Steve Jobs’ leave of absence won’t matter if the company he founded finally goes mass.
Why is Apple so beloved?
Because it’s small.
That remark will probably get me hammered by Apple’s intense, die-hard, unquestioningly loyal fans. But today, an Apple executive not named Steve Jobs—and if it’s not Jobs, do we really care who it is?—will give the keynote at Macworld in San Francisco that could determine the company’s future. If he says anything about $99 iPhones, or selling them at retailers beyond Best Buy and Wal-Mart, start worrying about Apple. Flooding the mass market with iPhones will make Apple huge—and probably send the company into a crisis.
This view comes from my research about a concept I call The Fidelity Swap. The principle behind The Fidelity Swap is relatively simple: it shows how consumers constantly make trade-offs between a product’s fidelity—i.e., how good it is, what its aura is, its cool factor—and the convenience of actually getting that product. Most successful products and services are either high fidelity and low convenience (like a U2 concert) or extremely convenient yet low fidelity (like a U2 song in MP3). Stuff that’s so-so fidelity and so-so convenience (U2 on a CD) meets with a whole lot of consumer apathy.
Apple always had a secret sauce. For most of its existence, the company has been the underdog, fighting the Microsofts and IBMs.
In the 2000s, Steve Jobs rebuilt Apple by making it into the highest-fidelity tech company on the planet. Apple kept prices high, and made hardware and software that was beautifully crafted and undeniably better than its competitors’. But Apple always had a secret sauce. For most of its existence, the company has been the underdog, fighting the Microsofts and IBMs. Apple was creative, rebellious, sexy. The other computer companies were corporate and mindless, selling their products to the unenlightened masses. And for more than 25 years, Apple has played up that image, whether in its “Think Different” billboards or the more recent “Mac vs. PC” commercials.
Above all, Apple conferred identity. If you owned something from Apple, you were one of the elite who knew better. You were smarter, hipper. And Steve Jobs has been a master at keeping that image going.
In 2001, Apple introduced the iPod and iTunes. At first these seemed like typical Apple super-fidelity products – expensive, better than anything else, totally cool. But then something odd happened—something Apple had never before experienced: Its product took off with the masses. So Apple went with it, cutting prices, ramping up production, and creating the iPod Nano to serve even a broader, lower end of the market. At one point Apple had more than 90 percent of the digital music player market. It was the music player to buy when you didn’t want to think about what music player to buy. But somewhere along the way, the iPod became a little boring. It stopped conferring identity. It didn’t make you cool—it only made you fit in.
This could have been a huge problem for Apple. The more mass-market the music products went, the less Apple could be the company of “Think Different.” Steve Jobs understood that. In 2004 he realized high-end cell phones would have enough storage to hold and play digital music. They’d make stand-alone iPods superfluous. Jobs instructed his engineers to create a touch-screen handheld computer that could be a music player, cell phone, and all-around digital device.
The iPhone, unveiled two years ago, immediately recaptured Apple’s super-fidelity position—and its aura and identity. An iPhone made its owner feel cooler and smarter than everyone else. And it’s now Apple’s centerpiece product. If the iPhone had never come along, Apple would just make computers and iPods—neither getting the public all that excited anymore.
Today though, Apple stands at another corporate crossroads. The company has been driving down iPhone prices and selling them at Wal-Mart, making them far more accessible to the mass market. Pundits predict Apple could sell 100 million iPhones—and it probably could. Then Apple would be right back to where it was after the iPod went mass.
Trying to drive a high-fidelity product toward high convenience kills the exclusiveness, the aura and the identity that captivate consumers. Apple will have to decide whether it wants to maintain the iPhone as a high-end, exclusive niche product—like Mac computers—or drive it through to the mass market and make it as common and necessary as the iPod. But it can’t have both. That never works.
The choice here could determine what kind of company Apple becomes. If it sells 100 million iPhones, Apple could turn into a true tech giant, but consumers will view the company differently. It’s easy to love an underdog—harder to love a dynasty.
To regain its cachet, Apple would have to come up with another radical invention that redefines an industry. But can an Apple run by an unwell Steve Jobs—or no Steve Jobs at all—pull that off?
Apple could make another choice: It could put the brakes on iPhone distribution and pump money into iPhone R&D so it always offers the super-fidelity mobile gadget at high prices. That would help maintain the aura and identity that make people so crazy about Apple. The company wouldn’t get as big, but it would maintain its outsized influence on the industry and society. This is closer to Apple’s core—to what it knows how to be.
Kevin Maney is a contributing editor at Conde Nast Portfolio. He was previously technology columnist and senior technology reporter at USA Today, where he worked for 22 years. Maney is the author of the critically-acclaimed The Maverick and His Machine: Thomas Watson Sr. and the Making of IBM and the 1995 BusinessWeek bestseller Megamedia Shakeout . His next book, The Fidelity Swap , will be published in the fall 2009 by Doubleday. In addition, Maney writes and performs music; his song "Found It On Google" has been featured on NPR, Radio New Zealand and Mitch Albom's radio show. He can be found at www.kevinmaney.com.