By Christina Pazzanese, Harvard Staff Writer
On April Fool’s Day 1976, two college dropouts, Steve Wozniak and Steve Jobs, and a friend, Ronald G. Wayne, formed a company from the garage of Jobs’ parent’s house in Los Altos, a small city in Silicon Valley then in its infancy.
For the cheeky price of $666.66 (Wozniak liked repeating digits), buyers could get what they called the Apple-1, a “Woz”-engineered, personal computer consisting of a bare circuit board with an 8-bit microprocessor and 4K of RAM — monitor, keyboard, and power supply sold separately.
The Apple-1 was only capable of running elementary programs and games. Two hundred were made.
It may have seemed foolhardy then to push a product few Americans were even aware existed. But 50 years later, Apple is among the most popular and iconic consumer brands and, with a $3.8 trillion valuation, one of the world’s most successful companies.
In these edited reflections, Harvard analysts explain how Apple has transformed the personal computing, music, and communications industries. It has also revolutionized marketing and advertising, industrial and product design, and retail, and helped shift our relationship to tech — and, arguably, to one another.
Our experts include David B. Yoffie, Baker Foundation Professor, Max and Doris Starr Professor of International Business Administration, Emeritus; Marc Aidinoff, assistant professor of the history of science; and Jill Avery, senior lecturer of business administration and C. Roland Christensen Distinguished Management Educator.
Invented three industries
Yoffie: I would put Apple alongside of IBM, Ford, and General Electric — one of the most important American companies to emerge during its period of explosive growth because they impacted so much of American life and the way American business has operated.
When I think about Apple’s contribution, I start by thinking that they fundamentally invented three new industries, all of which have had a huge impact on mankind. The first one being the personal computer. Apple II was really the first real personal computer.
Second is what they did with the iPod, which was essentially a redesign of the entire music industry.
And the third is the iPhone, which has become the single most successful consumer electronic product in history of the world by almost any definition. It revolutionized personal communications.
So, at a very fundamental level, Apple has revolutionized the way in which we live our lives, in addition to becoming one of the most successful companies in the history of the world.
A user story
Aidinoff: As a historian of technology, I would flip that around to say they created the users for those things.
They taught people that they wanted and could use things in this way, that we could take a computer, which is a tool for doing advanced mathematics, and they taught us we can carry it around on our phone in our pockets, do music recommendations.
So, I think of that as a user story as much as a they-created-the-category story.
The secret sauce
Yoffie: This was part of Steve Jobs’ genius — his ability to figure out products that people wanted, even though they didn’t know they needed it.
It was not obvious at any point along the history of computers that you were going to have a graphical user interface and a mouse. It was not obvious to people that they wanted to keep all of their music on a small, single device.
Similarly with the iPhone, no one really believed that you could do this multitouch, internet-access device and make it so broadly functional until Steve was able to demonstrate the power of what it could deliver. That’s been their secret sauce.
Changed what a computer is
Aidinoff: What Apple does is it fundamentally changes what a computer is. The idea that a computer is something that I’m going to carry around in my pocket with hundreds of thousands of times more computer than the Apollo Project, that’s something Apple does through a whole bunch of technical innovation along the way, but also through changing cultural expectations of what a computer would be, teaching users how to use computers in different ways.
There are distinct technological pieces that people will credit Apple for, things that are really exciting in terms of chip design or in terms of operationalizing the graphical user interface, but it’s the way they package it all together that matters.
Products as heroes
Avery: Apple is one of the pre-eminent examples of a company that does branding, brand storytelling, and marketing incredibly well.
They started with an underdog brand biography. They positioned themselves against everybody else, as the little guy, as the different guy, coming into the market to take on the behemoths that had ruled for a long time.
They talk about their products as heroes. They talk about the functionality and the usability of their products, but they’re not just selling functional value. They’re selling the emotional value of consumers interacting with their products. They’re selling what we call “ego-expressive” or “identity value” — that Apple products are for people who are different, who are more creative, who think differently.
What that means is when someone uses an Apple product, it makes them feel different than if they were using a PC or another brand’s products. It makes them feel more creative, different than others and able to think differently. Users believe the Apple story. They buy into it.
Sticking it to the Man
Aidinoff: There’s a historian at Stanford who tracks the way Apple, in particular, took leftist hippie counterculture and commercialized it and made a computer resonant with those cultural impulses and “Stick it to the Man” individualism.
It’s hard to overstate from our present how much computers were seen as calculating machines for the military. You literally had people in the ’60s bombing computer centers as an act of protest against The Man. And so, the idea that a computer would be a cool, fun thing to listen to Nirvana on — that’s really changing what it means.
Not like George Orwell’s ‘1984’
Avery: That Macintosh launch ad in 1984 goes down as one of the best ads ever shown on the Super Bowl, if not one of the best ads overall.
It crashed into the market, positioning Apple against the big guys, against the corporate mainstream, and against what was expected of professionals and showed people that there was a new choice, an innovative choice, a different choice. That was one of the big starting points for the brand’s trajectory.
The “Think Different” ad campaign featuring images of Gandhi and Einstein and other creative thinkers throughout history was another classic ad campaign that really cemented the image of the brand in people’s minds.
Trust the product
Aidinoff: Apple has taken privacy really seriously in the era of Facebook and where other companies are selling your data. They’ve decided it’s in their best interest to make you really trust the product. Who knows how that’ll change with their partnership with OpenAI — I’m quite worried it will.
But you think of the fights they had with Facebook about five years ago, where all the Apple ads were about “Unlike, Facebook, we’ll keep your data private.” That is another thing that really helps them in what could have been a turbulent time.
Look good, feel good
Avery: Steve Jobs never saw design as a gimmick. He saw aesthetics as an essential part of creating value.
In the product categories he was going into, the products all looked the same. They were boxy, they were black or gray, they just didn’t have a lot of aesthetic value.
He felt that a desktop computer, and eventually, a phone, was something that you were going to interact with all day long and so it was really important for it to have aesthetic value and to create an aesthetic connection.
He invested heavily in design. This is a brand that realized that function alone is not enough, but function plus aesthetic design can create an incredible connection with the consumer and an incredible sense of value for the product.
It’s been a key, central feature of the product from the beginning.
Not stores, communities
Avery: The Genius Bars were genius.
If you think about who Apple was trying to sell to in the early days, it was not corporate accounts. Corporate accounts were locked up by IBM, by Dell, and that type of selling relationship was moving online. Gateway computers was another brand doing a lot of online ordering. Apple was trying to sell to individuals, and individuals don’t have IT departments at their disposal.
So, the fact that they established the Genius Bars and staffed them incredibly well allowed people to walk in and have their own IT department to help take away the friction of switching from a PC to a Mac or from non-Apple product to an Apple product.
The stores were visually beautiful spaces. They were more for display and aesthetics than for selling, particularly in the early days, and they created a community aspect to the stores themselves.
People would line up for three days before a new launch. That was all part of creating that brand value. The stores created event marketing and branding experiences for the brand, as well. The stores still feel like that.
Their own heroic comeback story
Yoffie: They almost went bankrupt midway through their journey.
In 1997, they were somewhere between three and six months away from bankruptcy, so it’s not as though it’s a picture of continuous success for its entire 50-year history, and they had to reinvent themselves between 1997 and 2007. That was really fundamental to their success.
In addition, it’s not just the products, but the complementary products and services that they built around their core products that have made them so successful.
So, it’s not just the iPhone; it’s the App Store. It’s not just having a phone in your pocket, but it’s the ability to connect it to your computer and to your AirPods and to the cloud and do it all in a seamless fashion. It’s been the ability to build out an extended set of complementary services and products that has made Apple such a powerful player.
A walled garden
Avery: The Apple ecosystem is the key to their business model — the hardware, the App Store, and everything else working together to create value for its customers, but also to extract value back to the company.
This is why Apple is so strict about app development and what gets included in the Apple store. Because it’s all building its ecosystem and keeping people in this walled garden of ecosystem. That’s a really important part of its monetization strategy.
Big challenges ahead
Yoffie: Cellphones are largely a replacement product. There aren’t that many people in the world buying new phones. What we’ve seen over, let’s say, the last 10 years, there’s been relatively little growth in its core business.
That’s a big challenge for Apple going forward. They’re trying to drive growth by creating services that complement the iPhone business, but it’s still fundamentally dependent on the iPhone.
The good news for Apple is that it does have only in the neighborhood of 20 percent to 22 percent world market share for cellular phones, so it does have an opportunity to take more share away from Android and from other products assuming they find a way to address markets around the world that are a little bit more price-sensitive than in the United States, Europe, and Japan.
But Apple needs to make some adjustments in order to do that.
This article was originally published on Harvard Gazette and is republished here with permission.
Reviewed by Asim BN.
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