Back in 2018 I was presenting to the Chief Marketing Officer of Fujitsu on my human centered design innovation process. It worked great for digital products and MVPs but somehow it wasn’t landing. At about the halfway point of the presentation, the CMO asked a straightforward question. “How do I create the next iPhone?” I had no idea. What happened next was a series of questions that I believe led me to unearth at least a portion of Apple’s product innovation guidelines. If I’m right let me know, if I’m wrong, also let me know.

It all started with this:

How do I create the next iPhone?

The holy grail of product innovation – that single device that catapulted Apple to one of the most valued companies on the market, and changed the way we interface with technology. 

I would be lying if I said that I wasn’t stunned, and I’m usually pretty quick on my feet. My response was, “Understand what the market needs and take risks,” but this left me dissatisfied. The answer wasn’t complete. 

The meeting continued, we exchanged pleasantries. My company did some work with Fujitsu, a project with Syngenta, another project with BC Hydro, all-around good stuff. But the question kept on bothering me. How do you create the next iPhone? 

In 2018, all the work we were selling our clients had a foundation in human-centered design.  

We’d go in, do market research, we get a sense of the market, understand gaps, where to enter, and get an understanding of our clients’ goals, what KPIs needed to be hit, then design a product that checked those boxes. Couple it with a go-to-market, build, launch, and hope we have product-market fit, if not, then test, edit, and augment the product. Sadly most corporate innovation projects die just before the test stage

I began framing the question around just that – design thinkingApple applies design thinking to product development, we all know that. HBS even published a case study on it. The iPhone had to be a result of that. But this approach was both naive and simplistic. 

Yes, Design Thinking had a role in the end product, but it wasn’t what spearheaded the iPhone. After much digging, it started to become more and more evident that the iPhone’s development began with the iPod, with the concept for the phone developed even earlier. 

The iPhone itself, however, was a result of incremental innovation, coupled with the foresight to exploit a market need. 

This isn’t a new theory per se, people had attributed incremental innovation to the iPhone’s success before but focused more on what came after. iTunes, App Store, etc., and less so on how Apple got to the iPhone in the first place. 

What is incremental innovation? 

incremental innovation example, how to design the next iphone

Think of incremental innovation this way. You have a car, and you can design it to fly to Europe automatically, and you do just that.  But only a few people will buy it. The population as a whole will have safety concerns, they will think it too risky, there won’t be any landing zones for the car or other infrastructure to make this experience seamless. Even though you can design the car, it doesn’t mean you should. 

But if you have a vision for that car, and you employed incremental innovation, it could look something like this. You have a car. Next year you release some self-driving elements, then some minor flying elements which will allow you to fly over traffic jams automatically. Next, you’ll add in regional flight, and begin building a network of landing zones. A few years later, offer a cross-continental model, and eventually, offer the public a car that can fly to Europe. Ok so not the best example, but you get the point.

Each step is incremental, and there isn’t a massive jump between cycles in terms of technology. While the flying car thing may not be the best example, each step saw a minor innovation, fly 100miles, the next model flies more miles, and now identifies best places to land, and so/on and so forth. 

But when Steve Jobs launched the iPhone, everyone went wow. Yes. This is true. Jobs was terrific at building heat, but the actual jump in innovation to the iPhone was actually incremental, and it all started with a music player. 

To Understand Apple’s Guidelines to Product Innovation We Have to Look Back. It all started with the iPod and iTunes.

first ipod, first generation, ipod 1, how to design the next iphone
The first ever iPod

The first iPod was launched in 2001 as a music player. Nothing more. 

Four years before its launch, Jobs came back to Apple as CEO and refocused the company’s R&D efforts on a handful of products. 

No more Newtons, no more Power CD (yes apple made a standalone CD player), QuikTake (digital camera), or Pipin (a gaming console). 

how to design the next iphone

R&D was cut and shifted. In my opinion, Jobs canned these projects because they weren’t performing well, they were all run of the mill mediocre products. It’s also worthwhile to mention that the concept of a device like the iPhone wasn’t anything new in Silicon Valley. Marc Porat brought the idea to Apple in 1988, and later build the first “PDA” with General Magic, a company founded by him and two other Apple Vets. 

The General Magic PDA and Newton both launched in 1993. Conceptually a “user-friendly” PDA was tested, and it failed. Tech issues aside, both made an insignificant market impact because they were just too early. 

But back to Jobs at Apple. He re-joins in ’97, cans the under-performing products, and then three years later, on January 2001, iTunes (rebranded from SoundJam) drops on the market, letting users rip CDs. 

If you have the time, watch the General Magic documentary, it’s fascinating.

This is more of less point zero in the iPhone’s innovation. It all starts with iTunes. Apple computer users can now efficiently manage their music, rip CDs, manage MP3s without the need for a 3rd party tool, add artwork, and build an in-home music library. 

Eight months later, Apple drops the iPod. It lets users of iTunes easily import their MP3s to it, and for the first time, permits users to navigate their MP3 libraries on a mobile device. Other MP3 players were already on the market, but what they lacked was the navigability of the iPod. The Forward / Back / Stop – was good for tapes but not for libraries consisting of hundreds of songs. 

A couple of things to note are essential here. The tech was finally ready. Toshiba had recently developed a hard drive that was small enough o fit into an iPod, and large enough to house thousands of songs. The market was ready, every high school and college kid in America downloading music from file-sharing networks like Napster (1999) and Kazaa (2001), and there was “just” enough innovation in the iPod’s user interface to have the general public go “ooooh.” 

The device was also bulky and mostly unpolished. An MVP (minimum viable product) if you will. 

The following year (2002), Apple releases iTunes on windows. Winamp was no longer needed, and under Ballmer Microsoft wasn’t in a position to innovate or mount a response. 

2002-2006 saw improvement in the iPod, a color screen was added, support for photos, then videos, podcasts, games store, and so on. Around 2004, the iPod really starts gaining momentum, around this time people also started producing 3rd party software for iPod models to expand its native functionality. Jobs and the iPod are on the cover of Newsweek, everyone wants an iPod.  

history of the ipod, how to design the next iphone

So, here you have this product, that literally everyone in America knows about, and companies are thinking, “how do I compete with iPod” – Zune, anyone? 

Then comes Summer 2007. I’m in grad school working with my buddy Rainer on a project called “I Go Radio” – we were trying to figure out how to create an international radio steaming service for feature phones when we see Steve Jobs unveil the iPhone, and we immediately want to bring the concept to it, but the platform is locked. Later that same year, Apple launched the first iPod touch, effectively an iPhone without the phone part, Bluetooth, and some other features. 

My guess is, they developed the touch, then as a last-ditch effort, Jobs wanted phone capabilities added, they just managed to squeeze it in. iPhone is a success, 3G launches next year with an App Store, the rest is history. 

Dissecting the market that made the iPhone possible. 

Several critical things are happening in the market that makes the iPhone’s success possible.

Faster internet speeds allowed for file-sharing services, and for people to amass vast music libraries. Listening on the go was still limited to bulky Walkman CD players, and the first wave of MP3 players hit the market, but storage was limited to 32MB, 64MB, 128MB. Not enough to store the vast quantity of music people were amassing. 

Here Jobs sees a market opportunity and delivers a product that solves a need. That need – an MP3 player that doesn’t suck. 

Palm pilot PDA before iPhone, how to design the next iphone
a Palm Pilot PDA

Subsequent versions of the same product (iPod), nudge the consumer base towards a specific media consumption experience, establishing familiarity with mobile devices that now stream movies, display photos, and do several other things. 

The iPod also helped reposition Apple’s products as status items, at $399 ($578 in 2019 dollars) the iPod was not cheap, but it was cool. 

In the mid-2000s, email had taken off. Email services like Hotmail and Gmail popped up in the late 1990s and really only took off a few years later. 

PDAs had seen a resurgence of sorts in the late 90s and began coming into their own in the mid-2000s. Palm PilotsHP iPAQSony Clie’sBlackberrys, these devices were at the top end of the market, and catering to the business community. 

And Apple, under Jobs, does an incredible job of filling consumer’s needs. They enter the market at just the right time, first with a bulky MVP type product, then if the market positively responds, quickly update it with a more polished version of itself. This was the case with the original iPod, iPhone, and even the iPad. 

During this time, society and technology became more entwined. Apple would test its hypotheses with alternative products. iPod nano’s, iPod shuffles (low entry point device to bring people into the Apple ecosystem). Each new product was testing various assumptions, and those findings leading to the next level of incremental innovation. 

So how what are Apple’s product innovation guidelines?

If you’ve read all the way down here and thought, there’d be a “Thirteen things you need to do to design the next iPhone” I’m sorry to disappoint you, there is no magic pill. What we can deduce, however, are the interactions between market trends and the product(s) that led to the iPhone’s launch, and these same steps have been repeated with subsequent Apple Products, iPad, AirPods, AppleTV, et al.

Start with the vision

Let’s start with the concept for a product, this case, an easy to use PDA with mass-market appeal. This is the product’s ideal state. It’s a position at some point in the future that we are trying to carve out a road to. 

The vision should be broad enough that it doesn’t deter you from following market needs, and concrete enough that it’s a specific thing you are working towards. 

Understand the ecosystem

It’s pivotal that you understand the interconnectedness between technology, market need, consumer trends, consumption patterns, alternatives (substitute products), and identifying the crossroads of all these things to pick a starting point. 

Keep your finger on the pulse, not only what is happening in the market today, but how people are consuming various experience, software, products. If the consumption of, or experience with these things is clunky, then there’s room for innovation. But just because there’s room to innovate, it doesn’t mean the market is ready. 

Timing is everything. 

Timing is so important when it comes to first-generation product releases. Releasing too early into a market that isn’t ready is just as bad, if not worse, than being a follower.

Releasing a product to a market that isn’t ready for that product will spell failure. Starting late, however, doesn’t mean failure. It means someone has gone ahead and laid the groundwork for you. 

In Apple’s case, MP3 players were already on the market, PDAs were on the market. Other companies laid the groundwork for Apple to succeed, and there are countless other examples of this. Remember, Friendster and MySpace laid the foundation for facebook; GM’s EV1 laid the foundation for Tesla. 

In a 2015 TED talk Bill Gross goes on to describe how timing is the most critical factor in a Startup’s success. Swap out startup for a product, and you have the same. 

Access to resources. 

The iPod wasn’t an overnight hit. In 2002, it only sold 400k units, doubled that in ’03, and it wasn’t until about the halfway point of 2004 that Apple broke the 1MM unit mark, rounding out the year with 4.4MM units sold which accounted to less than 5{abb65e2b6815f549a727af2ea9f3a377a727ddc064972a198a74f88a6b766686} of Apple’s revenue. Subsequently, this increased to around 40{abb65e2b6815f549a727af2ea9f3a377a727ddc064972a198a74f88a6b766686}.

ipod as percentage of apples revenue 2002-2014

The point I’m making here is Jobs and Apple were determined to push the music player forward and invest enough resources into it that it eventually became the company’s best selling product and allowed the company to throw enough R&D budget into the device to finally release a touch version – with a phone. 

This access to resources, a will to incrementally innovate a product that could have been seen as under-performing at other organizations, and understanding the market’s readiness for it is what made the iPhone a possibility. 

So for the global CMO, or you know, any startup CEO:

  • Start with a vision. To know how to design the next iPhone, you have to know what is your company’s “iPhone.” 
  • Understand the ecosystem and unearth opportunities to launch a WELL TIMED beach-head product that you can use to move an audience in the direction of wanting your “iPhone.” 
  • Support the product by building out an infrastructure to support it, and by investing the capital required to make it better from one generation to the next. 

A couple of companies that I see employing Apple’s product innovation guidelines are NVIDIA and Tesla. Compare how they ship their products to how Apple shipped the iPod, and you’ll see several similarities. 

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