The reason why great companies fail is that good management itself was the root cause.
A controversial but history-proven thought: titans of industry will fail for doing the right things. Listening to customers, forging ahead of competitors, and pleasing investors with growing profits are noble and sound actions taken by some of the best business minds in the world that lead companies to create impressive and welcome sustaining innovations. Sustaining innovations are powerful, futuristic improvements to current business that market leaders produce to stay atop their industry. Yet it is disruptive innovations — new technology or models that are unknown and unprofitable for any logical resource-allocating companies to conceive — that will surprise the market and upend industry giants. This is the innovator’s dilemma according to Clayton Christensen, one of the world’s most influential business management thinkers. Disruptive innovations are initially too small to “be interesting” to large established firms, but ultimately steadily work their way up the market with niche entrants eventually capitalizing on a crucial first-mover advantage against large, less nimble, market leaders.
MRIs show Apple products and religion light up the same part of the brain, inciting passion and reactions for its products amongst loyal fans similar to that of scriptures and very religious people. The Company has been a dominant force in the technology industry and consistently contended for smartphone market leadership. Yet, now more than ever, Apple is vulnerable to the Innovator’s Dilemma. Though it feels like a lifetime ago, it has only been just over a decade since the first iPhone was released. At the time, the phone was a disruptive innovation, putting together music, browsing, and communicating all through a revolutionary, beautiful interface. Like all disruptive innovations, the first iPhone caught industry leaders by surprise, for most of which it quickly became too late by the time they began to respond. In the 10 years since, the iPhone has become Apple’s cash cow and flagship device, propelling the Company to the pedestal it rests on now. But in this same time frame (while it is hard to remember a time without them) the likes of Instagram, Tesla, Uber, Bitcoin, 3-D printing, and many other groundbreaking technologies have demonstrated the potential to take center stage and threaten to render established players obsolete.
Aside from a couple of potentially game-changing (but seemingly non-core) products such as the Apple Watch and AirPods, in the ten years since Steve Jobs introduced the world to a true “smartphone,” Apple has apparently been focused on sustaining innovations: iPhones of different sizes (including tablet-sized), forms, and features. Just last quarter, Apple released its iPhone X. As impressive and beautiful as the device is, it can still be bucketed as a sustaining innovation. Yet again, with this next generation of the iPhone, Apple faithful can enjoy a number of incremental improvements and even most notably unlock their phones with their faces. Pouring resources and focus into improving the iPhone is a logical business decision because the market tells Apple to keep doing so. But it is ultimately this feature-iterating (or sustaining innovation) rather than category-creating (disruptive innovation) that becomes Apple’s Innovator’s Dilemma.
As Steve Jobs ingeniously demonstrated: people only think they know what they want, and it takes bold vision to give the market what it truly wants. In the five years it took Apple to develop the iPhone X, there has likely been someone tinkering and experimenting with a revolutionary concept that Apple would prudently not explore based on its current business. It is this next visionary, not Samsung or Microsoft, that should loom as the scariest threat to Apple. Maybe it is a contact lens embedded interface or bone-conducting smart hat. Whatever concept that next visionary is prototyping in his/her garage can do the same thing to Apple that Apple did to Nokia. Check out the above Forbes Magazine cover from 2007 — the same year the first iPhone was announced.
If anyone is fit to find the innovator’s solution, it is Apple. The Company is much better positioned to fight off market forces today than it was when Jobs was brought back to save the Company from bankruptcy in 1997, which he accomplished through a partnership with Microsoft. What allowed Steve Jobs to save the Company? On top of being a once-in-a-generation visionary, he prioritized the pursuit of creating great things over any traditional management principles.
So, the era of setting this up as a competition between Apple and Microsoft is over as far as I’m concerned. This is about getting Apple healthy, this is about Apple being able to make incredibly great contributions to the industry… -Steve Jobs, ’97 Macworld Expo
Apple must embrace this emphasis on creation and contribution. The Company has more cash than any other technology company in the world, and must not fear spending it on acquisitions, risky R&D projects, and moonshot innovations. Apple should avoid thinking like a myopic consumer products company, focused on its history of and today’s ongoing demand for the iPhone, but instead as a technology company creating with a 50-year mindset. For example, Apple devices are all mediums to get information to and from your brain. The ability to seamlessly interact with content through an embedded device, like the Company’s AirPods, is much more Jetson than the Flinstone option of having to use your eyes and hands to utilize a device. To protect itself from the Innovator’s Dilemma, Apple must disrupt itself. The world has changed dramatically since the first iPhone was introduced just over a decade ago. Where will we be in 2028? Apple must decide this today…or prepare to let someone else.
