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Take the iPod as an example. When it came out in 2001, there
were already plenty of MP3 players available. Most were flash-based, when flash
memory was still very expensive. The mainstream was at 32MB, in the process of moving
up to 64MB. That does not hold many songs. Some utilized 2.5" hard drives,
which were much larger for the price, but also much bulkier. And the process of
getting music onto these things was not very smooth - the interfaces for
transferring music were flaky, and USB 1.1 was too slow. Apple had recently
introduced iTunes and saw these problems first hand.
Apple's solution of course was to develop a player based on
a 1.8" hard drive. It was more expensive than most players out there, but its
capacity/size combination enabled it to hit a sweet spot in the consumer market
- remember "1000 songs in your pocket"? That elegant slogan captured this
But to enable true mass consumer adoption beyond just early
adopters, they had to vastly improve the user experience. Using FireWire of
course sped things up a lot. But also the music transfer component of the
iTunes + iPod software had to be very robust and easy-to-use. Oddly enough,
iTunes was acquired software that Apple streamlined once in-house, and the iPod
software was based on a reference platform from PortalPlayer to which Apple did
extensive work on the user interface. But they made it work by simplifying and
focusing on the user experience, not "cool features".
So all in all, what did Apple invent? Not a lot. They did
file for a patent on the scroll wheel, which apparently was the subject of
other similar patent applications (including one by Microsoft!) but they received
it in the end. And they have actually been the defendant in a couple patent
infringement lawsuits related to the iPod. Everything else had already been
invented. So the point is that they did not invent - they innovated.
The net result is of course an entire new market and
ecosystem. In fact, the ecosystem was also an enabler - the iTunes music store
came out after the iPod, legitimizing digital music at a time when the only
other way to get major-label music in digital format came with the risk of
being sued. Now of course in addition to the iTunes ecosystem there are all
kinds of accessories available from armbands to boomboxes to well, a stereo dock
and bath tissue holder.
So by focusing on an unmet need and figuring out the best
way to address it, Apple reinvented themselves as a company, reinvented the way
that music (and now movies, TV, games, etc) gets consumed, created viable new
market segments, and increased their stock price by about 20x. To me, that is
the definition of innovation.