company where the company's CEO noted, "Trees don't grow to the sky
forever." The company's core business was strong, but the CEO told the
group it had to innovate to sustain success in an increasingly turbulent
environment.
A couple of days later, I was talking to my colleague Matt Eyring. He
said, "So Scott, you've been a big supporter of Apple over the past few
years. What do you think about buying some stock?"
"Trees don't grow to the sky forever," I told Matt.
Whoops.
Since late 2005, Apple's stock has quintupled. With a market
capitalization of close to $250 billion, Apple is (at least today) the
third most valuable company in the world, behind ExxonMobil and Microsoft.
It's a stunning story that's been dissected to death, but still
remarkable enough to warrant reflection. Ten years ago — three years
after Chairman and CEO Steve Jobs had returned to "rescue" Apple — the
company was still largely treading water, with a relatively meager $3
billion market capitalization. Its personal computer products had a
loyal following in niche markets, but that was about it.
Over the past decade, Apple has launched five legitimately game-changing
innovations:
1. *The iPod.* The elegant MP3 player that started Apple's decade of
disruption.
2. *iTunes.* Beautiful software with a powerful business model that
showed that people would in fact pay for music if the price was
right and the interface was simple enough.
3. *The iPhone.* Dubbed the "Jesus Phone" by supporters, a smartphone
that three years later still hasn't been matched by rivals.
4. *The AppExchange.* Sure, no one needs 98 percent of the apps that
Apple offers, but wow, what a selection.
5. *The Apple Store. *The quietest part of Apple's revolution, today
close to $2 billion worth of goods move through Apple
revolutionary stores.
Many expect the iPad to be Apple's sixth big success. It's still too
early to tell (and, as noted before, I'm waiting for the twist
<http://blogs.hbr.org/anthony/2010/04/waiting_for_the_ipads_twist.html>),
but watching my four- and two-year old children play around with our
iPad leads me to believe the device has only scratched the surface of
its disruptive potential.
That's not to say the next decade will be as great for Apple as the past
decade. It now has to think hard about how to manage conflicts that will
emerge at the intersections of its businesses. The company will
inevitably find it hard to maintain its growth rate as revenues approach
$100 billion.
Looking back, my mistake in dismissing Matt was pretty simple. I didn't
count on the impact of items three through five on the list above. It's
a natural enough mistake. The number of companies that have organically
created three distinct multi-billion dollar new businesses in a decade
is pretty short.
And if Apple had indeed stopped at the iPod, my advice to Matt would
have appeared smarter. After all, iPod sales have slowed over the past
few years as that market has approached saturation. But Apple's
brilliance has been to relentlessly push the pace of innovation.
Reflecting on Apple's decade of disruption highlights three critical
lessons:
1. *Don't just focus on building beautiful products. *Build beautiful
business models, new ways to create, deliver, and capture value.
The iPod and iPhone would not have had nearly as much impact if
they hadn't been matched with iTunes and the AppExchange respectively.
2. *Think in terms of platforms and pipelines. *Competitors that
chase Apple's latest release find themselves behind when six
months later Apple introduces its latest and greatest offering.
3. *Take a portfolio approach.* While Apple has been on a phenomenal
run, not everything it has introduced has been a home run. For
example, Apple TV
<http://www.engadget.com/2007/01/09/live-from-macworld-2007-steve-jobs-keynote/>
hasn't had the "revolutionary" impact that Jobs predicted upon its
launch in 2007.
Many companies I've spoken to dismiss the learning from Apple's success.
"Apple has Steve Jobs," they'll note. "We don't."
Of course, Jobs has been a central player in Apple's success. It's
indeed unlikely that Apple could have been as successful without such a
visionary, charismatic leader. But my own view is that the "black box"
of innovation has cracked open, making innovation success more widely
available.
Innovators around the world — whether they are intraprenreurs working
for large companies or entrepreneurs set out to create the next great
business — can meaningfully increase their odds of success by drawing on
the increasingly deep pool of academic research and case examples.
Whether they wear mock block turtlenecks is up to them.
About the Author: Scott is the Managing Director of Innosight Ventures.
Scott has written three books on innovation, the latest being /The
Silver Lining: An Innovation Playbook for Uncertain Times/
<http://harvardbusiness.org/search/12329?legacy=true>.
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