Apples 2005 Challenge: Surpass the iPod

Opinion: The player's success is not enough to pull Apple out of its "niche innovator" role. The company needs to take its knack for making products desirable in a new direction.

Bertrand Russell once said—and Im paraphrasing here—that genius is to present a problem in a way which allows a solution. And thats exactly what is needed in Apples current situation, which is both highly encouraging and somewhat preoccupying in terms of midterm 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 typecast 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 also may 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.

/zimages/4/28571.gifTo read about Apple threatening the owner of the U.K. iTunes domain, click here.

These days, the key area of interest for Apple is boringly commonplace, yet it is supremely challenging. I am of course alluding to the most coveted spot of consumer technology today, what one might call "The Great Living-Room Conundrum": the convergence of digital media with lifestyle and entertainment. The company that ends up dominating 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. Theres one simple reason: Unlike most other players in this field, Apple is not fueled by technology, but it 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, Apples failures often can 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 dont buy technology. They are generally not interested in technology for its own sake, nor 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 an MP3 player. Apple convinced the market that the iPod was a cool, convenient way of listening to music.

So, here are Apples core issues in conquering the living room:

1) Find the magic formula. The problem with the living-room conundrum is that all of the ingredients are pretty well-known; its the magic formula that 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, and its also quite clear that wireless networking and broadband Internet access will play a crucial role. What we havent 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 toward true integration of all of these elements. One of the biggest mistakes companies can make in this space is trying to go 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 surpass the iPod. Build on its strengths—yes, by all means—and 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. And it needs to do this more than ever before. From a market perspective, all Apple needs now is another successful consumer product. On the grander scale of things, Apple not only needs to find one more consumer success—but also one it can tie into its overall vision of the digital home. And thats where it becomes tough.

Next Page: Looking for the niche approach.