Nearly all companies must eventually embrace innovation or risk injury. As the music business follows consumers' shift to streaming media, Apple will eventually abandon part of what made it successful. iTunes Radio, expected to launch Tuesday, is the first step away from Apple's music download business and toward a future of streaming.
An article I wrote with Alex Pham in today's issue of Billboard looks at the innovator's dilemma facing Apple. An innovator's dilemma presents a company with two choices: continually improve its existing, profitable product line or develop a new product that has the potential to kill its existing product line. In other words, a company must adapt or die.
In order to succeed in the streaming marketplace, Apple has to risk killing the music download business it has dominated for the last ten years. With the launch of iTunes Radio, Apple shows it understands the future of music is streaming. iTunes Radio is not necessarily an iTunes-killer -- Internet radio is generally believed to complement music purchases -- but is a first step toward the kind of streaming service that could eventually replace the iTunes Music Store.
"The Innovator's Dilemma"
Any company has the potential to overcome this dilemma. "Any leader could do this if they truly believe that disruption occurs," Clay Christensen told me via email. Christensen, a professor at Harvard Business School, literally wrote the book on the subject. Published in 1997, the widely regarded book "The Innovator's Dilemma: When new Technologies Cause Great Firms to Fail" examines a range of industries to understand why successful companies can lose their market leadership to innovative, smaller companies.
Even a great company with intelligent management can be unable to integrate disruptive innovation into an organization. "There is a difference in those who believe IN disruption and those who believe disruption," Christensen continues. "Some will see it and actually move and change. If you simply believe IN it, most just sit and wait until it’s too late."
There's reason to believe Apple won't cling to its download business. Apple has shown an ability to overcome the innovator's dilemma in the past and get behind disruptive innovation. It has built a very successful tablet business that jeopardizes the success of its desktop and laptop businesses. In short, Apple has an attitude that is rare in the business world: it would rather cannibalize its own business than let a competitor hurt its business.
The innovator's dilemma continues to plague companies 16 years after Christensen's book was published. James Allworth, a Fellow at the Forum for Growth and Innovation at Harvard Business School, explained to me (for the magazine) that companies can recognize the dilemma and see the potential of innovation but still fall to the incentive structures that prevent companies from adopting innovations.
Microsoft is a common example of a company that has failed to overcome the innovator's dilemma. Apple, Google and Samsung have handily beat Microsoft in the smartphone business while Apple and Samsung have routed the company in the tablet business. Faced with an inability to generate profits outside of its enterprise division, Microsoft has restructured its organization, purchased Nokia and set the stage for a new CEO to take over in 2014.
One important question regarding Apple is if current CEO Tim Cook has Steve Jobs' ability to steer the organization away from the normal incentives that derail innovation. Time will tell. Apple has not introduced a new product category since Jobs passed away. But Christensen says an ability to overcome the dilemma doesn't have to leave when a successful leader leaves. "It can definitely stay with the company," he says.