Each year at this time our 100 student entrepreneurship class discusses innovation and entrepreneurship and the reading, coincidentally, is a book by the same name by Peter Drucker. Written in 1985, the book's examples are dated and most of its major themes have been repackaged in scores of more recent and more popular books. With the elevation of Steve Jobs to the role of chairman of Apple, I decided to put Drucker to the test and determine if the innovations that make Jobs the greatest entrepreneur of our time are consistent with the theoretical framework Drucker constructed 25 years ago. My conclusion: we should place pictures of Drucker and Jobs side-by-side at the front of the Entrepreneurs Hall of Fame. No one has executed and validated Drucker's ideas better than Chairman Jobs. Intentionally or not, his accomplishments secure Drucker's spot along with his own as two giants of American entrepreneurship.
Drucker, at his most elegant states, "entrepreneurs innovate." A statement that conjures up a cure for cancer or a car that runs for hundreds of miles without fossil fuel. However a short sentence buried deep in Drucker's Innovation and Entrepreneurship provides the true punch line: "innovative opportunities do not come with the tempest but with the rustling of the breeze." In example after example he suggests that the most promising innovation is not new knowledge or the big new idea but rather the redesign of a process or a product, a response to the unexpected, or a change in demographics or popular perception. He also suggests that what generates the greatest impact is often not a revolutionary new product but rather a change in an existing business model that unlocks consumer demand.
At first blush it might seem that Steve Jobs was a font for revolutionary new ideas. After all, he and his partners invented one of the first personal computers, and being the father of the Apple II secures Jobs a place in the history books. However what gets him to the front of the pack is a series of innovations right out of Drucker's playbook.
The iPod is a good example. When it was introduced MP3 players were well-known but little used by those over 25. Thanks to Napster music was virtually free for those with who knew how to download and play it -- a demographic that was crucial to the success of the music industry. Through elegant design, flawless execution and a digital store that was rich in content and esthetically appealing, Apple changed the music industry. Even more remarkably, Jobs turned the old practice of giving away razors to sell blades on its ear by slashing the cost of music and selling individual songs for under a dollar in order to sell millions of his iPods. He also established an electronic relationship with millions of consumers, a move that was far more important than even Jobs understood at the time. But to the hardcore the iPod was old news, boring and unnecessary words that seem to surface in response to all of Jobs' great innovations.
The iPhone is another case in point. At the time of its introduction, the last thing anyone thought they needed was a more advanced cell phone. Most of us had no clue about how to use the features on the one we had. Many of us carried three separate appliances, a Blackberry for email, an iPod for music and a cell phone. Then the yuppies learned the only way they could communicate with their kids was by texting them and transmitting photographs from their phone to their Facebook page was cool. Jobs was there just in time with an iPhone to replace their iPod. Apple's intuitive user interface, fantastic design and remarkably high-resolution images moved the smart phone demographic up the age and income curve to a demographic that looked more like Jobs himself. Again, no rocket science here; just great design, flawless execution and a deep understanding of the consumer.
The iPad is the best example of Drucker's principles at work. Arguably the product is simply a bigger iPhone, with almost no utility for someone who already has a laptop and a smartphone. This is exactly what the critics trumpeted when the product was announced and even now almost every day someone asks, "why would I need an iPad?" The best answer I've heard is "Don't ask, just get one and you'll find out." By increasing the size of an iPhone, Jobs created a lifestyle appliance that changes people's lives. The promise of "always on" actually becomes a reality and everything from weather, to sports scores to movie times are instantly accessible to a demographic that does not yet view the smart phone as an appendage to the brain. The idea that two person empty nester households would, between them own four to six apple appliances (two iPhones, two iPads and perhaps two Apple lap tops) was beyond the scope of Apple's best case scenario and the iPad has become the most successful new Apple product of all.
Finally there is the Apple Store, arguably the most innovative retail initiative since the shopping mall. What began as an under the radar attempt to reconnect with Apple's devoted user base emerged as a world-wide phenomenon largely as a result of great design and flawless execution. Little tweaks like hand-held check out, the "genius bar" for customer education and a look and feel that is enticing instead of intimidating combine to turn just another store into the best store ever. Interestingly, Apple's emergence as a bricks and mortar retailer is completely counter-intuitive.
The Apple user base should, one would think, be primarily online purchasers and I suspect they are. But as one of my students said last week, "you go to the Apple Store to have fun and in the process you almost always buy something." That sentiment was echoed by my co-instructor, who said, "It's hard to understand the iPad unless you go play with one at an Apple store."
Ten years ago if Steve Jobs had become Chairman Jobs he would have joined a distinguished group of high-tech executives who had built great companies. In the last decade he has changed industries and the way many of us live. Arguably his first act involved "the big idea" which is exactly the kind of innovation Drucker believes is so risky and unreliable. His second act, and the one that makes Jobs a truly great innovator, resulted not from a series of tempests but rather from the careful listening and interpreting of the rustling of the breeze.
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