Dragon #3: The Apple Store
When Apple launched the iPod in the fall of 2001, it was a bold and risky move. The company had never had a hit product outside of its computer line, other than companion printers for its computers. Apple was investing a lot in the iPod, and was initially counting on it to help drive a lot of Mac sales.
But, before Apple even launched the iPod, Jobs had already made an even riskier move. On May 19, 2001, Apple opened the doors on its first two retail stores. Both were in malls - in Glendale, California (a suburb of Los Angeles) and Tysons Corner, Virginia (a suburb of Washington, D.C.). The Apple Store was born.
Virtually no one in the press or on Wall Street thought it was a good idea. Gateway and Dell had already tried retail stores and completely flamed out. Microsoft had opened a tech lifestyle store called “microsoftSF” at the Metreon in San Francisco in 1999. Despite its prime location next to the Moscone Convention Center and in the heart of San Francisco’s tech community, it was a flop, too.
David Goldstein, a retail consultant writing for TheStreet.com, stated, “It’s desperation time in Cupertino, California. I give [Apple] two years before they’re turning out the lights on a very painful and expensive mistake.”
A funny thing happened with the Apple Store, though: Customers showed up. Apple designed the stores to be high-touch and low-pressure. There was lots of light and open space and people could wander in and try out Apple products and accessories, get help with Mac hardware and software problems, and take classes on how to do new stuff with their Macs.
When Jobs first opened the Apple Store in 2001, Macintosh market share was hovering around 2% of the personal computer market. By 2010, Mac market share had risen to 10% (although some tracking services claim Mac market share is actually only about 5%).
Even beyond the raw market share gains for Mac, the Apple Stores were a runaway financial success. By the beginning of 2010, there were over 200 Apple Stores in 10 countries. In 2007,Fortune declared Apple the most profitable retailer in America. Apple’s Regent Street store was called the most profitable in London in 2009. And, in the heart of the retail capital of the world, the Fifth Avenue Apple Store in New York City was called the highest grossing retailer in Manhattan by Bloomberg.
The most impressive statistic for the Apple Store may be that, in the brutal world of retail, the company has never had to shut down a single store.
Dragon #4: The iPhone
The successful risks that Apple took with the iPod and its retail stores emboldened Jobs and Co. to take another swing for the fences in 2007. At the Macworld Expo in January that year, Steve walked on to the stage for his annual keynote and told the audience, “We’re going to make to some history together today.”
In a career marked by effective salesmanship, the Macworld 2007 keynote was Jobs at his most persuasive. It also didn’t hurt that he had an innovative product to show off.
Thirty minutes into the keynote Jobs paused momentarily and said, “This is a day I’ve been looking forward to for two and half years. Every once in a while a revolutionary product comes along that changes everything… [You're] very fortunate if you get to work on just one of these in your career. Apple’s been very fortunate. It’s been able to introduce a few of these into the world. In 1984, we introduced the Macintosh. It didn’t just change Apple. It changed the whole computer industry. In 2001, we introduced the first iPod, and it didn’t just change the way we all listen to music, it changed the entire music industry.
“Well, today, we’re introducing three revolutionary products of this class. The first one is a widescreen iPod with touch controls. The second is a revolutionary mobile phone. And, the third is a breakthrough Internet communications device… These are not three separate devices. This is one device, and we are calling it ‘iPhone.’ Today, Apple is going to reinvent the phone.”
In 2007, smartphones were primarily business tools deployed by corporate IT departments. They allowed professionals to check their email from their smartphones at all times. Most of these phones also had some limited Web browsing capabilities, but page loads were slow and reading Web sites on 320×240 screens was not pleasant.
The other problem with the smartphones of the time was that they were difficult to use. The Palm Treo, the BlackBerry, and the various Windows Mobile devices all had a fairly steep learning curve. For consumers buying smartphones at retail locations, there were reports of up to a 50% return rate, simply because people couldn’t figure out how to use them.
With the iPhone, Apple wanted to solve two problems. First, it wanted to make smartphones much easier to use, and second, it wanted to make the smartphone a legitimate Web browsing device. With its touch-based interface, the iPhone hit it out of the park on the first goal. From the first day it hit the market (June 30, 2007), the iPhone was the easiest smartphone to use. Many competitors have emulated it since then, but it arguably remains the most simple UI to navigate, especially for new users.In terms of its goal of putting the full Web browser in the palm of your hand, the first iPhone arguably did succeed in offering the first fully functional and readable Web browser, mostly because of its pinch-to-zoom UI. However, this was negated by the fact that the first iPhone did not have 3G connectivity. So, even though the browser worked well, the Web browsing experience was painfully slow unless you were on Wi-Fi.
The other problem with the first generation iPhone was that it wasn’t very useful, especially for business professionals. It did not have the email functionality of the BlackBerry or the Treo, and it didn’t have a lot of applications to take advantage of the easy new UI. As a result, a lot of executives and IT departments wrote it off as a toy - mostly just a fancy iPod with a phone in it.
Apple stepped up its game with the second generation iPhone, giving it 3G functionality, Exchange ActiveSync support, better security features for businesses, and opening it up to third-party applications. Then, the third generation iPhone mostly pumped up the internal horsepower of the device.
By the end of 2009, U.S. market share for the iPhone climbed to 30% in a growing smartphone market crowded with a lot of players. Meanwhile, iPhone’s global market share grew to 17% in 2009.
However, the biggest victory for the iPhone has been its application ecosystem, which has attracted the most software developers and the most application installs. After opening the doors of its App Store in the summer of 2008, the App Store served its billionth download nine months later on April 23, 2009. Five months later on September 28, 2009, it served its two billionth download. A little over three months later on January 5, 2010, the App Store served its three billionth download.
Dragon #5: The Tablet
Long before Apple released the iPhone, there were rumors that the company was developing a tablet computer. Part of that was due to the PDA legacy with the Apple Newton and part of it was due to expected competition with Microsoft’s Tablet PC.
However, an Apple Tablet never appeared. Some of the technology that was rumored to be in the tablet, such as the multi-touch UI, eventually showed up in the iPhone. Nevertheless, the rumors of an Apple Tablet continued even after the iPhone was released. On the heels of one tablet rumor, I remember having a detailed conversation with Macworld Editor in Chief Jason Snell in the summer of 2008 about what an Apple Tablet might entail and why anybody would want one.
In 2009, the rumors of an impending Apple Tablet started to heat up. There was a report in March that Apple had ordered a bunch of 10-inch touchscreens. There were rumors in July that PA Semi, which Apple had acquired in 2008, was building the chips for the Apple Tablet. Then camethe rumor in August from The Wall Street Journal that Jobs, who had just returned to Apple after a brush with death and a liver transplant, was spending nearly all of his time and energy on the development of a new touchscreen tablet. Oh, and in September, Apple hired back an original developer from the Newton team.
Ever since The Wall Street Journal article, most analysts, journalists, and observers in the tech industry have assumed that an Apple Tablet was coming. The main question was the timing.
The other big question centered around what the purpose of the tablet would be. Would it just be a big-screen iPhone or iPod Touch? Would it be a Mac laptop with a multi-touch screen and no keyboard? Would it be an e-reader? Would it be gaming platform (after all, games are a big part of the App Store)?
Ask five tech industry experts about the Apple Tablet and you’re likely to get at least six different answers. Still the general consensus is the Applet Tablet will be a personal media device and it’s primary function will be consuming digital content in various forms - text, audio, video, and a new breed of multimedia mashups.
The most revolutionary aspect of this device is that it could usher in a new era of interactive reading that would change books, newspapers, and magazines forever. As we heard Jobs say in his 2007 iPhone presentation, he loves to create products that can revolutionize industries, and a big swing for the fences like this one would be right up his alley.
It’s no secret that these are all industries that are desperately struggling to adapt their business models to the digital age. If Jobs could provide a new platform for them to do it and bring the masses a 21st century reading experience in the process, it would rank as another major conquest in Jobs’ prolific career.
Apple has reportedly been wooing content partners for months. Some have even posted their concepts for tablet-based content. Sport Illustrated offered a video of what its digital future could look like, and Ray Kurzweil’s Blio eReader software provides a glimpse of what the future of interactive e-books could be.
Recently, Steve Jobs reportedly said, “This will be the most important thing I’ve ever done.”
Coming from him, that says a lot. For that reason, it’s also a tall order. Does he have it in him to slay another dragon?
Postscript: The iPad sold 15 million units in 2010, far exceeding even the most optimistic estimates. It is expected to sell 45 million units in 2011. It has caused a lot of people to rethink their ideas of what they want and need in a computing device. Today, I don’t think there are many people who would argue that Steve Jobs slayed this dragon, too.
