Apple the Unsuccessful Innovator

If He’s So Smart…Steve Jobs, Apple, and the Limits of InnovationThe battle over digital music is just another verse in Apple’s sad song: This astonishingly imaginative company keeps getting muscled out of markets it creates. So what does Apple have to tell us about innovation? [Fast Company]

The article’s point is keen: Apple prides itself (justifiably) on innovation – at all costs. But are they really successful as a business? If innovation is so important, then why has Apple repeatedly been pushed out of and out-maneuvered out of markets that they created?

The list of markets created by Apple is long: Personal Computers, Multimedia, PDAs, and Hard Disk MP3 players like the iPod are all Apple inventions. Apple is widely known for innovation, class, fit and finish, and above all style. So why is it that when it comes time to make money on technology Apple isn’t even close to companies like Dell, Compaq, and others with far less innovative pedigrees?

Apple has been forced to watch the celebrations from out in the alley, its nose pressed longingly to the window as others feast: Today, more than a quarter-century after its founding, it commands just 2% of the $180 billion worldwide market for PCs. Almost everyone agrees that Apple’s products are not only trailblazers but also easier to use, often more powerful, and always more elegant than those of its rivals. Yet those rivals have followed its creative leads and snatched for themselves the profits and scale that continually elude Apple’s grasp.

Fast Company looks at innovation, with the question of why innovators so often fail to take advantage of their innovations. The article’s key point, which I agree with is: there are several ways to take advantage of innovation: integrator, designer, or licensor. In addition the article mentions that the while Apple has been almost exclusively a technical innovator, the ones who most often prosper are those who innovate on business processes.

James Andrews, of the Boston Consulting Group, for example, argues that too many companies presume that they can boost profits merely by fostering creativity. “To be a truly innovative company is not just coming up with great new ideas, or products and services,” he says. “It is coming up with ones than generate enough cash to cover your costs and reward your shareholders.”

In virtually any industry, business-model innovators rather than technical innovators have reaped the greatest rewards in recent decades, argues Gary Hamel, the chairman of Strategos, an international consulting company that focuses on helping businesses innovate successfully. Hamel points to Amazon, eBay, and JetBlue. Each company either delivered goods and services differently (by bringing distribution of books or secondhand goods to the Web) or more cheaply (by becoming a sort of Wal-Mart of the skies). Dell has done both. “Dell hasn’t done anything to make PCs more attractive, more powerful, or easier to use. To the extent that there is innovation there, it has come from other companies,” like Apple, Hamel says. “All of Dell’s contributions have been in providing [other companies’ technical] innovations to a wider audience at lower cost.”

In some cases, innovation that we might think of as technical is actually business-model based. Henry Ford, for example, didn’t invent the automobile–but he did develop the production process that drove costs down and enabled him to pay his assembly workers enough that they could afford cars of their own. “You can be tremendous at innovation on the technical side,” Hamel says. “But if you can’t wrap that innovation into a compelling value proposition, with a dynamic distribution strategy and attractive price points, then the innovation isn’t worth much at all.”

The question seems to be: can you put the 2 together? Be both technically and economically innovative?