Why Apple needs to innovate faster

ZDNet's most recent Great Debate raised the question whether Apple needs to innovate more rapidly. The answer is a definite “yes” and here’s why.

Apple has been one of the most innovative companies in the world. Based on the vision of Steve Jobs, it has created products that truly changed the world, such as the Macintosh, iPod, iPad, and App Store. Despite these accomplishments, Apple’s pace of innovation has slowed, causing the company to lose its edge as a market leader.

Aside from creating products that delight consumers and starting an entire industry of app developers, Apple’s relentless and rapid drive for innovation has made investors wealthy. When the company released the iPod in 2001, Apple had less than $5.5 billion in revenue and its stock price hovered around $20; the company’s total market capitalization was $7 billion at that time. Today, Apple’s market capitalization is about $500 billion and its stock price is currently around $500.

Apple’s poor record on innovation in recent years is also reflected in market share numbers.  According to IDC, Android has 75% of the smartphone market, compared to Apple’s 17%. In addition, Samsung holds a much larger share of the world smartphone market than does Apple.

For both consumers and the enterprise, mobility and the consumerization of IT have changed the game on how we work, play, and communicate. Apple was once the leader, innovating rapidly and bringing the most interesting products in the world to market. Today, the company lives on past success and future promises, without the innovation we expect. So, yes, the lack of new products has hit Apple hard. For proof, look no farther than Apple’s poor stock performance, which is truly a measure of confidence in the company.

Although Apple’s growth has been incredible, the long-term numbers mask intense weakness over the last few years. Since Steve Jobs sad passing, Apple has released extensions to existing products rather than anything profoundly new. Product line extensions represent a natural evolution for established brands. For example, Apple has released new iPhones, faster laptops, and better screens on the iPad but nothing game changing since the original iPad.

Although lack of innovation may be fine if your company sells detergents or other products that don’t change much over time, it's the kiss of death for a technology company that relies on innovation as the foundation for its existence. Both Google and Samsung now offer phones and tablets in various sizes, experimenting with various form factors, sizes, and operating system features.

As an interesting point of comparison, look at this chart comparing the stock performance of Apple and Samsung. The blue line shows Samsung while the red indicates Apple. Note which stock is doing more poorly:

In addition, Microsoft’s acquisition of Nokia signals that company’s intention to be a major player in the smartphone market. As Apple sits still, competitors are extending the concept of mobile devices and releasing numerous products. Samsung even introduced a smart watch ahead of Apple’s anticipated offering.

The ecosystem threat is equally significant. As Apple slides, the Android and Microsoft software environment will grow. Email, music, and other services tempt buyers to each platform and exciting hardware is an important part of that equation.

It is sad and hard to acknowledge that Apple’s glory days of innovation are past. My worthy debate opponent argues that Apple’s products are so good that short-term product delays don’t matter in the larger scheme of Apple greatness. This tempting argument is wrong, however, because the company has run out of “insanely great” ideas. That the real problem and explains why the company once known as the world’s innovation king is now relegated to product line extensions and little more.

We all miss Steve Jobs’ vision because he changed our technology world in many ways. Today, sadly, Jobs is gone and Apple is lost. Sure, the products are still great but they are not fundamentally new. The recent announcement of new iPhones just confirms the verdict: innovation at Apple is history and new products are nowhere to be found.