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Among both liberals and conservatives, he was one of the great giants of 20th century economics.
“What was really so important about him,” said W. Allen Wallis, a former classmate and later faculty colleague at the University of Chicago, “was his tremendous basic intelligence, his ingenuity, perseverance, his way of getting to the bottom of things — of looking at them in a new way that turned out to be right.”
The iPod turned five yesterday and much ink has been spilled in the last week about the product’s success, its ubiquity and impact on Apple. The state of the digital music market at the time of the iPod’s introduction has been relatively ignored though. It’s hard to imagine its embryonic state in 2001 from the perspective of 2006 and five years of hindsight. At the time, everything in the space, from devices to software to services, was up for grabs as various industries grappled with the problem of creating a new model for the music business. Several products already existed, but no one had quite nailed it before Apple came along.
One of the most remarkable things about the iPod’s introduction was the clearly articulated argument that Steve Jobs made when it was introduced. It’s preserved on YouTube and truly worth a look. Jobs’ argument is carefully constructed and compelling on many levels. However, aside from his famed “reality distortion field,” the argument adheres to basic business principles and provides an extremely useful template for the introduction of new products and services into emerging or underdeveloped markets.
Describe the Target Market:
On deciding where to innovate next, Apple chose music. Why?
“We love music, and it’s always good to do something that you love. More importantly, music is a part of everyone’s life. Music has been around forever; it will always be around. It is not a speculative market. Because it is a part of everyone’s life, it’s a very large target market all around the world. It knows no boundaries.”
Although I’m sure he (and his team) examined it in great detail, Jobs stays away from hard numbers such as demographics, market size, dollars spent and average music library size. During the pitch, he keeps the focus on where music fits in people’s lives, not where it fits into Apple’s bottom line.
Know What You Are Not Going to Do:
It’s a given that the digital music player market wasn’t exactly saturated in 2001, but Jobs’ back of the napkin analysis of the opportunity space was clever in its adherence to simplicity. He compared traditional CD players, Flash-based units, Mp3 CD units and hard drive jukeboxes on a simple price per song basis. Again, a basic analysis but one that illuminates the choices available to Apple. More importantly, Jobs was clear about what Apple wasn’t going to do. “We studied all of these and that’s where we want to be.”
State Clearly What You Are Going to Do, Part 1:
Jobs described where the iPod fits into Apple’s product portfolio in one simple sentence:
“iMac, iBook, iPod.” Having established it as part of Apple’s consumer-focused offering, he offered why Apple could go there:
“No one has found the recipe for digital music. Not only do we think we can find the recipe, but we think the Apple brand is going to be fantastic because people trust the Apple brand to get their great digital electronics from.”
State Clearly What You Are Going to Do, Part 2:
Jobs described the offering in concrete terms: an Mp3 player that holds your entire music library with CD quality sound that doesn’t limit you to one format. Rather then dwelling on technical specifications, Jobs again came back to a value proposition that describes what Apple is going to do for the consumer:
“How many times have you gone on the road with a CD player and said, “Oh god, I didn’t bring the CD I wanted to listen to. To have your whole music library with you at all times is a quantum leap in listening to music.”
Show How Features Support Purpose (or, If You Must Explain How, Do It Like This):
Jobs then takes the Wizard of Oz tack and gives us a peek behind the curtain by detailing the three breakthroughs that will allow us something heretofore impossible: The ability to fit our whole music library in our pockets.
1. The iPod is ultra portable: Jobs describes the new hard drive and skip prevention technology that makes it possible to “take iPod (and all your music) bicycling, mountain climbing, jogging, you name it, and you are not going to skip a beat.”
2. The iPod is fast: A simple apples to apples (no pun intended) comparison between Firewire and USB demonstrates that the iPod is going to upload 1,000 songs in 10 minutes rather than 5 hours.
3. The iPod is smart: The battery of the iPod is supported by FireWire rather than a separate charger, meaning that there are fewer parts to keep track of. It charges and loads songs, all at the same time.
Jobs cites all three of these technologies to back up his claim that “people trust the Apple brand to get their great digital electronics from.”
Demonstrate Strategy Tangibly:
After all the build up, Jobs pulls out the iPod. It’s the size of a deck of cards, and he makes the explicit comparison. What he holds in his hand is the tangible result of what he’s talking about, and it shows.
The iPod pitch is remarkable in its simplicity and effectiveness. It sticks to the basics of Moore’s elevator pitch and doesn’t add much fluff. What is remarkable has been Apple’s adherence to this technique and development philosophy over time. The future was staring us right in the face.
Not to pick on my people, but Germans can be a little process-oriented from time to time. This comes from Kettner, a supplier of hunting equipment:
“Dear Kettner Customer,
We are restructuring our logistics operations so that we may serve you even more quickly in the future. As a result of this thorough process, this page is under construction.”
I can appreciate Kettner wanting to supply my (non-existent) hunting needs with greater speed. Their corporate motto is “Competence in hunting.” Sadly, they don’t seem to be too competent with the customer experience.
A few things popped out of Wired’s September article: Can the PS3 Save Sony?
“With digital entertainment, you have to think about hardware, software, and services that tie them all together,” says [Phil] Wiser, who managed to heave Sony onto the MP3 bandwagon before leaving earlier this year for a Silicon Valley startup. “But it’s very hard to quantify the advantage of good software. If you’re in a hardware company and you analyze it from a financial perspective, you just want to do it as cheaply as you can. Software and services are an afterthought.”
Great. You are selling a game console and the software and services are an afterthought.
Perhaps even more telling:
“At the root of Sony’s precarious position — not just in the industry, but with gamers at large — is the company’s overweening ambition. The PS3 is all about power. Sony has said curiously little about whether this amped-up Linux über-computer will actually be fun to play. Meanwhile, Nintendo wowed everyone at this year’s E3 with the Wii, a console you can play simply by waving a wand at the screen. And Microsoft has upped the quotient by making it easy to play with all your buddies online.”
These are some of the same reasons Disney had to buy Pixar, Ford and GM are in talks with Nissan/Renault and why Will Wright says “It turns out that we don’t use computers to enhance our math skills — we use them to expand our people skills.”
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