INNOVATION LESSONS FROM APPLE - IMD

INNOVATION LESSONS FROM APPLE Insight from the success of a modern day leader

By Bill Fischer - October 2010

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INNOVATION LESSONS FROM APPLE I Insight from the success of a modern day leader

In the face of increasing shifts in the world economy, and particularly increased competition across markets and company offerings, it would appear that one of the latest trends in instinctive strategic advice for companies is to become “more innovative!” Yet being more innovative is not necessarily easy. The world market is littered with the discarded corporate carcases of firms that aspired to be more innovative and couldn’t achieve those aspirations. Even such great innovative organizations as Digital Equipment, Pan American Airlines and Polaroid, each innovative leaders in their industries for appreciable periods of time, are now gone, largely as a result of their failure to sustain innovativeness. Innovation is a very difficult aspiration to fulfill!

For more than a decade, it seems as if everyone’s choice for the most “innovative” firm has been Apple. iPhones, iPads and iPods have changed not only industries, but the way in which we live. Truly, this is innovative success has led to such amazing market success over the past few years. The iPod, which can be seen as the beginning of Apple’s forays outside of mainstream personal computing (not counting the unsuccessful Newton of the early 1990s), blew-up CD production and distribution and rattled traditional commercial radio with the introduction of podcasts. It is truly an innovative success story, and it took only eight months for the Apple team to move from start to finish. Clearly, there are some lessons for innovators in this story!

Take motivation from mistakes Apple was most decidedly not thinking about portable music as the 20th century drew to a close. In the age of mp3 and peer-to-peer sharing of music, Apple was focused on video and developing iTV and iMovie — so much so that their then current version of the iMac didn’t have a CD-burner. In fact, if they are honest, they missed reading the market for music completely. The world’s most innovative company was literally blind to one of the biggest social trends that was occurring at the time! To their credit, however, and with the aid of distressing financial figures resulting from such a misreading of the market, Apple realized that it had to change its approach to the market and to the technology. Given Apple’s widespread


reputation for innovation and trendiness, its failure to anticipate the importance of music in the lives of personal computer users was completely uncharacteristic. Occasioned by a $195 million quarterly loss, however, Apple took motivation from their mistake and realized that they needed to completely rethink the way they went to market. Apple not only learned from their mistake, they used it to catapult a new innovation.

Hire for skills So, if you’re Apple, how do you recover? The common advice from most management books on building teams has typically been to: “hire for attitude, train for skills.” This model better ensures harmonious work environments and friendly collaborations. Yet, in the world of innovation, aspirations and attitude aren’t enough. In the situation that it found itself in, Apple needed real skills, and so when Steve Jobs compiled the iPod team he loaded the odds in his favor by going with his very best people in hardware, software and design. A team was assembled because they were the best. And putting the best skilled on a mission to change the world, drove competition within them, leading the team to perform at peak levels – nobody on that team wanted to be ”second-best!”

Look outside for great ideas What really sets the iPod apart from all of the other mp3 players, however, is neither the hardware, the software, nor the design – although all are world-class. The iPod’s real differentiator is the ease with which the customer can access, download, store and upload the music and podcasts. No one else can do this, and this “innovation” did not come from within Apple, but from an outsider – Tony Fadell – who was trying to do this on his own. Apple found him – think about how difficult that is, to find someone with a good idea outside of your firm – and hired him on an eight-week contract! This was not about building a long-term employment relationship, nor about loyalty, but about accessing someone else’s good idea.

Creative innovative work zones


Once the team was pulled together, Steve Jobs put them into a common physical space that although not consistent with their hierarchical position, raised the probability of their having effective and fast conversations. The design team’s working quarters have been described as having “very little personal space” – there were no cubicles or offices. By imposing open environments, the creativity and free-flow of ideas were nourished. In the flow of ideas, space matters!

Defining leadership boundaries When you talk about Apple, you can never avoid mentioning Steve Jobs. To do so would be to underestimate his importance to the attitude of the company, and ultimately the brand. So what role did he play in the iPod? After developing a top-notch team, Jobs gave them ambitious and clear visions. He charged the team with creating a product that would put 1,000 songs in their pocket; software so easy that their mothers could use it; and a complete product offering that would be in retail outlets in eight months. What is so exquisite about these objectives is that they are simple, clear and precise, yet broad enough so that the team could get to work without feeling constrained by the way the vision was presented — the team could be totally focused and liberated at the same time! Innovative leaders must provide a clear briefing that organizes a team but which, at the same time, doesn’t restrict their talent capabilities.

Be the police, but dress like a cheerleader Even with a reputation for getting involved in projects, Jobs actually didn’t interfere all that much with the iPod project. He was both smart enough to compose a highly skilled team and then to let their skills shine. Yet, along the way, Jobs acted as both a policeman and cheerleader for the project. He imposed an attitude that let the team members know that Apple’s win would also be theirs personally. And, by cheerleading, he was also able to police the parameters of the project, ensuring the team stuck to his briefing goals.

Stand on firm ground


Another Apple product, the iPhone, is now redefining the mobile phone. Yet, this innovation recently posed a threat to Apple when a technical glitch created reception problems for users. Job’s response was to display true leadership by giving a message that matched what the Apple culture really is — an engineering company that has repeatedly changed the world for the better. His message to the public was, “we’ll fix the small iPhone problem,” and to his competitors, “catch us if you can!”

Apple’s success continues with new innovations as the iPad is now the next in place to revolutionize an industry – publishing. Once again, Apple and Jobs have recognized a value chain opportunity that is currently vulnerable to big change, and, using current, not revolutionary, technologies. They have innovatively developed a way to profit from it by “rewiring” the customer experience in the way that they propose to weave the entire valuechain together.

Bill Fischer is Professor of Technology Management at IMD. He directs IMD’s Mastering Innovation Globally program which will take place in Hong Kong from October 25 – 27, 2010.


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