From Newton to iPhone: The Story of Apple's Comeback - Innovator's Dilemma Part IV

Hey there!

Today we're going to look at how the Innovator’s Dilemma both broke and fixed Apple. Fun Fact: The Innovators Dilemma came out the same year (1997) that Jobs returned to Apple.

First up Apple’s foray into the personal digital assistant (PDA) market with the Newton.

So sit back, grab a cup of coffee, and let's explore why this tech giant failed when old school executives were running the show. And how that changed when Jobs came back on the scene.

Estimated Read Time: 3 minutes

The Newton

Now, let's shift our focus to Apple, a company that needs no introduction. Apple's story is a bit different from HP's in that it illustrates the dangers of investing too much in a single project and failing to earn an attractive return.

In the early 1990s, the emerging market for hand-held PDAs presented itself as a potential vehicle for achieving the needed growth. Apple saw this as an opportunity and invested scores of millions of dollars to develop its product, dubbed the "Newton." The Newton's features were defined through one of the most thoroughly executed market research efforts in corporate history.

Apple CEO John Sculley made the Newton's development a personal priority, promoting the product widely and ensuring that the effort got the technical and financial resources it needed. However, the timing of Newton's entry into the handheld market was similar to the timing of the Apple II into the desktop market. It was a market-creating, disruptive product targeted at an undefined set of users whose needs were unknown to either themselves or Apple.

In launching the Newton, Apple assumed that its customers knew what they wanted and spent very aggressively to find out what this was. Then, to give customers what they thought they wanted, Apple had to assume the precarious role of a sustaining technology leader in an emerging industry. It spent enormous sums to push mobile data communications and handwriting recognition technologies beyond the state of the art. And finally, it spent aggressively to convince people to buy what it had designed.

Unfortunately, the scale of the investments Apple made in its Newton in order to hasten the emergence of the PDA market made it very difficult to earn an attractive return. Small markets cannot satisfy the near-term growth requirements of big organizations, and the Newton came to be broadly viewed as a flop.

Fast forward a few years to 1997, and Steve Jobs was back at Apple. As the big dog, Jobs was always on the lookout for ways to improve the company. He stumbled upon this book (also published in 1997) and was deeply influenced by it. He realized that Apple's managers had been so focused on profits that they had lost sight of their passion for building great products. Christensen's theory really hit home - the pursuit of profit can lead companies right off a cliff.

So, Jobs decided to shake things up. He knew that in order for Apple to thrive, they needed to focus on making awesome products, not just making profits. He completely transformed the company and flipped the priorities away from profits and back to innovation. And boy, did it work. Today, Apple looks totally different from other big companies out there, and they continue to innovate and disrupt the industry.

At Apple, people are there to serve the mission - building great products. Jobs wasn't afraid to replace execs who couldn't deliver the goods, and he made it clear that if you wanted to stick around, you'd better shut up and do your job. Apple was all about solving problems that customers didn't even know they had with products they didn't even realize they wanted.

But the real secret sauce here is that Apple made the creation of value for customers its top priority. They weren't scared of cannibalizing their own products or disrupting the market, because when you're all about creating value for your customers, those things aren't "bad things" to be avoided - they're actually what you strive for.

And that's how Jobs solved the innovator's dilemma. He knew that it was possible to overcome the challenges of disruption, and Apple is living proof of that.

We are going to wrap up The Innovator’s Dilemma tomorrow and on Monday we will be back with something a little lighter.

Catch you soon.

Best,

Camillo