9-609-066 REV: MARCH 4 , 2010 STEFAN THOMKE BARBA RA FEINBERG Design Thinking and Innovation at Apple Think different. — Apple Advertising Slogan, 1997–2002 By the beginningn of March 2010, weeks after the dramatic debut of its iPad, Apple’s share price remained in the US$ 200 range, where it had hovered for more than for six months—signaling solid financial strength and future grrowth prospects as world economies, and businesses, continued to reel from the worst recession since the Great Depression. With a market capitalization of nearly US$ 200 billion and annual sales approaching $50 billion, Apple was now worth more than the industrial giant General Electric and exceeded the value of Sony Corporation bby a factor of five, even though both firms had larger revenue bases. All the more amazinngly, a scant 12 years earlier, when Steve Jobs returned to Apple, the company’s share price had hovered around $5 and the future was uncertain at best. Jobs, after all, had already been fired from the firm he co-founded almost a decade earlier, and he was coming back when the company was nearly written off. Even so, through that difficult period, the core commitment to product design and development had stayed alive. Since being founded in 1976, Apple has been considered a leading designer and integrator of computer hardware and software. By 2010, it had fundamentally changed the music, mobile telephone, and retail operations through its sleek products, innovative stores, and new business models. Moreover, the just introduced iPad tablet computer might accelerate the transformation of the publishing business. Apple stores had some of the highest revenues per square foot in the retail sector and its applications (App) store for the iPhone had achieved one billion downloads only nine months after launch (in 2007). Surprisingly, Apple’s radical innovations also came with consistency. Anyoone who used the Apple II in 1978 and then picked up an iPhone three decades later would find a familiar object. Somehow the new device was the same as the old one: different, but the same. Apple’s success was not just the result of clever strategic moves or an innate sense of market timing. It came from a deep commitment to understandinng how people used computing devices and a desire to develop “insanely grreat products.” The iPod famously arose from the all-pervasive love of music within the firm. At the same time, this enthusiasm remarkablly matched the needs, abilities, and dreams of millions of customers. And, for all these new markets that were conquered, Apple kept its eyes on the core computer business. As Apple ventured into new businesses and faced an ever-increasing number of fierce competitors, the roots of its success puzzled many industry experts and technology pundits. The company often defied conventional business logic and was not afraid to experiment outside its core ________________________________________________________________________________________________________________ Professor Stefan Thomke and independent researcher Barbara Feinberg prepared this case. This case was developed from published sources. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective manageement. Copyright © 2009, 2010 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545- 7685, write Harvard Business School Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu/educators. This publication may not be digitized, photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School. 609-066 Design Thinking and Innovation at Apple markets. It built retail stores when competitors were moving to direct sales and distribution models, and its products were rarely first to market. There was, however, a surprising consistency in the way the company worked. Simply put, the “Apple Way” was a set of principles with a deep commitment to great products and services at its core: design thinking, clear development strategy and execution, its CEO as chief innovator, and the rational courage to conduct bold business experiments. Design Thinking Those of us on the [original] Macintosh team were really excited about what we were doing. The result was that people saw a Mac and fell in love with it. There was an emotional connection . that I think came from the heart and soul of the design team. — Bill Atkinson,1 Member of Apple Macintosh Development Team It was not evident that falling in love with computers was something that made sense at the time when these were machines for data processing and automation. Moreover, in the mid-1970s, when Apple entered the scene, computer equipment was typically housed in discrete locations within company headquarters and government facilities, guarded and used only by specialists. The notion of personal computers as a tool for individual work was unimaginable. Corporations and governmental agencies controlled how work functioned and, by extension, influenced the creation of tools that were to be deployed to control it. The business processes and systems that evolved were eventually captured in enterprise software, with its emphasis on automating tasks. To Steve Jobs and the original cadre of Apple developers, however, the goal was to design a computer that both supported and fostered individual work. Moreover, they reasoned, potential customers would have to fall in love with computers if they were to master the machine’s apparent complexity and spend a lot of money to do so. People would have to see how this tool would benefit them and want that benefit for themselves. Apple’s products would target people with this appeal. From the beginning, Apple addressed individual users (“the rest of us”), believing that products that were intended to be useful to people would in fact so be. For that to happen, the level of complexity needed to be reduced dramatically. Simplicity in Design and Use Helping people “love” their equipment and the experience of using it animated—and continues to motivate—how Apple products were and are designed today. Cordell Ratzlaff, a major architect of the Mac OS X operating system (circa 1990), noted: We did the design first. We focused on what we thought people would need and want, and how they would interact with their computer. We made sure we got that right, and then we went and figured out how to achieve it technically. In a lot of cases when we came up with a design that we knew really worked for people, we didn’t know how we were going to build it. We had a design target, and we worked with engineering to reach it. We ended up doing a lot of things that we initially thought were impossible, or would take a long time to do. It was great because we were applying a lot of creativity and ingenuity on the design side and then pushing the engineers to use the same kind of creativity and innovation to make that happen.2 From the beginning, Apple products were conceived of as being highly interactive. To that end, said Jonathan Ive, Apple’s senior vice president of industrial design, who spearheaded the iPod’s development (late 1990s), “So much of what we do is worry about the smallest of details . [while] I 2 Design Thinking and Innovation at Apple 609-066 don’t think all the people using the product notice or care in a conscious way about every little detail, I do think in the aggregate it’s really important, and it contributes to why people like the product.”3 Worrying about the smallest detail, which includes even the packaging of Apple products, has helped realize co-founder Steve Jobs’ design sensibility: that simplicity is the ultimate sophistication. Distinct from organizations whose notion of “detail” is often conflated with “features,” Apple products are often noteworthy for what they do not contain. Years ago, the slot for inserting diskettes was eliminated from Mac computers (you would have to add an external device); reviewers criticized Apple for its arrogance and omission of must-have features. Other companies soon followed Apple’s lead, however, and external devices were quickly developed to plug into ports that Apple products contained. In other words, when the smallest detail is scrutinized, it’s possible to discover what can be lived without—and what can be developed elsewhere. Here’s how Paul Mercer, whose Pixo company implemented iPod’s user interface software, characterized the phenomenon: [T]he iPod is very simple-minded . it really doesn’t do much other than let you navigate your music. That tells you two things . [first] that the simplification that went into the design was very well thought through, and, second, that the capability to build it is not commoditized. The fact that nobody has been able to duplicate the capabilities . means that the building blocks may be difficult to come by, and that the design sense, to create a simple and easy-to-adopt solution, does not exist in most product development organizations worldwide.4 This “design sense” was evident in the iPod Mini, which actually reduced the amount of music that could be played but took advantage of new hard drive technology. “The mini was designed with exactly the same philosophy [as the original iPod]”, explained Ive: We were trying to take advantage of and exploit the fact that it was a smaller drive and really understand the difference. We made one model taking an approach [similar to the original], using that design vocabulary and form factor, and it was just completely wrong. Then we started to explore very different materials and approaches. We realized we could make this in aluminum.