In theory, the market is supposed to provide guidance for people to provide the services and products that they want. "I find out what the world needs, then I proceed to invent it," boasted Thomas Edison, who earned some 400 patents over the course of a spectacular career. And in the years since Edison invented staples of modern life ranging from the light bulb to the moving picture, we have developed sophisticated means of gauging whether the public might be receptive to new products – product testing, phone surveys, focus groups, and market research. Use the data to improve on what it out there--a better-tasting burger, a more efficient air conditioner – and you can reap significant profits.
But incremental gains on existing products aren’t revolutionary. Over time, the big bangs – the breakthroughs that enable a company to last for a century or more - come from translating the fruits of research and innovation into entirely new products, and ultimately into entirely new industries. And that requires marrying technical skill to intuition. “A lot of times, people don’t know what they want until you show it to them,” as Steve Jobs, the guiding spirit of Apple and a latter-day Edison, liked to put it. When that’s the case, companies not only have to invent new products – they have to create and build the commercial infrastructure that makes the original breakthrough compelling.
This is a lesson that Edison, known as the Wizard of Menlo Park (New Jersey), and Jobs, whose company came to be based near Menlo Park, California, taught us nearly a century apart.
After building a stock ticker in the 1860s, Thomas Edison spent much of the next decade in his laboratory, figuring out ways to harness the power of electricity to improve the quality of life. His bright idea turned out to be the incandescent light bulb, which he invented in 1880. At the time, of course, Americans, who were lighting their homes with candles and whale oil and kerosene, didn’t know they wanted an electrical light.
Once Edison invented the device, it had limited appeal. It was expensive, costing about a dollar. And unless people were producing their own electricity at home, the brilliant bulb wasn’t of much use. And so, in a lesser-known breakthrough, Edison went on to build the first electrical power station and system. In 1882, the Pearl Street station, in lower Manhattan, went on line, with 59 customers – mostly businesses and factories. In essence, he “invented” the idea of a utility company, which would power the light bulbs and other devices people might plug in.
The logic of the business became circular. To make people want to become electricity customers, Edison had to give them devices that would use this new power source to great effect. In 1892, his firm merged with another to create General Electric, which then set about rolling out a host of electricity-powered products – none of which existed, none of which people had really been asking for, and all of which became standards and must-haves. They included: motion picture cameras and projectors, electric fans, electric ovens and ranges, air conditioners and refrigerators, and ultimately televisions.
Steve Jobs performed a similar feat at Apple, more than a century after Edison worked his magic. And he would transform the electronics market that Edison had helped forge.
In the early stages of his career, Jobs proved a brilliant inventor and marketer – but his products, unlike those of Edison, didn’t become standard. Apple computers remained very much a niche product, and by 2001 Apple owned just 3 percent of the vast PC market.
His real breakthrough came with the invention of the iPod, and with the construction of the commercial infrastructure that would make it compulsory.
People had been carrying around music for several years – transistor radios, the Walkman, etc. But with the iPod, Apple rolled out a cool, small, light device that would allow music to be stored and toted in a digital form. Like those first light bulbs, the iPod was slow to develop as a business. Why? There was no easy, legal way for people to buy and manage digital copies of music that would run on the iPod.
So in 2003, Apple rolled out the iTunes store. "We were able to negotiate landmark deals with all of the major labels," as Jobs put it at the time. "There is no legal alternative that's worth beans." At the outset, people could choose from 200,000 songs on the store. And because they could only be played on Apple’s operating system, the iTunes store created and then reinforced a virtuous circle – kind of like Edison’s power plants did. The more people bought iPods, the more they wanted and needed to use iTunes. And the more they set up accounts at the iTunes store, the more they needed iPods and other Apple devices to play the music.
For Edison, electricity was the fuel that powered a series of innovations. For Jobs, content and communications proved to be the fuel. And just as General Electric evolved into a company that turned all sorts of mechanical products into electric ones, Apple turned all sorts of analog products into digital ones. Under Jobs, it continued to roll out new devices that were powered in part by iTunes and the commercial infrastructure it had built – iPhones in 2007, the iPad in 2010. And as these devices sported greater functionality, the iTunes store added new products that reinforced customer loyalty: movies and television shows, books, apps.
Each time, it should be noted, the inevitably expensive innovations were greeted with great skepticism, in part because many people thought the products they had worked just fine. Why would people shell out $500 for an iPhone when flip phones and Blackberries worked just fine? Who would pay $1 in 1881 (the equivalent of $23 in today’s money) to buy an electric bulb when kerosene lamps could provide perfectly good illumination?
In both instances, the answer turned out to be the same: everyone.