2 Usefulness:The ability to store and access documents on the desktop.Overlapping windows that scrolled perfectly.The ability to compose a document and print it exactly as it appeared on the screen.
3 Art:Playful and intuitive icons.Wide range of beautiful fonts.The hardware design was clean and light — an attractive consumer product in comparison with IBM’s gun-metal grey.
These features were the raison d’être of the Macintosh. Price reduction was a subsidiary, much less important objective. In fact, as we shall see later in the book, most proposition-simplified products and services — such as the Mac — sell at a premium to their rivals.
In designing the Lisa and the Mac, Jobs’ reference point was the Xerox Star. He was interested in dramatic cost reduction, but only if it coincided with product improvement. For example, the mouse. The Xerox mouse had three buttons and didn’t roll smoothly. Also, because of its many features, it cost $300. So Jobs commissioned a design house to come up with a $15 mouse with one button and smooth rolling even on a rough surface. Before long, they had developed one.
Jobs’ main purpose was not to re-engineer the Xerox technology to make it commercially viable. He wanted to surpass it — to enable users to move a window around the desktop, drop it into a folder, increase or reduce its size, all simply by manipulating the icon, with no need to select a command before doing so. The Xerox Star couldn’t do any of this. The Mac could do all of it, and more.
Which Type of Simplifying is Better?
It depends:
on what the entrepreneur or executive wants to do,
on what his or her firm is able to do,
on the opposition,
on the market,
on the technology, and
on the time and place.
Neither approach is inherently superior to the other.
The big advantage with price-simplifying is that it is often possible to build a huge mass market and a business system that cannot be imitated and out-scaled easily — at least not after the early days — which effectively shuts out all rivals. The price-simplifier is likely to end up with much higher volume than the proposition-simplifier, for the latter relies on the customer’s willingness to pay a premium for a demonstrably superior product. The rub for proposition-simplifiers is that they need to keep ahead of their rivals through constant innovation and new product development — otherwise, they will lose market share and suffer falling margins. Yet they may be able to build an extremely valuable, loyal following, and brand among the middle to top of any given market. The price-simplifier must price down the experience curve, passing on cost savings and keeping margins tightly constrained. In contrast, the proposition-simplifier can — sometimes — hang on to fat net margins: up to 40 percent in the case of Apple, which at the time of writing was the most valuable company in the world.
The history of computing shows that there can be room for both a price-simplifier and one or more proposition-simplifiers to weave their magic within the same broad market. But any company that tries to pursue an approach that is halfway between the two is destined to fail. The Mac never reached double figures in terms of overall market share, so it never slayed the mighty IBM. What helped IBM and IBM-compatible machines was that Microsoft eventually duplicated most of the features of the Mac’s operating system. Windows 1.0 was not launched until the autumn of 1985, and it was initially a poor imitation of the Mac’s (and even the Xerox’s) operating system. But gradually the gap was closed, especially between 1985 and 1996, when Jobs was exiled from Apple and there was little reinvestment in Macintosh software.
Even so, the laws of simplicity saw to it that IBM was not the main beneficiary of its Faustian pact with Microsoft. IBM continued to be outflanked in terms of product quality by the Mac, and then lost most of its remaining market share to price-simplifiers — initially Compaq and Hewlett-Packard, and later Dell. As a company, IBM was always a reluctant simplifier, pursuing neither proposition-simplifying nor price-simplifying with any great vigour. Over the life of its involvement with PCs, it never made any money from them, bleeding cash to such an extent that the whole firm nearly collapsed. In 2005 Big Blue made its last computer and sold the husk of the business to a Chinese rival, Lenovo.
And what of plucky little Apple? Its share of the computer market fell to just 3 percent during the barren Jobs-less years, but it did just fine after the Second Coming of Steve in 1997. Jobs rationalized the product line, developed new software with impressive wow appeal and, together with the firm’s new design supremo Jony Ive, triumphed with the iMac, launched in 1998 as a desktop computer for the home market. Priced at $1,299, the iMac sold 800,000 units in its first five months, the highest run rate that Apple had ever had.11 During the 2000s, the Mac reached new heights when it became the hub for other Apple devices. It took more than two decades, but proposition-simplifying finally paid off in spades. As with Henry Ford’s price-simplifying, Steve Jobs didn’t reach the summit in a single bound. Self-belief and doggedness eventually proved just as essential as the right strategy.
On the stock market in May 2000, Microsoft was worth twenty times more than Apple. Ten years later, Apple overtook Microsoft, and a year later it was worth 70 percent more than its chief rival.12 As we write, Apple is worth $742 billion.
In 2010, Macintosh’s global market share in computers was just 7 percent, yet it accounted for 35 percent of the industry’s operating profits,13 higher than any other company. Apple created and dominated the top segment of the PC market and was rewarded with very attractive returns.
Without Apple, it is unlikely that computers today would be so elegant and easy to use. Without Apple, the desktop we all take for granted today might not have become the common currency of computers.
1 Steve Jobs was a different kind of simplifier from our previous examples. He was a proposition-simplifier who aimed to make an “insanely great” product. Do you find it easier to imagine yourself as a price- or a proposition-simplifier? What about your company?
2 Price-simplifiers create or enlarge a mass market. With the Mac, Apple served the middle and upper echelons of users, who were willing to pay a significant premium for a more intuitive, useful, and beautiful product. Do you think this might work in your industry?
3 In the same broad market, price- and proposition-simplifiers can happily coexist, each with their distinctive customer appeal, and each with their distinctive commercial advantage. For price-simplifiers, it is a mass market. For most proposition-simplifiers, it is higher net margins. Which of these advantages do you think your organization would value more?
4 The worst fate, as with IBM, is to fall between the two simplifying stools — to be out-proposition-simplified and out-price-simplified. No matter how iconic the brand, how lofty the reputation, how high the installed base of users, how clever the executives, or even how rich the company, for those stuck in the middle, the knacker’s yard beckons. Is this a danger for your firm?
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