I often write about how companies can gain dominate markets by leveraging points of strategic control. Apple’s control of sapphire glass (see my earlier post below) was one classic example that has seemingly gone awry not for strategic, but for operational reasons. Recent developments demonstrate the appropriateness of the age-old question “Which tire on the car is most important?”
Indeed, Apple may have to delay the launch of its steel and gold Apple Watches due to quality issues of the new furnaces at its supplier’s Mesa Arizona plant. Apple’s chief supplier of sapphire crystal, GT Advanced Technologies (GTAT), according to court papers, finds the terms of its contract with Apple “oppressive and burdensome”. The short version of a long story (http://fortune.com/2014/10/11/apples-got-a-mess-on-its-hands-in-mesa-arizona/ ) is that GTAT committed to building larger furnaces to meet Apple’s scale requirements only to find out that the quality of the sapphire produced by the furnaces didn’t meet Apple’s quality requirements. The end result may be Apple spending as much as $1billion to upgrade the furnaces at GTAT’s Mesa facilities in order to get production of its higher-end Apple Watches out reasonably close to on time.
What started out as a brilliant way to secure unrivaled volume and quality in sapphire glass may have ended up as a huge headache and investment for Apple. It goes to show that you are only as good as your weakest link … get the strategy right and if your operations and production goes awry, the strategy won’t matter …
Even with points of Strategic Control, the “best laid plans of mice and men often go awry” … is no less true for Apple and sapphire glass!
Post note: Thanks to Jason Lambert for pointing this out!