IBM). OCP allowed Samsung to become a leading OSI company to acquire hardware and software support from global partners. OCP prevented Samsung from delaying product launches, customer support, and other value-addition services necessary for the commercial success of consumer electronic products in the worldwide marketplace. OCP connected Samsung’s OSI culture with hyper-scale markets through support servers, efficient solutions, and flexible hardware procurement (Samsung, 2021). The OSI culture followed by Samsung is an essential strategy that ensures a competitive position in the global consumer electronics industry. Samsung competes with Apple globally by adopting a distinct innovation culture and strategic industry collaborations externally.
2.4 Nurturing Innovation Teams and Collaborative Processes in Samsung Electronics
Samsung officially introduced OSI culture in 2016 by adopting the Open Chain practice introduced by the International Standards Organization (ISO). Samsung joined growing communities in the digital landscape and consumer electronics sector to improve product features like automation, synchronization, cloud connectivity, and telecommunications. Customers using Samsung are unwilling to make a brand switch due to community collaboration created by the company through OSI (Samsung, 2021a). Samsung received support from the Linux Foundation, a non-profit organization (NGO) in the United States of America (US). Linux Foundation assisted Samsung and its OSI strategy by building an effective sourcing network. Samsung could connect to communities and market vendors easily while ensuring compliance with the ISO standards set for Open Chain projects (Samsung, 2021a).
Additionally, Samsung made necessary collaborations internally by engaging the company’s CEO and Executive VPs. The Head of the R&D Strategy department at Samsung was the prime representative to collaborate with the Linux Foundation while implementing the Open Chain project (Samsung, 2021a). The post-implementation allowed Samsung to connect with hardware vendors and software developers, such as IBM, Google, Microsoft, and Facebook. Samsung used Open Chain to acquire an Android system with official licensing for its products, such as televisions (TVs), washing machines, air conditioners, etc. The Android connectivity was wider than smartphones manufactured by Samsung. Besides, Samsung transformed its product line to smart controls by nurturing OSI culture in the business model (Samsung, 2021a). The OSI culture allowed Samsung to introduce value in its diversified product portfolio and provide a rationale to customers for exhibiting brand loyalty in the long run.
2.5 Innovation Technology Roadmap for Apple Inc.
2.5.1 Apple Inc. Environmental Scanning – PEST Analysis
2.5.1.1 Political. The American government imposed new regulations on the consumer electronics industry, particularly for importing new products and technologies into international marketplaces. First, the government announced the Supplier’s Declaration of Conformity (SDoC), a Financial Crime Compliance (FCC) authorization on equipment sold in the international market. Manufacturers like Apple and Samsung must provide SDoC of the spare parts inserted in consumer electronic products before exporting to other countries (Shen, 2022). The SDoC introduced political complexity for the consumer electronics industry worldwide.
Additionally, the American government introduced regulations for product labeling as a subcategory requirement of the SDoC. Manufacturers must insert product name, model number, telephone number, and necessary contact information for the customers before sending pr...