If He's So Smart...Steve Jobs, Apple, and the Limits of Innovation

Apple's purist approach may well have made certain early innovations possible--networking, for example, which it introduced on the first Mac machines in 1984. Windows PCs didn't have printer networking until the mid-1990s. But time and again, Apple's obsession with controlling the entire process of innovation has also demonstrated the truth of Voltaire's dictum that the perfect is the enemy of the good. Today, the company has just 300,000 independent and in-house developers writing programs and making products for its operating systems, including the latest, OS X. More than 7 million developers build applications for the Windows platform worldwide.

APPLE'S DEMAND TO CONTROL THE ENTIRE PROCESS OF INNOVATION SHOWS HOW THE PERFECT CAN BE THE ENEMY OF THE GOOD.

Fewer developers mean fewer new products to run on Apple machines. That means fewer options for end users, which influences purchasing decisions, and therefore sales and profits. One example of a popular product not easily available for the Mac is the personal video recorder, or PVR. That's the TiVo-like device that lets users pause, rewind, and record live television programs on their PCs. Only two developers offer a PVR for the Mac: Elgato Systems' EyeTV and Formac's Studio TVR, retailing at $199 and $299 respectively. At least six software or consumer electronics vendors produce Windows-compatible PVRs, and Microsoft itself gives away PVR capability as a standard feature on Windows XP Media Center.

Apple has consistently rejected opportunities to adjust its innovation strategy to another model. Licensing its operating system to hardware manufacturers would have been an obvious choice. Yet when Jobs returned to Apple in 1997, he terminated the first and last licensing program, championed by former chief executive Gilbert Amelio. Jobs is reported to have told Apple managers that he feared "Mac knockoffs" would dilute the Apple brand.

Spurning The "Gee Job"

At the heart of Apple's innovation conundrum also lies a powerful cultural bias: the lionization of purely technical innovation. Ours is a material society. So it's natural that when we think of innovation, we are more inclined to think of objects, things that we can see, touch, and feel, and of inventors such as the Wright brothers and Thomas Edison. It turns out, though, that the most economically valuable forms of innovation often aren't the tangible kind. Instead, they are forms of innovation that we might belittle as less heroic, less glamorous: the innovation of business models. Don't think innovator-as-hero; think innovator-as-bureaucrat. Even Edison--who held 1,093 patents (more than anyone else in U.S. history) and who in- vented such doodads as electric light, the phonograph, and the motion picture--fared pretty badly when it came to choosing business models. He waged and lost one of the world's first technology-format fights, be-tween alternating and direct currents. And he abandoned the recording business after, among other things, insisting that Edison disks be designed to work only on Edison phonographs. Sound familiar?

In virtually any industry, business-model innovators rather than technical innovators have reaped the greatest rewards in recent decades, argues Gary Hamel, the chairman of Strategos, an international consulting company that focuses on helping businesses innovate successfully. Hamel points to Amazon, eBay, and JetBlue. Each company either delivered goods and services differently (by bringing distribution of books or secondhand goods to the Web) or more cheaply (by becoming a sort of Wal-Mart of the skies). Dell has done both. "Dell hasn't done anything to make PCs more attractive, more powerful, or easier to use. To the extent that there is innovation there, it has come from other companies," like Apple, Hamel says. "All of Dell's contributions have been in providing [other companies' technical] innovations to a wider audience at lower cost."

In some cases, innovation that we might think of as technical is actually business-model based. Henry Ford, for example, didn't invent the automobile--but he did develop the production process that drove costs down and enabled him to pay his assembly workers enough that they could afford cars of their own. "You can be tremendous at innovation on the technical side," Hamel says. "But if you can't wrap that innovation into a compelling value proposition, with a dynamic distribution strategy and attractive price points, then the innovation isn't worth much at all."