Where to Innovate? – Apple Story

Portfolios of Innovation and Apple

As a business competing in dynamic markets, your company faces threats and opportunities in an economic landscape that is constantly in flux. To meet, understand, survive, and exploit these changes, leaders have to orient their innovation efforts around the question “where to innovate?” Answering this correctly ensures that investments in time and money will lead to growth in new business landscapes as they emerge; getting the wrong answers means losing opportunities and wasting very precious time and resources.

Most everybody uses strategy to focus on the most attractive markets and offerings, but leaders and winners use innovation to build much more robust portfolios which include new growth options that will enable them to achieve their targets as things inevitable change over time. These are the Fields of Play that companies must map out for themselves to win in innovation. They use innovation, of course, to reinvent their core offerings. But they also use innovation to exploit adjacencies and they use innovation to explore new frontiers: the exciting new markets sometimes called as the white space, the blue ocean beyond.

They also use innovation to help them to decide where to place their bets on the best and most likely future scenarios, where to invest in options for a variety of other potential future developments and where to buy insurance if the market changes in ways that are unfavorable to the company. These are key aspects of their investment strategy and growth strategy going forward.

Because they are realistic about the many uncertain futures facing them, good leaders are very interested in portfolios, not just one winning thing. Instead of a blockbuster product, they’re looking for growth platforms. These can be understood as growth engines that can adapt to multiple futures, giving them an adaptability that really has the legs to cross multiple terrains – not just things that will meet this quarter’s or this year’s earnings targets, but things that will continue to drive growth into the future.

Coming to grips with uncertainty and multiple futures means that winners and leaders in innovation must think and act differently. They think beyond just improved performance or features of products and services; in addition, they think about growth and innovation breakthroughs and platforms and solutions with clear and compelling value. Steve Jobs and Apple provide examples of a leader and a company that have found the innovation premium that can be derived from thinking and acting differently in order to create a portfolio of platforms.

The Apple iPod is an example of the creation of an innovation portfolio with legs. In 1999, Napster demonstrated the attractiveness of downloading music on- line. The only problem with this was that most of that music was pirated. In contrast, the introduction of the iPod in 2001 along with its sister-store iTunes was a way to satisfy consumers as well as music producers who had felt extremely threatened by free downloading of their intellectual property.

It’s very important to note that iTunes and the iPod were the only think on the horizon of Apple’s future. Steve Jobs and his colleagues were wondering “what can we explore with iPod and iTunes that goes beyond simple music purchases?” What Apple was really doing was building an “i” platform: it was about personal customization of media and communications. This was a potentially huge new consumer landscape that Apple could exploit first through this new platform. This went far beyond simply coming up with the iPod mini and other enhancements to the iPod. The real stroke of genius was going from the iPod, to the iPhone and most recently to the iPad.

And when innovation really infuses the company culture, possibilities open wider and wider with every new product. With the iPhone, for example, Apple did far more than revolutionize mobile telephony – they also created a whole new business model. In partnering with wireless provider AT&T, they hit upon sharing a variety of revenues: from purchasing the applications, to data revenues, to enrollment revenues that were desperately needed by AT&T at the time.

The story of the “i” innovation platform of Apple suggests questions you need to ask yourself to find the right fields of play for your own innovation efforts:

• Do I have a really good and clear definition of the fields of play and platforms that we will go after as a company?
• Do they adequately deal with both potential opportunities as well as potential threats?
• Do platforms have strong value propositions that are sustainable and differentiated?
• Do lead concepts enable you to build business with lead customers?
• Do you have winnable and sustainable business models?