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Few events are as anticipated as the unveiling of a new Apple product. Before each announcement, the internet and media run wild with speculation about what new toy Steve Jobs will present next. Such was the case when the rumor mills began to churn with news of an Apple tablet prior to an Apple press conference in January in San Francisco. The hype was unprecedented as loyal fans awaited the announcement of another groundbreaking product that would revolutionize the lackluster tablet PC market, in the same way that the iPod did for MP3 players, and the iPhone did for the smartphones. When the announcement finally came, however, reactions were mixed. Some heralded the iPad as the next essential computing device, while others, who expected a full-blown tablet PC, simply scratched their head and asked, “what is it?” Indeed, the iPad is unlike any of Apple’s previous efforts. At the same time, however, it represents quintessential Apple thinking and business strategy.
Throughout its history, Apple has seen product development in a different light from its competitors. The company has penetrated markets by taking existing products, carefully studying their shortcomings, and reinventing them “the right way” to create revolutionary, must-have products. Their development process is vertically integrated to a high degree: the entire package – hardware and software both – bare the Apple brand. As a result, the company’s products have a distinctly “Apple” quality: elegantly engineered, self-contained, and a little bit spunky.
This attitude towards innovation brought Apple both success and failure in the ‘90s. The introduction of the PowerBook in 1991 improved hugely upon the clunkiness and limited functionality of portable computers at the time, and gave rise to the modern form and layout of the laptop computer. Despite a small marketing budget, the project was a major commercial success and netted Apple $1 billion in its first year of release alone. Other efforts, though, were more ill-fated. Starting in 1989, Apple made huge investments into developing Newton, a PDA-like hardware/software platform that was designed to revolutionize the personal computing market. In the end, however, the product was plagued with problems, and development was hindered by frequent changes in the scope of the project. At the same time, Apple was taking missteps into markets for other consumer products, such as digital cameras, portable CD players, and audio speakers. Furthermore, Apple’s mainstay operating system business was loosing ground to Microsoft. While Microsoft was busy licensing off its software to every willing hardware manufacturer, Apple was trying perhaps too hard to control the entire computing experience, software and hardware, itself. As a result, Microsoft was able to both dominate the software market and mold the hardware market around its products, leaving Apple unable to compete in either realm.
After several years of declining market shares and stock prices and numerous changes in leadership, Steve Jobs retook the reigns of Apple in 1997, with the hope of setting the company back on track with a completely revamped product line. However, he stubbornly stuck to the strategy of vertically integrated software and hardware development, which had contributed to the company’s past failures. While other companies were embracing open cooperation, Jobs was committed to putting out more Apple-only innovations, with the company’s name on each and every component of the package.
Jobs asserted that the company’s core problem before he took power was that its products simply “sucked.” He believed that if Apple cut everything it had done up to that point, and started making flashy, groundbreaking products, success would be in the bag. As it happened, he was right. Jobs’s business strategy was embodied in the iMac, the all-in-one desktop computer that ultimately brought Apple back to profitability. The iMac streamlined the fragmented components of PC counterparts that had separate and interchangeable monitors, towers, and operating systems, into a single, neatly designed package that worked right out of the box. The success continued into the new millennium as the company began to focus on creating personal devices. The simply designed iPod and iTunes brought an end to clunky and poorly functioning MP3 players and digital media software. Mac OS X became a serious alternative to Windows due to its sleek design and ease of use, as well as its newfound compatibility with Intel processors. The iPhone brought smartphones into the mainstream and now is helping to revolutionize the way people use their mobile phones by integrating them into everyday life. With each new product, Apple has shown itself to be a powerhouse of innovation and has truly become a force to be reckoned with. Apple has been named the most innovative company in the world by a number of publications, such as BusinessWeek, and today its stocks sell for more than $200 a share.
Thus far, Apple has clung to the same business and management strategy it began with, focused on centralized, vertically integrated product development. This strategy manifests itself in all aspects of the company, all the way down to the company’s daily culture. Other companies pride themselves on openness both within the company and outside of it. Google, for example, is known for its informal management style, and employees are treated generously and given a huge degree of autonomy in their projects. Jobs, however, has been known to micromanage all Apple projects and makes sure each component of every product meets his own standards. Employees, as a result, often tread carefully around Jobs, who is known for launching into violent tirades against errant employees. Most workers live knowing that there is always a strong possibility of being fired for any missteps. Alan Deutschman from Salon Magazine wrote of one executive in particular who was continually being pressured by Jobs: “She was so unnerved by his interrogations and his frequent tirades that she decided the only way to preserve her mental health was to ignore his calls.”
Similarly, for most companies, the paradigm in Silicon Valley is one of maximum compatibility and interchangeability. As mentioned earlier, companies like Microsoft and Intel base much of their strategy on integrating their own products with those of other companies; for example, Microsoft develops software that can be used with Intel’s chipsets, and Intel develops chipsets that can be used with Microsoft’s software. Furthermore, the more compatible one company’s product is with other products, the more likely it is to be universally accessible. Google and Microsoft’s handheld operating systems, for example, are designed to work on a number of different hardware platforms. Apple, on the other hand, intentionally limits compatibility of Apple software and hardware with other company’s platforms. Apple’s iPhone OS runs only on the Apple iPhone, and all third-party applications must be approved by Apple before release. As a result, Apple—Steve Jobs in particular—is able to fully control and streamline software and hardware design, free from third-party influences, and benefit from high profit margins.
So how does the iPad fit into all of this? In many ways, the iPad represents more of the same from Apple. It is the perfect example of a product built up from the Jobs-centric development process, giving it that sexy, unique “Apple” quality. The outside is characteristically Apple—at 0.5 inches thick and 1.5 lb, the iPad is lightweight and sleek. The insides are all Apple, too, with a high-performance, low power (and proprietary) Apple A4 chipset at the heart of the device. And similar to the iPhone, the iPad can only run the iPhone OS.
Unit-by-unit, this strategy won’t work out too badly for Apple, in the end. The high profit margins are still there: analysts suppose Apple pays around $290 for a base-model iPad, which in turn is priced at $499, providing them a 42% profit margin. But many are worried that the lack of third-party support, stemming from Jobs’s desire to streamline software and hardware in a “closed ecosystem,” will limit the device’s capabilities. The iPad lacks support for Adobe Flash, a deficiency for which the iPhone has long been criticized. The device’s only data port is the standard iPod dock connector; there are no USB or Firewire ports in sight. And like the iPhone, the iPad only supports applications downloaded from the Apple App Store, all of which are preapproved by Apple. Some are going so far as to say that this strategy might stifle future innovation. Apple has the power to block any competitor from putting its software on the iPad, which, critics claim, could prevent major software innovations for the device. In the event that Jobs is right, and that the iPad becomes the next “must-have” product, this could be even worse for innovation. If the iPad becomes the pre-eminent tablet of choice, developers might be forced to cater to Apple’s desires and guidelines without regard for potentially groundbreaking innovations in the broader market.
In other respects, however, the iPad represents a departure from Apple’s previous successes. The iMac, the iPod, and the iPhone all took existing ideas and reshaped them into useful and appealing products. This strategy of tapping into existing, but not yet well-developed markets has presented a tried and true path to success. The iPad, on the other hand, doesn’t fit into any previously defined device categories. Apple believes that the iPad holds a unique future in the day-to-day lives of consumers. It is made to work as a third device to complement the smartphone and the laptop, possessing functionality somewhere between the two. Unlike current tablet PCs, which are more or less laptops with PC-like functionality and touchscreens, the iPad is like a scaled up iPod Touch, making it ideal for video or other multimedia applications. In this way, the iPad will be competing in a number of already existing markets. For example, the iPad will pit itself against the Amazon Kindle in what many expect to be the defining battle for the future of the e-reader market.
Some have reacted to the iPad’s novel role positively. Many believe that its rich interface, responsiveness, and ease of use will make its purpose apparent once it is in the hands of consumers. Portable digital content like e-books and movies will be readily available with greater practicality than an iPhone and without the extra baggage of a laptop. Those hopeful for the iPad’s future believe that unlike the iPod or the iPhone, which transformed one market at a time, the iPad will transform multiple markets at once. At the same time, Apple hopes that the iPad will spearhead the development of a new market for a third class of devices between smartphones and laptops, adding a completely new layer of technology to people’s every day lives.
Still, others are skeptical. They believe that rather than being novel, the device suffers from an identity crisis. When it comes down to it, what is the device actually for? What gap in people’s lives is it filling that other devices have not been able to? There is no major indication that there is even demand for a device to complement the smartphone and the laptop. Indeed, one website polled its readers before and after the January 27 iPad announcement, and found that interest in the device had, in fact, decreased by half after the unveiling. Furthermore, many believe that the iPad won’t be able to serve as a multimedia platform as well as current platforms do. For example, netbooks, the other set of devices that are attempting to establish themselves as the third device between the smartphone and the laptop, are $200 cheaper than the iPad, have much greater hard drive space, and can support many more applications. Even Amazon’s Kindle, which is more limited in scope than the iPad, might not be threatened by the iPad’s e-reader capabilities. Unlike the Kindle, which has a display conducive to reading in all kinds of environments, the iPad has a glossy display that limits its usage to shaded areas. The Kindle also benefits from its lack of a backlight, which helps the device better approximate the feeling of reading a printed book; the iPad requires the backlight to support playback of various media, such as movies, which means that reading on an iPad screen is hardly easier on the eyes than reading on a computer. This is only one way that Apple has compromised certain design features in order to emphasize multifunctionality. This, combined with the fact that Apple has not clearly defined its purpose, may have put the iPad at risk of not being able to seriously penetrate any market at all.
Despite the skepticism, the iPad’s debut was a success, with 300,000 units sold in the first day. However, early evaluations of the iPad have not been able to answer most of the questions at the root of this discussion. Reviewers have praised the iPad’s sleek design, streamlined capabilities, and ease-of-use, but have noted that several fundamental flaws in the device—such as its awkward ‘keyboard,’ and the lack of a built-in camera, Flash support, or capacity for multitasking—prevent it from being “revolutionary,” as Apple has declared it to be.
Most notably, the jury is still out on whether or not the iPad will actually fill an essential role. Many have argued that for all applications requiring a medium in-between a laptop and a smartphone, the iPad ends up being functionally less adequate than current netbooks. Others say that the endless possibilities offered by third party applications will define the iPad’s role. As Scott Lowe at IGN notes in his review of the device, “The iPad was designed… in order to bridge the gap between a smartphone and a laptop. There's no doubt that Apple has accomplished exactly that with the iPad, but the larger question of whether such a gap really needs to be filled remains to be seen. For that reason, rendering a definitive verdict on the iPad is a difficult task.”
It is uncertain what the future has in store for the iPad and Apple. In the end, the sales will speak for themselves. Even if the iPad flops, Apple will continue to chug along, searching for that next, great new innovation. But they may need to reevaluate how exactly to find it.
Few events are as anticipated as the unveiling of a new Apple product. Before each announcement, the internet and media run wild with speculation about what new toy Steve Jobs will present next. Such was the case when the rumor mills began to churn with news of an Apple tablet prior to an Apple press conference in January in San Francisco. The hype was unprecedented as loyal fans awaited the announcement of another groundbreaking product that would revolutionize the lackluster tablet PC market, in the same way that the iPod did for MP3 players, and the iPhone did for the smartphones. When the announcement finally came, however, reactions were mixed. Some heralded the iPad as the next essential computing device, while others, who expected a full-blown tablet PC, simply scratched their head and asked, “what is it?” Indeed, the iPad is unlike any of Apple’s previous efforts. At the same time, however, it represents quintessential Apple thinking and business strategy.
Throughout its history, Apple has seen product development in a different light from its competitors. The company has penetrated markets by taking existing products, carefully studying their shortcomings, and reinventing them “the right way” to create revolutionary, must-have products. Their development process is vertically integrated to a high degree: the entire package – hardware and software both – bare the Apple brand. As a result, the company’s products have a distinctly “Apple” quality: elegantly engineered, self-contained, and a little bit spunky. This attitude towards innovation brought Apple both success and failure in the ‘90s. The introduction of the PowerBook in 1991 improved hugely upon the clunkiness and limited functionality of portable computers at the time, and gave rise to the modern form and layout of the laptop computer. Despite a small marketing budget, the project was a major commercial success and netted Apple $1 billion in its first year of release alone. Other efforts, though, were more ill-fated. Starting in 1989, Apple made huge investments into developing Newton, a PDA-like hardware/software platform that was designed to revolutionize the personal computing market. In the end, however, the product was plagued with problems, and development was hindered by frequent changes in the scope of the project. At the same time, Apple was taking missteps into markets for other consumer products, such as digital cameras, portable CD players, and audio speakers. Furthermore, Apple’s mainstay operating system business was loosing ground to Microsoft. While Microsoft was busy licensing off its software to every willing hardware manufacturer, Apple was trying perhaps too hard to control the entire computing experience, software and hardware, itself. As a result, Microsoft was able to both dominate the software market and mold the hardware market around its products, leaving Apple unable to compete in either realm. After several years of declining market shares and stock prices and numerous changes in leadership, Steve Jobs retook the reigns of Apple in 1997, with the hope of setting the company back on track with a completely revamped product line. However, he stubbornly stuck to the strategy of vertically integrated software and hardware development, which had contributed to the company’s past failures. While other companies were embracing open cooperation, Jobs was committed to putting out more Apple-only innovations, with the company’s name on each and every component of the package.
Jobs asserted that the company’s core problem before he took power was that its products simply “sucked.” He believed that if Apple cut everything it had done up to that point, and started making flashy, groundbreaking products, success would be in the bag. As it happened, he was right. Jobs’s business strategy was embodied in the iMac, the all-in-one desktop computer that ultimately brought Apple back to profitability. The iMac streamlined the fragmented components of PC counterparts that had separate and interchangeable monitors, towers, and operating systems, into a single, neatly designed package that worked right out of the box. The success continued into the new millennium as the company began to focus on creating personal devices. The simply designed iPod and iTunes brought an end to clunky and poorly functioning MP3 players and digital media software. Mac OS X became a serious alternative to Windows due to its sleek design and ease of use, as well as its newfound compatibility with Intel processors. The iPhone brought smartphones into the mainstream and now is helping to revolutionize the way people use their mobile phones by integrating them into everyday life. With each new product, Apple has shown itself to be a powerhouse of innovation and has truly become a force to be reckoned with. Apple has been named the most innovative company in the world by a number of publications, such as BusinessWeek, and today its stocks sell for more than $200 a share.
Thus far, Apple has clung to the same business and management strategy it began with, focused on centralized, vertically integrated product development. This strategy manifests itself in all aspects of the company, all the way down to the company’s daily culture. Other companies pride themselves on openness both within the company and outside of it. Google, for example, is known for its informal management style, and employees are treated generously and given a huge degree of autonomy in their projects. Jobs, however, has been known to micromanage all Apple projects and makes sure each component of every product meets his own standards. Employees, as a result, often tread carefully around Jobs, who is known for launching into violent tirades against errant employees. Most workers live knowing that there is always a strong possibility of being fired for any missteps. Alan Deutschman from Salon Magazine wrote of one executive in particular who was continually being pressured by Jobs: “She was so unnerved by his interrogations and his frequent tirades that she decided the only way to preserve her mental health was to ignore his calls.”
Similarly, for most companies, the paradigm in Silicon Valley is one of maximum compatibility and interchangeability. As mentioned earlier, companies like Microsoft and Intel base much of their strategy on integrating their own products with those of other companies; for example, Microsoft develops software that can be used with Intel’s chipsets, and Intel develops chipsets that can be used with Microsoft’s software. Furthermore, the more compatible one company’s product is with other products, the more likely it is to be universally accessible. Google and Microsoft’s handheld operating systems, for example, are designed to work on a number of different hardware platforms. Apple, on the other hand, intentionally limits compatibility of Apple software and hardware with other company’s platforms. Apple’s iPhone OS runs only on the Apple iPhone, and all third-party applications must be approved by Apple before release. As a result, Apple—Steve Jobs in particular—is able to fully control and streamline software and hardware design, free from third-party influences, and benefit from high profit margins.
So how does the iPad fit into all of this? In many ways, the iPad represents more of the same from Apple. It is the perfect example of a product built up from the Jobs-centric development process, giving it that sexy, unique “Apple” quality. The outside is characteristically Apple—at 0.5 inches thick and 1.5 lb, the iPad is lightweight and sleek. The insides are all Apple, too, with a high-performance, low power (and proprietary) Apple A4 chipset at the heart of the device. And similar to the iPhone, the iPad can only run the iPhone OS.
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Unit-by-unit, this strategy won’t work out too badly for Apple, in the end. The high profit margins are still there: analysts suppose Apple pays around $290 for a base-model iPad, which in turn is priced at $499, providing them a 42% profit margin. But many are worried that the lack of third-party support, stemming from Jobs’s desire to streamline software and hardware in a “closed ecosystem,” will limit the device’s capabilities. The iPad lacks support for Adobe Flash, a deficiency for which the iPhone has long been criticized. The device’s only data port is the standard iPod dock connector; there are no USB or Firewire ports in sight. And like the iPhone, the iPad only supports applications downloaded from the Apple App Store, all of which are preapproved by Apple. Some are going so far as to say that this strategy might stifle future innovation. Apple has the power to block any competitor from putting its software on the iPad, which, critics claim, could prevent major software innovations for the device. In the event that Jobs is right, and that the iPad becomes the next “must-have” product, this could be even worse for innovation. If the iPad becomes the pre-eminent tablet of choice, developers might be forced to cater to Apple’s desires and guidelines without regard for potentially groundbreaking innovations in the broader market.
In other respects, however, the iPad represents a departure from Apple’s previous successes. The iMac, the iPod, and the iPhone all took existing ideas and reshaped them into useful and appealing products. This strategy of tapping into existing, but not yet well-developed markets has presented a tried and true path to success. The iPad, on the other hand, doesn’t fit into any previously defined device categories. Apple believes that the iPad holds a unique future in the day-to-day lives of consumers. It is made to work as a third device to complement the smartphone and the laptop, possessing functionality somewhere between the two. Unlike current tablet PCs, which are more or less laptops with PC-like functionality and touchscreens, the iPad is like a scaled up iPod Touch, making it ideal for video or other multimedia applications. In this way, the iPad will be competing in a number of already existing markets. For example, the iPad will pit itself against the Amazon Kindle in what many expect to be the defining battle for the future of the e-reader market.
Some have reacted to the iPad’s novel role positively. Many believe that its rich interface, responsiveness, and ease of use will make its purpose apparent once it is in the hands of consumers. Portable digital content like e-books and movies will be readily available with greater practicality than an iPhone and without the extra baggage of a laptop. Those hopeful for the iPad’s future believe that unlike the iPod or the iPhone, which transformed one market at a time, the iPad will transform multiple markets at once. At the same time, Apple hopes that the iPad will spearhead the development of a new market for a third class of devices between smartphones and laptops, adding a completely new layer of technology to people’s every day lives.
Still, others are skeptical. They believe that rather than being novel, the device suffers from an identity crisis. When it comes down to it, what is the device actually for? What gap in people’s lives is it filling that other devices have not been able to? There is no major indication that there is even demand for a device to complement the smartphone and the laptop. Indeed, one website polled its readers before and after the January 27 iPad announcement, and found that interest in the device had, in fact, decreased by half after the unveiling. Furthermore, many believe that the iPad won’t be able to serve as a multimedia platform as well as current platforms do. For example, netbooks, the other set of devices that are attempting to establish themselves as the third device between the smartphone and the laptop, are $200 cheaper than the iPad, have much greater hard drive space, and can support many more applications. Even Amazon’s Kindle, which is more limited in scope than the iPad, might not be threatened by the iPad’s e-reader capabilities. Unlike the Kindle, which has a display conducive to reading in all kinds of environments, the iPad has a glossy display that limits its usage to shaded areas. The Kindle also benefits from its lack of a backlight, which helps the device better approximate the feeling of reading a printed book; the iPad requires the backlight to support playback of various media, such as movies, which means that reading on an iPad screen is hardly easier on the eyes than reading on a computer. This is only one way that Apple has compromised certain design features in order to emphasize multifunctionality. This, combined with the fact that Apple has not clearly defined its purpose, may have put the iPad at risk of not being able to seriously penetrate any market at all.
Despite the skepticism, the iPad’s debut was a success, with 300,000 units sold in the first day. However, early evaluations of the iPad have not been able to answer most of the questions at the root of this discussion. Reviewers have praised the iPad’s sleek design, streamlined capabilities, and ease-of-use, but have noted that several fundamental flaws in the device—such as its awkward ‘keyboard,’ and the lack of a built-in camera, Flash support, or capacity for multitasking—prevent it from being “revolutionary,” as Apple has declared it to be.
Most notably, the jury is still out on whether or not the iPad will actually fill an essential role. Many have argued that for all applications requiring a medium in-between a laptop and a smartphone, the iPad ends up being functionally less adequate than current netbooks. Others say that the endless possibilities offered by third party applications will define the iPad’s role. As Scott Lowe at IGN notes in his review of the device, “The iPad was designed… in order to bridge the gap between a smartphone and a laptop. There's no doubt that Apple has accomplished exactly that with the iPad, but the larger question of whether such a gap really needs to be filled remains to be seen. For that reason, rendering a definitive verdict on the iPad is a difficult task.”
It is uncertain what the future has in store for the iPad and Apple. In the end, the sales will speak for themselves. Even if the iPad flops, Apple will continue to chug along, searching for that next, great new innovation. But they may need to reevaluate how exactly to find it.
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