27 Jan 2010

Harvard Business School Faculty on the New Apple Tablet


BOSTON, Jan. 27, 2010 — Excitement mounts as Apple CEO Steve Jobs prepares to unveil the company's newest product - its version of the tablet. Four Harvard Business School professors offer their thoughts on this long-awaited and buzz-filled debut.

Bhaskar Chakravorti Bhaskar Chakravorti

Bhaskar Chakravorti
Senior Lecturer of Business Administration

The Apple tablet has already been declared the savior of many chronically - even terminally - ill industries: newspapers, television, movies, and computing, for instance. Enthusiasts believe that the tablet could be the magic pill that will do for all these industries what its predecessor, the iPod, did for the dying music industry in 2002. I'm not surprised that the media have created plenty of space for enthusiasts to write about the revolution ahead.

And why not? Apple has done it before, and the tablet is expected to be even more beautiful than its forerunners.

But can Steve Jobs upend the status quo once again? He can if the tablet fundamentally changes our behaviors. But that does not happen through phenomenal design alone. Design can capture our attention and spark excitement. But for a product to lead to sustained behavioral change, we also need an innovative business model that changes our incentives as consumers or content creators or distributors - and motivates the entire value chain to do things differently.

The iPod reinvented the way music was bought, collected, and shared, thanks to the powerful connections between a brilliantly designed device and a proprietary music store that allows consumers to buy songs unbundled from a variety of labels. The iPhone changed the game by being more than just an attractive instrument attached to the iTouch. Equally important, it offered a platform on which others - independent entrepreneurs, programmers, and designers - could show off their creativity and build profitable businesses. Consumers loved the dazzling array of apps. These forerunners of the tablet changed behaviors not only by capturing our hearts and minds through design but by giving many other players strong mutually reinforcing incentives to change the way they did things.

What is the revolutionary business model that will accompany the tablet? If Apple does not have one after it comes out today, the new device will certainly turn heads and make headlines, but it may not turn around the many ailing industries that are banking on its life-saving properties.

Karim Lakhani Karim Lakhani

Karim R. Lakhani
Assistant Professor of Business Administration

Two elements of Apple's strategy go a long way toward explaining Apple's success: Controlling the user experience and creating a platform for external innovation. Both of these will have an impact on the hotly anticipated Apple iPad tablet.

Many will agree that the turning point for Apple from a somewhat profitable niche player in the computer industry to the dominant creator of much loved mass-market consumer devices occurred with the introduction of the iPhone. Smart phones had been around for a decade, but it took Apple, with its singular focus on the user experience, to create the market. When I got mine, I wondered if emergency meetings were taking place at Nokia, Palm, Sony-Ericson, Samsung, and RIM to re-examine their innovation strategies.

Apple's design of the iPhone was not just intuitive. It was inevitable. However this experience was not limited to the device itself. Even the process of getting one's wireless number transferred to the new AT&T network was done in a way that recognized the primacy of the user experience. Apple's staff had clearly thought through the vagaries of dealing with phone companies and alleviated this problem for customers. This singular focus on owning the customer experience, end-to-end, has separated Apple from its rivals, first in computers and now in consumer electronics. The eager anticipation for the tablet is driven by the expectation that the user experience will be beyond what most firms have delivered.

The second component behind's Apple's resurgence has been its recognition that it no longer has a monopoly on good ideas for end-use applications of mobile computing and communication devices. Although the company reluctantly agreed to allow third-party developers to create applications for the iPhone, that decision is now viewed as the key to snatching the product from the proprietary clutches of the phone companies and turning it into a platform for innovation.

As Kevin Boudreau of London Business School and I have written, Apple has succeeded in building a competitive market for applications where the risk of development is externalized to thousands of external firms. At the same time, all these efforts increase the value of Apple's platform. The tablet will now be part of this strategy as well.

Daniel Snow Daniel Snow

Daniel C. Snow
Assistant Professor of Business Administration

Apple (and its competitors) would be wise to anticipate the iPad tablet's role in some important technology transitions. Here are a few that my research tells me to look out for.

First, new technologies often provide unexpected improvements to the technologies they are intended to replace. I call these technology "spillbacks." Watch for the tablet to generate spillbacks that support smart phones, netbooks, and notebooks. For example, increasingly sophisticated App Store apps will take advantage of the iPad's screen size and computing power. But these new apps may also become a new type of software, complete with distribution channel, for use in old-fashioned MacBooks and desktop Macs. Similarly, the connectivity and bandwidth infrastructure needed to stream movies and other content to the tablet will spill back to old iPhones, increasing their performance and extending their usefulness.

Second, old technologies rarely abandon the entire market to a new technology. Expect to see some of the iPad's "victims" find profitable niches in which the tablet can't compete. Is your company work so sensitive that your IT team won't let you store and work on your documents in the Internet "cloud"? Are you crunching data in large Excel spreadsheets and working in locations without constant connectivity to Google Docs? If your answer to any of these questions is "yes," you will be a tough sale for iPad.

Finally, think about the swings of the technology pendulum. Twenty-five years ago, we moved from centralized, mainframe-based computing to localized, desktop computing as computing power became cheaper. But increased connectivity and economies of scale in storage have led to a return of centralized computing (the "cloud") that addresses myriad storage and software update needs. As technological barriers continue to fall, I expect to see the emergence of a hybrid computing device - something with serious onboard computing and graphics power (always connected to the cloud) that represents the best of both worlds. The iPad is a stop on the way to this hybrid destination.

Stefan Thomke Stefan Thomke

Stefan H. Thomke
William Barclay Harding Professor of Business Administration

As an innovation researcher and Apple product user, I will be part of the large community of customers awaiting the launch of the Apple tablet with a combination of curiosity and enthusiasm. Can Apple do it again? Can they understand our needs better than others and deliver, in Steve Jobs's words, another "insanely great product"? The company's track record is impressive. Apple has created and transformed markets for music, movies, and mobile phones -- industries where it had little experience, faced fierce competition, and where margins had been on the decline. At the same time, the company has gained market share in its core computing business.

The tablet is a logical extension that builds on its business, product, and service platforms. If executed well, the tablet could take Apple into entirely new businesses and an aggressive reuse strategy in software and hardware will keep their R&D and manufacturing costs in line. It has also has the potential to change how people work and play with their computers.

The publishing industry could certainly benefit from an alternative to reading devices such as the Amazon Kindle and more imagination about how its content is packaged, sold, and used. At the technology level, we have reached a perfect storm where components are so advanced that it takes a brilliant integrator to give customers a product that they want, use, and love. This is what Apple does best. It is rarely first to market when it comes to products or technology, but it is often first when it comes to deeply understanding the user.

Ultimately, success will depend on the user's experience with the tablet, but Apple has learned from both its successes and failures. They know that customers want products like the iPhone and the iPod, not the Newton, which was ahead of its time.

With Apple's obsession about secrecy, one can only guess the company's next move, but recent history should be a good predictor. Their reuse strategy and experience will impose constraints on how far they can go. I will carefully study the product launched today, watch Apple's next moves, and learn. As Yogi Berra once noted, "You can see a lot by just observing."

About Harvard Business School

Founded in 1908 as part of Harvard University, Harvard Business School is located on a 40-acre campus in Boston. Its faculty of more than 250 offers full-time programs leading to the MBA and PhD degrees, as well as more than 175 Executive Education programs, and Harvard Business School Online, the School’s digital learning platform. For more than a century, faculty have drawn on their research, their experience in working with organizations worldwide, and their passion for teaching, to educate leaders who make a difference in the world. The School and its curriculum attract the boldest thinkers and the most collaborative learners who will go on to shape the practice of business and entrepreneurship around the globe.