The revolutionary iPod arrives

Before we dive into the story of what is now considered a classic example of Apple’s enormous success and Steve Jobs’ visionary determination, let’s pause for a moment to look at something else. The events that preceded it and explain how this breakthrough came about. And from which we learn that Apple’s success in the music field and in the design of the iPod came at the price of a hard lesson in what it had previously considered a key part of its business: computers. We are talking about the beginnings of the iMac series of computers.

When Steve Jobs returned to Apple as interim CEO in 1997, Apple had a wide range of products on offer. Too wide, Jobs decided—customers were having trouble navigating it. Many products differed in terms of memory combinations, size and case design, and processor clock speed. Only fans wanted to distinguish between the Power Macintosh family by numbers. Jobs himself later said that even he had to spend three weeks with people from the product division explaining what each number meant and who the product was intended for. He may have been exaggerating in a way, but he was right about the essentials: it was difficult for customers to choose a computer from Apple’s range. In 1997, Jobs discontinued two-thirds of the models, much to the chagrin of fans, including a personal digital assistant called Newton.

Let’s pause for a moment at Newton. This “palmtop computer” came on the scene in 1993, and it is said that Jobs simply hated it and canceled it because it was pushed through by Apple’s then-CEO John Sculley, whom Jobs despised. In reality, it was more a case of Jobs’ mental incompatibility with the product, as it represented everything he hated, especially the stylus control and the still-unrefined handwriting recognition at the time. Although the Newton was famous for its revolutionary handwriting recognition for its time, it still did not have the quality that Jobs expected from the product. It was unreliable, and entries often had to be corrected or another variant of the recognized word had to be selected. It was still far from perfect. Jobs had long held the view that rather than releasing a product that was imperfect in any of its key parameters, it was better not to offer it at all. The axe fell on the Newton product at the beginning of 1997, when Jobs downsized its division, but by the end of the year he realized that although the product was promising, Apple did not currently have the strength to push it to a state where the company could be satisfied with it. And Apple needed to focus on its main revenue segments to return Apple to profitability. Apple lost more than a billion dollars in fiscal year 1997, and Jobs later admitted that the company was three months away from bankruptcy. It could not afford to be sentimental about a product, no matter how revolutionary and well-received by fans, when it was not making money and needed a major restructuring.

It was precisely this stubbornness and pragmatism that apparently led to Newton’s decision to call it quits and shelve the entire Newton OS. Seven years later, when Jobs was thinking about a personal device that Apple should produce, he remembered Newton and used the experience as a cautionary tale. He would definitely reject the capacitive display, the stylus, and the constantly imperfect handwriting recognition. But that was still a long way off.

Jobs decided that Apple products must be divisible into a simple matrix and marketed and sold as such. Until then, Apple had been responding to requests from retailers: retailers reported that the market wanted something, and engineers created a new model series by modifying the existing model. This led to fragmentation and confusion, which ultimately did not benefit sales, because although the configuration met the requirements of a few retailers, others paid no attention to it. Jobs’ decision was primarily intended to make the products clearer, but it also had another desirable effect: better inventory management and the ability to respond more quickly to requests, because the number of ways to assemble new computers was significantly more limited.

Jobs’ product matrix defined two main categories of computers: Consumer and Professional, each of which had two variants, Desktop and Portable. That made a total of four products. Considering that Apple introduced fifteen different computers in 1997 and continued to manufacture a number of others from previous years’ model ranges, it is clear that this was a radical cut. The professional line of computers was now based on the Power Macintosh G3, and Apple would focus on the PowerBook G3 for portable computers, but Apple had nothing to offer in the consumer computer market. Yet it was precisely in the consumer segment that demand was growing and where it was easier to realize Jobs’ vision of a “digital hub.”

It was necessary to start searching and designing. In 1997, Apple did not sell any computers for less than $2,000, which was too much for the end-user segment. It was necessary to lower this threshold, ideally to the $1,000 mark. Ultimately, the decision was made to start with the cheapest computers priced at $1,200.

Jobs envisioned an “all-in-one” computer. He hated connecting individual computer components with wires, and in the past, Apple had scored many successes with designs that built the display unit into the computer itself. So the design team went back to 1984, when the original Macintosh was created, a computer that had a monitor combined with the computer itself.

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The revolutionary iPod arrives

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