What Kind of Innovative Does Apple Have to Be?

Harvard Business Review

Who's the target audience for the new iTunes Radio? Me. My family and I have a bunch of Apple devices, a WiFi network built around an Apple Time Machine, and not enough technological savvy (or time) to figure out workarounds. I signed up for Spotify a while ago, and like it. But I can't figure out how to get it to play on the multiple speakers hooked up to my WiFi network, so I imagine that when Apple's alternative is rolled out this fall I'll immediately start using it instead. I might even pay extra for the ad-free version.

So is iTunes Radio an innovation? Of course not: It's a Rhapsody/Pandora/Spotify copycat. But it's an improvement that will keep lots of affluent customers who don't want to hassle with technical stuff but do want to stream music on iTunes wrapped in Apple's cold yet comforting embrace.

Other new features announced at Apple's World Wide Developers Conference Monday, such as the iOS 7 and Mavericks operating systems, had a bit more actual newness to them. Waxing incomprehensibly poetic about iOS 7, John Gruber described it as "three dimensional not just visually but logically. It uses translucency not to show off, but to provide you with a sense of place." Sounds great, I guess, and probably even innovative.

The subject of whether Apple is still innovative has become an extremely touchy one over the past year. Partisans of rival mobile operating system Android, along with skeptical Wall Streeters, have been raising questions about the company's ability to keep innovating in the post Steve Jobs era. Apple fans of course bristle at these suggestions. So do Apple executives. "Can't innovate anymore, my ass," senior VP of product marketing Phil Schiller declared Monday after unveiling Apple's new Mac Pro.

The cylindrical black desktop is very cool-looking. But it's the latest iteration of a high-end niche product that Apple has been selling for years. It is a textbook example of what Clayton Christensen dubs a sustaining innovation, a product aimed at existing customers that improves on what went before it and is able to demand a premium price. Except for a few dark years in the mid-1990s, Apple has always been very good at sustaining innovation. The key to its phenomenal success over the past decade, though, has been — to use Christensen's terminology again — disruptive innovation. The iPod/iTunes combo, the iPhone, and the iPad all disrupted and redefined markets, and in the case of the iPhone and iPad created entire new ones.

The sustaining/disruptive dichotomy doesn't describe everything important about innovation. It's probably overused and certainly gets misused a lot. But it so perfectly fits the debate over Apple's innovation quandary that it's a little strange it doesn't come up more often in this context. As it is, Apple's critics and partisans mostly talk past each other. The former are bemoaning the lack of disruptive innovations; the latter are celebrating the steady flow of sustaining ones. To quote one Apple fan, Mike Elgan, writing on Cult of Mac:

In the two year period after the iPod, iPhone, iPad or whatever ships, everyone says Apple is innovative. In the years of iteratively perfecting the vision, everybody says Apple is not innovative. Then Apple comes out with the next market-creating product, and then they're innovative again.

But it's the "or whatever" that everybody's wondering about. It's been three years since the iPad was unveiled. Speculation about where Apple's next big move will be have centered around watches and TVs. It's hard to imagine either having the impact of the iPhone or iPad — but then most people had trouble envisioning at first how successful the iPhone or iPad would be. In 2007, Christensen called the iPhone "a sustaining innovation relative to Nokia" and predicted that it would flop.

Until Apple comes out with its next big new disruptive thing, and it succeeds, the "Apple can't innovate anymore" meme will live on, whatever Phil Schiller's ass thinks. The harder question to answer is whether Apple can remain successful and keep growing without another disruptive innovation. Obviously, if some other company disrupts it, it won't. The big threat at the moment is clearly Google's Android operating system, which undercuts Apple in price and seems to fit in with another Christensen framework that says that technology products inevitably evolve from integrated and closed to modular and open.

But while Android has rocketed past the iPhone in smartphone market share, its progress seems to have stalled recently while the iPhone marches on. We may not have reached the point yet where modular trumps integrated in smartphones and tablets; sustaining innovations may sustain Apple's fortunes for quite a few years more. They won't create new fortunes, though. It takes a different kind of innovation to do that.

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