Walter Isaacson begins chapter 30 of the biography Steve Jobs titled “The Digital Hub” with a “What next?” workshop Jobs facilitated in 2001 where iPod idea got a push. However, as we read further into the chapter, we come across various events that influenced the decision making, shaped the idea and took it forward. Here are 3 lessons I feel innovation leaders (CXO, product managers, Biz heads, VCs) can learn from iPod story:
1. Strategic theme (“Digital Hub”): Apple introduced FireWire technology in 1999 that would help transfer video from cameras into iMac fast. The video could then be edited, mixed with music and distributed further. Seeing this Steve Jobs realized, “Using iMovie makes your camcorder ten times more valuable. That’s when it hit me that the personal computer was going to morph into something else.” Jobs would call that “something else” – “Digital Hub”. A side effect of PC becoming a hub was that it would create opportunity for personal devices to become simpler. Note that the source of the insight was an internal "bright spot" (i.e. iMovie-camcorder joint value creation) not a trend discussed externally. Digital hub would soon become the dominant theme during the brainstorms like the one mentioned above. I have facilitated “What next?” workshops for the past several years. Rarely do I come across a team or its leadership with clarity on strategic theme such as “Digital Hub”.
2. Investment confidence ($10 million check): iTunes software was launched in January 2001. However, Jobs had started pushing for the portal music player idea a few months earlier – in the fall of 2000. At that time, Rubinstein responsible for hardware engineering, told Jobs that the right components were not available yet. During one of his regular supplier visits to Japan in February 2001, Rubinstein came across a tiny 1.8-inch Toshiba hard-drive with 5GB space. Toshiba engineers were not sure what it could be used for. Rubinstein realized its potential use in the portal music player. Fortunately, Jobs was also in Japan giving a keynote at the Tokyo MacWorld conference. That night he met Jobs at the Hotel Okura where Jobs was staying and said, “I know how to do it. All I need is $10 million check.” Jobs immediately authorized it. That was roughly 2.5% of the R&D spend at that time and R&D budget was around 5% of revenue. This demonstrates Steve’s investment confidence – not that easy to find at least in India.
3. Business plan review (Experimentation focus): “There are certain meetings that are memorable both because they make a historic moment and because they illuminate the way a leader operates.” This is how Isaacson describes the iPod’s proposal review meeting in April 2001. Tony Fadell, a new joinee and a key brain behind iPod was the presenter and in the audience were Jobs, Rubinstein, Schiller (designer), Jonathan Ive (Head of design), Jeff Robbin and marketing director Stan Ng. It was Fadell’s first presentation to Jobs.
Fadell began his presentation with a slide deck on the potential market and existing players and soon realized Steve doesn’t like slides. Steve later told Isaacson, “If you need slides, it shows you don’t know what you’re talking about.” Fadell quit showing the slides and showed the three different models he had brought in to the conference room. Rubinstein had coached him on what order to reveal them so that his preferred choice is shown last and with a bit of suspense. The last mockup option was hidden under a wooden bowl at the center of the table.
Fadell took various parts out of a box and spread them on the table. These includes 1.8-inch drive, LCD screen, boards and batteries all labelled with their cost and weight. This was followed by a discussion around how the prices might come down in the coming year. Some pieces could be put together, like Lego blocks, to show options.
The models were made up of Styrofoam. The first one had a slot for removable memory card, the second one had DRAM memory which was cheap but user could potential lose all songs if battery ran out. Jobs didn’t like both of these models. The final model was shown by lifting the bowl and revealing the fully assembled model of 1.8-inch drive. Next Schiller demonstrated the trackwheel through a few models. Jobs shouted, “That’s it!” The decision was made and Fadell & co got working on the project immediately.
Fadell recalls, “I was used to being at Philips, where decision like this would take meeting after meeting with a lot of PowerPoint presentations and going back for more study.”
As an innovation leader ask yourself: (1) Do I have any strategic insight like the “PC as a Digital Hub”? (2) Am I willing to write a “$10 million check” for the strategic initiative when a “Rubinstein” shows up? (3) Can we emphasize experimentation (prototyping) in the business plan review over PowerPoint projections?
“Apple’s R&D spending hits bottom as percentage of revenue” by Larry Dignan, ZDNet.com, October 17, 2011. (has a table that gives Apple’s R&D as a percentage of revenue since 2000).