The Strategy That Made Apple Computers a Leader in Mobile Computing
This is the story of a man and a machine that transformed the way we work and play. He distorted and compressed reality, and achieved the impossible by insisting on simplicity and its benefits for customers.
His story begins in the early 1970s, when computer technology began to change and a wave of simplification began, as the microprocessor made computing faster, cheaper and easier to operate. In 1975, the MITS Altair became the first mass-produced personal computer kit, but it was much less sophisticated -- as well as much cheaper -- than the many microcomputers that were emerging at the time. For $495, the hobbyist got a pile of parts to solder to a board; even assembled, it was pretty primitive.
One of those hobbyists was Steve Wozniak; another was his friend, Steve Jobs. In 1975, they began working on the Apple I, a step up from the Altair, but still an unprepossessing machine. The Apple II, a much neater product, quickly followed. The first real packaged computer, it came in a sleek and friendly plastic case modeled on the Cuisinart food processor; and it could be plugged in and used straight out of the box. Its simplicity made the computer a general consumer product for the first time: You didn’t need to be a geek to use it.
Yet the real breakthrough came not with the work being done at the Xerox research labs. Jobs secured an invite for himself and his team at the end of 1979 and was amazed by what he saw. The Xerox engineers had invented the “desktop” -- a screen that could have several documents and folders on it at the same time, represented by icons. A device they called a mouse was used to access the one you wanted with a simple click. All of these features were included in the Xerox Star. Launched in 1981, it was the first recognizably modern PC. But the Xerox Star retailed at $16,595, and only 30,000 of them were ever sold. If it was to trigger a revolution, the Xerox Star needed to be simplified.
The Apple Lisa, introduced in January 1983, was the first computer on which users could drag a file across the desktop, drop it into a folder, scroll smoothly through a document and overlap a series of windows. Through Jobs’ famous WYSIWYG -- What You See Is What You Get -- the Lisa also enabled users to print off exactly what they saw on the screen. The Lisa 2, introduced a year later, cost $3,495 -- about a fifth of the price of a Xerox Star for a greatly superior machine. The Macintosh was a further advance -- it cost $2,495 and had many charming features that made it both easy and fun to use, including a superb graphics package and a great variety of different fonts, documents, spreadsheets and other templates.
But Jobs wasn’t a price-simplifier. One of his early co-conspirators on the Mac project -- and the man who named the machine -- was Jef Raskin, a young, brilliant and highly opinionated computer scientist. Raskin wanted to build a computer for the masses, to go into every home. His ideal was a machine with a keyboard, a screen and the computer itself in one unit, priced at $1,000. If Jobs had supported this notion, Apple might have become the Ford Motor Corp. of computers. He could have done so, which would have made him a price-simplifier. But he had a different idea, as his biographer Walter Isaacson explains:
“Jobs was enthralled by Raskin’s vision, but not by his willingness to make compromises to keep down the cost. At one point in the fall of 1979, Jobs told him to focus on building what he repeatedly called an ‘insanely great’ product. ‘Don’t worry about price, just specify the computer’s abilities,’ Jobs told him. A power struggle ensued. Jobs prevailed; Raskin left the company. In 1984, the Mac was priced at a 25 percent premium to the rival IBM PC, an inferior machine in everyone’s eyes, except for the majority of buyers.
Jobs wasn’t obsessed with price or with the creation of a mass market for his machine. He simplified principally to make his PC better for the user. He made a device that he himself wanted to use. He wasn’t wholly uncommercial: he simplified so that his machines were easier to produce and therefore cheaper, and he introduced some stunning cost savings relative to the Xerox Star. But he reduced cost and price only when doing so did not compromise his main objective, which was to make a fabulous computer. Ease of use, art and usefulness made his machine a joy to use. Price was important too, but markedly less so. Ever since no Apple device has been sold primarily on price."
Jobs is a perfect example of our second breed of simplifier -- those we call proposition-simplifiers -- because the overwhelming innovation and advantage lie in the proposition of the product or service, not in its price. With proposition-simplifiers, their absolute priority is to make the product or service not just a little better, but a whole order of magnitude better, so that it’s recognizably different from anything else on the market. The Macintosh, the iPod, the iPad and the Apple watch all met this criterion: the proposition was either a great improvement on an existing product or else a totally new, unique creation. At least one of the dimensions we specified as optional extras for price-simplifiers -- ease of use, usefulness or art -- must be present in a proposition-simplifier’s new product or service. In fact, usually two or three of these benefits must be present; but whether it is one, two or all three of these advantages, they must transform the proposition.
In the case of the Macintosh, all three benefits were evident, with ease of use the most important:
1. Ease of use
- Simple to set up and plug in
- Escape from the DOS command mentality that was still used in all other machines at the time. Even the path-breaking IBM PC, launched in 1981, used old-fashioned command-line prompts to drive the operating system.
- The Macintosh operating system, with its desktop and bitmapped graphical displays, was far more intuitive and required less training and expertise than the DOS systems.
- The ability to store and access documents on the desktop
- Overlapping windows that scrolled perfectly
- The ability to compose a document and print it exactly as it appeared on the screen
- Playful and intuitive icons
- Wide range of beautiful fonts
- The hardware design was clean and light -- an attractive consumer product in comparison with IBM’s gun-metal grey
So what became of plucky little Apple? Its share of the computer market fell to just 3 percent during the barren Jobs-less years, but it did just fine after the Second Coming of Steve in 1997. Jobs rationalized the product line, developed new software with impressive wow appeal and, together with the firm’s new design lead Jony Ive, triumphed with the iMac, launched in 1998 as a desktop computer for the home market. Priced at $1,299, the iMac sold 800,000 units in its first five months, the highest run rate that Apple had ever had.11 During the 2000s, the Mac reached new heights when it became the hub for other Apple devices. It took more than two decades, but proposition-simplifying finally paid off in spades. As with Henry Ford’s price-simplifying, Steve Jobs didn’t reach the summit in a single bound. Self-belief and doggedness eventually proved just as essential as the right strategy.
1. Steve Jobs was a different kind of simplifier from our previous examples. He was a proposition-simplifier who aimed to make an “insanely great” product. Do you find it easier to imagine yourself as a price- or a proposition- simplifier? What about your company?
2. Price-simplifiers create or enlarge a mass market. With the Mac, Apple served the middle and upper echelons of users, who were willing to pay a significant premium for a more intuitive, useful and beautiful product. Do you think this might work in your industry?
3. In the same broad market, price- and proposition-simplifiers can happily coexist, each with their distinctive customer appeal, and each with their distinctive commercial advantage. For price-simplifiers, it’s a mass market. For most proposition-simplifiers, it is higher net margins. Which of these advantages do you think your organization would value more?
4. The worst fate, as with IBM, is to fall between the two simplifying stools -- to be out-proposition-simplified and out-price-simplified. No matter how iconic the brand, how lofty the reputation, how high the installed base of users, how clever the executives or even how rich the company, for those stuck in the middle, the knacker’s yard beckons. Is this a danger for your firm?