This is the second in a series of posts about Sony’s recent decision to stop production of the Walkman. See my earlier post to get some more background. This post looks at how Apple unseated Sony. The post is excerpted from The Innovation Zone, now available for your Kindle and (of course) your iPad.
Abandon the Success of the Past: Apple and the iPod®
Sony found its way into the Innovation Zone and stayed there for the better part of the 20th century. But, staying in the Innovation Zone requires us to do one of the hardest things for any successful person or organization: to let go of the models we use to describe the past.
The error most of us make is that we move forward as if the ideas and experiments of the past are limited to the variables of the past. However, the variables change. In the case of the transistor radio, the combination of a new generation of young rock-and-roll fans, the need for radio transmissions to warn citizens in the case of nuclear attack, and the increasing mobility of people all created a platform and environment of radical change that was ready for a portable, battery-powered radio.
Economic variables change, making ideas that would have been much too expensive in the past much more affordable today. The variable of scale also changes our ability to realize benefit from ideas that would have been nothing more than a novelty in the past. Think of e-mail, which is only useful if enough people have it. Convenience, security, and demographics are more variables that change the viability of an idea dramatically. So, while it is certainly wise to learn the lessons of the past, it is just as important to be able to periodically abandon them when the context of those lessons changes enough.
The problem, of course, is that we can rarely, if ever, factor in all of the external complexities that may constitute an adequate change. This seems like an impossible predicament. It isn’t. Abandoning success isn’t about just tossing out all previous knowledge. Instead, it’s about not being bound by the limits of the past in testing the limits of the future. It was a challenge that Sony would soon face and ultimately succumb to.
For two decades, Sony continued to dominate the market for personal music with its Walkman through a steady proliferation of successive models. However, Sony was not infallible.
The first indications that something was wrong started in 1975 when Sony introduced the Betamax videotape format, and began a long battle over the both the rights to Betamax and the popularity of the competing VHS standard. Sony got lost in the mistake of trying to invent rather than to innovate, in trying to repair broken dreams rather than create new ones.
In 1989, Akio stepped down as Chairman of Sony. In the coming decade, Sony would create tall silos with its varied divisions, and would compete with itself as much as it did the rest of the market. It finally would lose its grip on the personal player market it had become inseparable from when another outsider made a bet that followed Morita’s pattern of innovation so closely, and so predictably, that the irony of its eclipsing Sony is nothing short of poetic. This new company’s innovation was built on the market that Sony and many of its competitors had laid the cornerstones for with personalization, digital music, and miniaturization. The company was, of course, Apple Computer and the innovation is the now-legendary iPod.
In the same way that Sony’s TR–63 was not the first transistor radio, the iPod was not the first MP3 player – not by a long shot. In fact, it was not the least expensive, nor was it the smallest or, by any measure, the incumbent. In fact, Apple was the outsider in the music business. Apple no more created the popular MP3 format that all of the iPod’s music used, than Sony had created the transistor. But, Apple created the experience by bringing together the interface, digital media, the ability to buy music at its most atomic level in order to create personalized playlists and, most importantly, it let the market run with it.
IPod’s approach was seen as the enemy to established players. The person who lead Apple’s iPod development was Tony Fadell, who had actually approached all of the incumbents with his idea of creating an iPod device that would benefit from the use of a high capacity hard disk and an online music store where users could purchase music rather than subscribe to it. The incumbents turned Fadell away at the doorstep. Doing it Fadell’s way would undermine the established model and require walking away from success, fighting with existing incumbents who owned the content, and confusing the market with an approach that was not the norm.
Fadell finally found an unlikely reception at Apple, which had sworn off consumer electronics years before with its own failed efforts at PDAs and the very visible disaster of its Newton PDA. Within just eight months, Fadell and his team had developed the first iPod prototype, built on PortalPlayer, a software technology Apple acquired from another company! Fadell refined PortalPlayer, combined it with existing components from the now discontinued Newton, added navigation controls that were radically different from the Walkman-type of controls that were painfully inept at managing large music collections, and included the Apple iTunes Music Store along with synchronization software to link it to a user’s desktop.
Apple had the benefit of understanding the critical role of experience. Apple’s core competency had always been the crucial interface and experience between man and machine. It understood how machines and people interfaced best, and could rapidly zero in on the essential elements of experience in order to refine them. Apple also understood the value of intimacy in a customer relationship – intimacy in how the customer perceived the role of Apple in their lives. Historically, Apple has had a strong cult following based on a sense its users have of the understanding Apple has of the way its users behave. Within a few months of its introduction, the future of the iPod was clear.
We will look back and wonder how we possibly lived without iTunes and our portable digital music libraries. Our behavior will be altered so dramatically that we will convince ourselves nothing could take its place, and with that the door to the next innovation will crack open.