The chances are that during the next 12 months you or your children or someone in your family will want to purchase an Apple iPod, an iPod accessory or a Mac Computer.
So what is it that makes the iPod so unique and why is it driving sales across a multitude of devices from receivers to in-wall mounts to music systems?
The answer is one company – Apple. In the space of five years they have done more to simplify technology than most other technology companies. They have delivered dynamic innovative design and friendly “less intimidating” technology that consumers are buying in droves. Even Mac hardware sales are up 48 per cent and rising off the back of the boom in iPod sales. In an exclusive interview with SmartHouse Reseller, Greg Joswiak, the worldwide vice president of iPod marketing, said: “Somewhere along the way innovation in technology disappeared as companies scrambled to deliver one product after another. Saving money was put ahead of innovative design. At Apple we recognised that great design and easy functionality were critical in delivering technology products to market.”
In Australia to finally launch an Apple iTunes online store, Joswiak said: “At Apple we have a great team of people who we have recruited over a period of time. The tech crash shortly after 911 was good to Apple. In that period, many companies cut back on staff and projects and we went on a hiring spree. Then only weeks after 911 we launched the iPod. People told us we were mad as it was a period when no one was launching new products let alone launching into the music MP3 market”.
So how did the iPod cut through against companies like Sony who had already sold 300 million walkman units?
In an era when most technology outfits have tightened their belts to adapt to a slower-growing market, Apple has forged ahead on a platform of innovation. Others, like Sony, have slashed jobs, R&D budgets and product lines and focused on incremental advances to existing product lines. Not Apple.
By combining technical know-how with a new concept for how to sell music online, Apple’s iPod music player has become the most influential new tech product in years. At the same time, Apple has maintained its reputation for making the most elegant, easy-to-use desktop computers as well.
Greg says that the iPod’s success is thanks to “great design, ease of use and a clear understanding of what consumers wanted”. He adds: “The walkman was horrible. It was built by engineers. It was a horrible design, had a terrible interface that made it difficult for consumers to get a great music experience. We recognised this and delivered a combination of great software and hardware. The toggle wheel on the iPod made it easy to use. The software made it easy to load and manage songs and access content.”
On the question of third party relationships he said: “iPod accessories have become an economy to themselves and right now we are seeing some great iPod accessories come through. One of the big growth areas is the automotive industry with many manufacturers now ditching traditional sound systems in cars for an iPod solution. Some 15 automotive brands including BMW are now specifying an iPod as an optional accessory”.
In a few months time we will see the first of the Intel Mac products. So why did Apple move to an Intel platform? According to Joswiak, it had nothing to do with speed. “It was more about power management and a roadmap that was a combination of power speed and power management. What Intel demonstrated to us was that they had a roadmap based on performance coupled with good power management. This is critical when one is trying to combine great design, which is often packed into small spaces with performance that generates heat. They proved that they could deliver both requirements”
In recent weeks Apple has launched a new iTunes store in Australia, an iPod video player and new media centre type software that runs on a Mac PC – and there is more to come. As Apple chairman Steve Jobs says at the end of most Apple product launches “there’s just one more thing”. The phrase delights the Mac faithful because they have come to believe that something wonderful, perhaps even magical, is about to be introduced into their lives. This audience and their loyalty is what the likes of Samsung, Sony and HP would love to have.
What Apple builds is loyalty and for resellers and solution providers the secret to success is the integration of Apple products into a home environment. Apple use to be a closed shop with products only sold via either Apple stores or via a close knit group of resellers. There was no open distribution of an Apple product pre iPod. Today Apple is forging new relationships with distributors like Cellnet and KH distribution. They have also opened Apple shops inside Harvey Normans, Domayne, as well as David Jones and Myer. At the same time the CE channel is selling bucket loads of iPods and iPod accessories. Installers are also integrating iPod connectivity into homes.
The iPod has captured 75 per cent of the mobile music player market, and the iTunes online music store, which now accounts for 84 per cent of all legal sales of downloaded digital music. There have also been triumphant advances in nuts-and-bolts technology – from built-in wireless internet to optical drives that record CDs and DVDs. No wonder “one more thing” often induces panic, and then a copying frenzy, among Apple’s rivals from Seoul to Shanghai to Seattle.
Apple may be just a minor player in the computer and consumer electronics industries in terms of revenue ($14 billion in fiscal 2005) and market share (less than 5 per cent worldwide), but it is now undeniably setting the pace for both of those industries in terms of hardware, software, and industrial design. In the last quarter revenue grew by 345 per cent and Mac PC sales by 48 per cent worldwide.
Jobs’ latest surprises, announced in mid-October, included thin, flat-panel computers with built-in video cameras and one-button video teleconferencing to connect as many as four people, and pocket-sized video iPods with the largest colour screens in their class.
But the “one more thing” that is sure to have both rivals and consumers in a tizzy in Australia now is the ability to buy, download, and play not just music videos but also current and past episodes of television programs, including Desperate Housewives and Lost – two of the most popular shows on TV. (Ironically, Jobs himself has never been a fan of broadcast television.)
Along with a new Apple software program called Front Row and a new remote control that gives Macintosh users the ability to control everything from digital photos to music to video on the computer screen, Apple is poised to revolutionise the downloadable video market in the same way it has revolutionised music downloads.
In an interview after his latest grand unveiling, Jobs hinted at what’s coming: He isn’t done with the mobile-phone business, despite the disappointing reaction to the iTunes phone he launched recently with Motorola.
As his company moves deeper into music, video, consumer electronics, telephony, software, and services, Jobs is asked, how would he describe Apple these days? He responds by picking up the new Apple remote control device and placing it against a giant, peanut-shaped remote that comes with a computer running Microsoft’s Windows XP Media Center Edition PC operating system. The Apple remote, sleek and white and smaller than an iPod and has six buttons. The Media Center PC remote is a handful, with more than 40 buttons. “Apple is a company that takes complex technology and makes it easier and simpler to use,” he says, and seems satisfied with his answer. But moments later he smiles, and refines his definition: “Our goal is to stand at the intersection of technology and the humanities.” In other words, Apple has many “one more things” to come.
Jobs says that one thing he has got right is being able to say no to the thousands of ideas that are put in front of him. We have to concentrate on the “really important” creations to stay ahead.
During a recent interview with BusinessWeek in the USA, Steve Jobs answered the following questions.
Q: What can we learn from Apple’s struggle to innovate during the decade before you returned in 1997?
A: You need a very product-oriented culture, even in a technology company. Lots of companies have tonnes of great engineers and smart people. But ultimately, there needs to be some gravitational force that pulls it all together. Otherwise, you can get great pieces of technology all floating around the universe. But it doesn’t add up to much. That’s what was missing at Apple for a while. There were bits and pieces of interesting things floating around, but not that gravitational pull.
People always ask me why did Apple really fail for those years, and it’s easy to blame it on certain people or personalities. Certainly, there was some of that. But there’s a far more insightful way to think about it. Apple had a monopoly on the graphical user interface for almost 10 years. That’s a long time. And how are monopolies lost? Think about it. Some very good product people invent some very good products, and the company achieves a monopoly.
But after that, the product people aren’t the ones that drive the company forward anymore. It’s the marketing guys or the ones who expand the business into Latin America or whatever. Because what’s the point of focusing on making the product even better when the only company you can take business from is yourself?
So a different group of people start to move up. And who usually ends up running the show? The sales guy. John Akers at IBM (IBM ) is the consummate example. Then one day, the monopoly expires for whatever reason. But by then the best product people have left, or they’re no longer listened to. And so the company goes through this tumultuous time, and it either survives or it doesn’t.
Q: Is this common in the industry?
A: Look at Microsoft. Who’s running Microsoft?
Q: Steve Ballmer.
A: Right, the sales guy. Case closed. And that’s what happened at Apple, as well.
Q: How did Apple recapture its innovative spark?
A: I used to be the youngest guy in every meeting I was in, and now I’m usually the oldest. And the older I get, the more I’m convinced that motives make so much difference. HP’s primary goal was to make great products. And our primary goal here is to make the world’s best PCs – not to be the biggest or the richest.
We have a second goal, which is to always make a profit – both to make some money but also so we can keep making those great products. For a time, those goals got flipped at Apple, and that subtle change made all the difference. When I got back, we had to make it a product company again.
Q: How do you manage for innovation?
A: We hire people who want to make the best things in the world. You’d be surprised how hard people work around here. They work nights and weekends, sometimes not seeing their families for a while. Sometimes people work through Christmas to make sure the tooling is just right at some factory in some corner of the world so our product comes out the best it can be. People care so much, and it shows.
I get asked a lot why Apple’s customers are so loyal. It’s not because they belong to the Church of Mac! That’s ridiculous. It’s because when you buy our products, and three months later you get stuck on something, you quickly figure out [how to get past it]. And you think, “Wow, someone over there at Apple actually thought of this!” And then three months later you try to do something you hadn’t tried before, and it works, and you think “Hey, they thought of that, too.” And then six months later it happens again. There’s almost no product in the world that you have that experience with, but you have it with a Mac. And you have it with an iPod.
Q: Seriously, a lot of people give you much of the credit. How much of it is you?
A: Look, I was very lucky to have grown up with this industry. I did everything in the early days – documentation, sales, supply chain, sweeping the floors, buying chips, you name it. I put computers together with my own two hands. And as the industry grew up, I kept on doing it.
Not everyone knows it, but three months after I came back to Apple, my chief operating guy quit. I couldn’t find anyone internally or elsewhere that knew as much as he did, or as I did. So I did that job for nine months before I found someone I saw eye-to-eye with, and that was Tim Cook. And he has been here ever since.
Of course, I didn’t tell anyone because I already had two jobs CEO of Apple and of movie maker Pixar Animation Studios and didn’t want people to worry about whether I could handle three jobs. But after Tim came on board, we basically reinvented the logistics of the PC business. We’ve been doing better than Dell in terms of some metrics such as inventory for five years now!
Q: With the iPod, Apple moved beyond the PC into consumer electronics. But you’re still considered a niche player that picks its spots in bigger markets. Will you try to expand to become a more full-line player, like Sony or Samsung?
A: The fact that you’re comparing us to Sony is a statement in itself. I’m flattered. We really respect those guys and what they’ve accomplished over the years. But we’re just trying to make great products. We do things where we feel we can make a significant contribution. That’s one of my other beliefs.
I’ve always wanted to own and control the primary technology in everything we do. Take audio. For years, the primary technology was the [marking mechanism] inside a CD or a DVD player. But we became convinced that software was going to be the primary technology, and we’re a pretty good software company.
So we developed iTunes [Apple’s music jukebox software that later morphed into the iTunes Music Store]. We’re a good hardware company, too, but we’re really good at software. So that led us to believe that we had a chance to reinvent the music business, and we did.
Q: Many people say we’re in a period in which advances in various digital technologies – from drives to chips to screens to networking gear – is going to change the nature of innovation. Rather than inventing something from scratch, innovation will be the art of putting all of these capabilities together in new ways.
A: Of course, you’re never going to invent everything. But what’s the primary technology? And what’s the concept of the product? Where does the conceptualisation come from? I guarantee the 1.8-inch hard drive was not invented for iPods. But that’s not the primary technology in an iPod. Innovation comes from people meeting up in the hallways or calling each other at 10:30 at night with a new idea, or because they realised something that shoots holes in how we’ve been thinking about a problem. It’s ad hoc meetings of six people called by someone who thinks he has figured out the coolest new thing ever and who wants to know what other people think of his idea.
And it comes from saying no to 1,000 things to make sure we don’t get on the wrong track or try to do too much. We’re always thinking about new markets we could enter, but it’s only by saying no that you can concentrate on the things that are really important.
Q: So the key is to have good people with passion.
A: When I got back here, Apple had forgotten who we were. Remember that “Think Different” ad campaign we ran [featuring great innovators from Einstein to Muhammad Ali to Gandhi]? It was certainly for customers to some degree, but it was even more for Apple itself.
You can tell a lot about a person by who his or her heroes are. That ad was to remind us of who our heroes are and who we are. We forgot that for a while. Companies sometimes forget who they are. Sometimes they remember again, and sometimes they don’t.
Fortunately, we woke up. And we’re on a really good track. We may not be the richest guy in the graveyard at the end of the day, but we’re the best at what we do. And Apple is doing the best work in its history. I really believe that. And there’s a lot more coming.
Q: You’re back at work on a part-time basis. Are you going to come back full-time?
A: Yes. That was one of the things that came out most clearly from this whole experience [with cancer]. I realised that I love my life. I really do. I’ve got the greatest family in the world, and I’ve got my work. And that’s pretty much all I do. I don’t socialise much or go to conferences. I love my family, and I love running Apple, and I love Pixar. And I get to do that. I’m very lucky.