Random Access - Monday, January 22, 2001Innovation
How Apple does itby Chris Gulker
So I'm sitting here in Silicon Valley. It's unusually cold, and many of us are sitting in the dark thanks to rolling blackouts caused by the political mess California's energy companies are in.
So, first our stocks crash, and now we can't pay the light bill. Great. Happy New Year, Silicon Valley.
So, I'm doing my part: thermostat down, sweater on, lights off, thinking about the prospects for the coming year. Somehow, sitting in the dark, my thoughts keep going to the topic of innovation.
One of the poster children of innovation, Steve Jobs, has been in the headlines lately. Apple Computer, the company he founded, lost and then famously rescued, is on the ropes again. Mr. Jobs, who once said that the penalty for failure in Silicon Valley is zero, may be rethinking that position.
Apple's revenues dived some 57% last quarter, even more sharply than its PC competitors, as consumers, stung by the stock market and worried about recession, tightened their belts. Apple's innovative new Cube, a powerful, elegant computer packed in a compact, gleaming polycarbonate shell, garnered much critical acclaim, but sold poorly.
So lots of us, more than 5000 people, including 1200 members of the press, crammed into San Francisco's Moscone Center to hear Mr. Jobs' opening speech for the MacWorld Conference and Exposition. We were all mindful of the last time Apple was on the ropes, and how Steve had taken the stage at MacWorld Boston in August 1997.
That speech marked the beginning of a dramatic turnaround. Apple went on to introduce the iMac, the iBook, a practical, fast, inexpensive wireless networking system and announced a new operating system, Mac OS X. Apple sales soared, profits returned. Apple's stock split then rose to an all-time high. The August '97 speech was turned into a TV movie and featured prominently in a couple of recent books.
But the rosy years came to screeching halt in the last quarter of the old millennium. Apple shares, which had traded as high as $75 earlier in the year, plunged to an all-time low on warnings that the company would be unprofitable for the first time in 3 years. At 13, it was close to the level that had prompted Apple's board to dump CEO Gil Amelio in 1997.
Apple, with over $4 billion in cash, is in far better shape than it was 3 years ago. But Steve was back up against the wall, and we were all hoping to Be There when another Miracle was conjured up from the famous Jobs Reality Distortion Field. The lines were long around Moscone Center's main ballroom. After 90 minutes (and that was the press line), we were ushered in to a cavernous room featuring a giant John and Yoko and Charlie Chaplin 'Think Different' banners.
Sitting in the dark ballroom, waiting, my mind turned to innovation (I think there's a pattern here). Steve Jobs' innovation had clearly saved Apple: the iMac, the iBook, the AirPort wireless network were bold products, unlike anything PC powerhouses like Dell and Compaq were offering.
So why is innovative Apple crashing so badly compared to its 'me-too' competitors?
I think it goes to the nature of innovation. Innovation is risky. And while high-tech companies everywhere routinely babble about how 'innovative' they are, that's often not the case.
My experience, as a past employee of both Apple and a large 'old economy' media conglomerate, is that there are 2 kinds of companies. I call them top-down and bottom-up.
Bottom-up companies are far more commonplace, even in high tech. They tend to be careful, methodical and take only small, measured risks when they 'innovate'. HP and IBM come to mind: companies that, in my experience, launch products only after carefully studying the markets, running focus groups and otherwise figuring out how to minimize their financial risk.
When you ask focus groups what they want in a computer, they inevitably tell you they want it to be 'compatible' (meaning Windows), fast and cheap. So products from bottom-up companies tend to be very similar: they feature Microsoft's operating system running (usually) on Intel's chips, and their 'innovations' are things like keyboard buttons that launch AOL.
Contrast that to Apple, a top-down company if ever there was one: Steve Jobs and a small group of very smart people come up with an idea, build it, and then make sure the whole world hears about it. The good news is that when those products capture the imagination, much success follows. The bad news is, absent the focus groups, there's no warning when an innovation doesn't click.
In short, Steve Jobs is Apple's focus group. "I think Steve is often good at identifying trends and ideas in a marketplace that have eluded others" is how Colin Crawford, President and CEO of MacWorld's parent company, puts it.
And it's not like listening to customers is a bad thing. The landscape is littered with dead companies who didn't listen to customers, and successful ones who do.
But back to Moscone Center: Steve appeared and gave a masterful presentation. He announced that Apple would be giving customers the faster processors, CD RW drives and changes to Mac OS X they'd been asking for, and then he announced a 5-pound laptop with a 15-inch screen. It's one inch thick and made out of Titanium.
So, Apple listening to customers? Good. Apple innovating, again? Insanely great!
Random Access | www.gulker.com | Help/Info
editor@gulker.com This page was last built with Frontier on a Macintosh on Mon, Jan 22, 2001 at 7:38:03 PM.