‘In order to do a good job of those things we decide to do, we must eliminate all the unimportant opportunities.’
This was the marketing philosophy of Apple, Inc. [NASDAQ:APPL] in 1997.
It’s because of this philosophy that Apple is still here today.
In 1985, Apple made their worst mistake. They fired their co-founder Steve Jobs. In a speech given at Stanford University, Jobs said:
‘I was out — and very publicly out. What had been the focus of my entire adult life was gone, and it was devastating.’
It wasn’t until July 1997 that Jobs came back to Apple. But what he came back to was a business that was starving. Apple only had five weeks’ worth of cash left. Jobs went to work immediately. He began to streamline Apple’s product range.
Apple had wasted millions of dollars on non-core products, including printers, servers and digital personal assistants. Jobs tossed aside 70% of products made by Apple and focused on the 30% that was generating cash.
This idea to streamline the business didn’t just save Apple. It was also the basis for some of Apple’s most famous products.
Why do you think the iPod was such a success?
Apple discovered that 20% of the features on an MP3 player were used 80% of the time. So they decided to only focus on the 20% of features that most people used, improving on them to outmatch their competitors.
By removing rarely-used features, Apple was actually making the MP3 player more consumer-friendly. As you no doubt know, they soon came to dominate the market like never before.
The same principle applies to the iPhone. Commentators initially wrote the iPhone off. It didn’t have many of the features the BlackBerry had.
But the iPhone’s simplicity was exactly the reason behind its success. The iPhone focused on the 20% of features that everybody used more than 80% of the time. Apple made these features fun and simple to use, presenting them in a product that was both thinner and lighter than their rivals.
Less really is more. Even when it comes to investing.
You don’t need a university degree or fancy trading software to be a successful investor. In fact, you don’t even need to be that smart. Warren Buffett regularly tells people that an IQ of about 120 is more than enough.
All you need to do is focus on what’s important.
OK, so what’s important?
Earnings, assets and cash flow.
All you need to focus on is the state of a business and its future prospects. That means you shouldn’t concern yourself with where global growth is heading, or what interest rates might do in the future. To be a successful investor, all you need to do is understand the business and its intrinsic value.
Junior Analyst, Markets & Money
PS: Investing in equities isn’t just about picking the right stocks. It’s also about avoiding the wrong ones. Vern Gowdie, our award-winning financial adviser, believes there are five stocks you need to avoid.
In his report, ‘Sell These Five “Fatal” Stocks Now’, Vern reveals the five biggest threats to your wealth, and how you can avoid them.
To get your free copy of Vern’s report, click here.