Bertrand Russell once said (I'm paraphrasing here) that genius is to present a problem in a way which allows a solution. And that's exactly what is needed in Apple’s current situation, which is both highly encouraging and somewhat preoccupying in terms of mid-term perspective.
Phenomenal as it may be, the success of the iPod will not suffice on its own to pull Apple out of the "über-stylish niche-innovator" role the industry has type-cast the company in. It is also quite clear that the Macintosh platform on its own will not be able to grow significantly if it continues its course at the current rhythm of market penetration. Sure, iPods may drive iMac sales, and growing concerns about security may also erode confidence in the Windows platform, but the chances for the Macintosh to go from current levels of market penetration to double digit numbers remain fairly slim.
In terms of technology development, on the other hand, genius is about seeing beyond the obvious, and about anticipating constructive disruptions in the making. In short, it is about coming up with an idea or a product that nobody has thought of, but which has the potential to “click” with a majority of people.
These days, the key area of interest for Apple is boringly commonplace yet it is supremely challenging. I am of course alluding to what one might call “The Great Living Room Conundrum”; the most coveted spot of consumer technology today: the convergence of digital media with lifestyle and entertainment. The company to dominate this space will be very enviable indeed.
Yet Apple may have a better chance than others at cracking the way in which entertainment, the internet, and computing come together. For one simple reason: unlike most other players in this field, Apple is not fueled by technology, but is clearly vision-driven. The company owes its biggest successes to the capacity of spotting an emerging need, and then delivering a superior product to cover it. (And conversely, Apple’s failures can often be traced back to its incapacity to act like the “normal” technology provider).
In particular, Apple manages to succeed in one area where most technology-centric companies (and Microsoft in particular) almost systematically fail: in making products desirable. Logical reasoning may govern mainstream PC purchases, but truly remarkable successes in the market are founded on objects so desirable that they defy reasoning. Sure, the iPod is pricey, but millions of consumers want one anyway.
The keys to cracking the “Living Room Conundrum”.
The mistake many technology companies make when it comes to product strategies is that they attack the problem from the technology side. This does not work in the consumer market, because Joe and Jane Average don't buy TECHNOLOGY. They are generally not interested in technology for its own sake, not do they want to find out more about it.
Truly successful products do not start from the technology, but from the problem they want to solve. Take the iPod: Apple did NOT set out to sell a MP3 player. Apple convinced the market that the iPod was a cool, convenient way of listening to music.
So here are Apple's core issues in conquering the living room:
1) Find the magic formula. The problem with the “Living Room Conundrum” is that all the ingredients are pretty well-known; it's the magic formula which will make them work together in a harmonious, easy way that is the problem. We know that television, personal computing and digital media are converging; it is also quite clear that wireless networking and broadband Internet access will play a crucial role. What we haven't figured out is which combination of these features will have the capacity to support the emergence of widespread new usage patterns in the mainstream consumer space.
2) Take it one step at a time. It is likely that it will take many iterations and mistakes to edge towards true integration of all these elements. One of the biggest mistakes companies can make in this space is to try going too fast: the main problem with current attempts such as Media Center PCs is that they try to do far too much at the same time.
3) Overcome the iPod. The first thing Apple has to do right now is to overcome the iPod. Build on its strengths, yes, by all means; expand it as far as it can go, but go well beyond it. While it lasts, a mega-craze like the iPod is a wonderful thing. Once it has peaked, it becomes a significant burden to overcome. Coco Chanel used to say: Fashion is what becomes unfashionable. It will happen to the iPod eventually.
4) Continue to SURPRISE. In order to survive the iPod craze, Apple needs to do more than expand: it needs to surprise. More than ever it needs to surprise. From a market perspective all Apple now needs is another successful consumer product. On the grander scale of things, Apple not only needs to find one more consumer success — but also one which it can tie into its overall vision of the digital home. And that's where it becomes tough.
Look for the niche approach
What are Apple’s assets in this battle? So far the company has a rock-solid position in the music market; it has a credible offering in wireless networking, and it has the iMac, which begs to be considered as the ideal home-computer. But Apple knows very well that it's too early to sell the iMac as the digital hub for the home to a mass-market audience, and being too early is as bad as being too late. Even worse, Apple has no footing to the gaming market; as for video, consumer usage patterns for viewing video are far too fragmented to allow for a single device to become an iPod-like success in the near future.
Yet Apple clearly has understood one important (though often overlooked) lesson: true revolutions start at the fringe, not at the center. Before becoming a vast consumer hit, the iPod was the perfect stylish niche product. Since Apple has no chance at the Microsoft-style “we've got the money, lets just do it” juggernaut technique of product marketing, it has to go for the smart, viral marketing approach.
Whatever comes next from Apple will probably resemble the iPod in terms of approach rather than in terms of product. There is one additional problem, though: any future foray into the consumer space needs to be sufficiently close to Apple’s core business to avoid alienating the extremely loyal Macintosh user base.
So to get back at our initial question: yes, Apple could well crack the living room conundrum. But don't expect Steve Jobs to do it in a predictable way…
©Pfeiffer Consulting 2004
Apple is betting on niche products which are moving into the mainstream through their style appeal and ease of use, rather than relying heavily on technology for its own sake.
The industry's main challenge for digital convergence in the living room is that the usage patterns have not stabilized enough in key areas such as video viewing to allow true mass-market products to take off.
