This study — Who Captures Value in a Global Innovation System? The case of Apple’s iPod — is one of the best I’ve heard of in a long time. The researchers traced the parts and assembly of the iPod and attributed the value generated by each step by part and by country. A few key stats: of a $299 video iPod, Apple gets the largest piece of the pie: $80. The other portions are relatively small; China only gets $4 for assembly.
Hal Varian of the New York Times made this key observation about how Apple’s capabilities generate their benefits:
The real value of the iPod doesn’t lie in its parts or even in putting those parts together. The bulk of the iPod’s value is in the conception and design of the iPod. That is why Apple gets $80 for each of these video iPods it sells, which is by far the largest piece of value added in the entire supply chain.
Those clever folks at Apple figured out how to combine 451 mostly generic parts into a valuable product. They may not make the iPod, but they created it. In the end, that’s what really matters.
I’m encouraged by studies that highlight the value of concept design given my work in this area. Here’s a question for you: how would you most like to learn more about concept design: a book? videos? something else?