The iPod was a True “Lean Startup” (Part 2)

In Part 1, I discussed how Steve Jobs set a strict product strategy for Apple to have only 4 products: two notebooks and two desktops. A bloated product catalog had almost killed Apple, so Jobs was adamant in his decision and would push back on any hint of a 5th product. Until 2001 came around.

2001: The First Pivot

In September 2000, Apple released a beta of the new Mac OS X (codenamed Puma), which would reach consumers in March 2001. At Macworld 2001 in January, Steve Jobs described the Mac as the center of a hub. iMovie had already been in the market, re-defining editing for consumers. At Macworld, Apple released iDVD, a tool for burning custom DVDs, and iTunes, a music organizer; iPhoto would be introduced a year later. iTunes was not originally an Apple product, but a hastily re-developed version of SoundJam MP, which had been developed by a small company acquired by Apple.

Jobs bet that consumers would continue to create content, and the Mac would be the center of the entire ecosystem. Apple’s strategy was not to create cameras or music players but to re-invent how people stored and shared media.

Finding a Niche

While developing their media suite, Apple needed to test their software with hardware from many vendors. Digital cameras and camcorders were mature and innovative, but the music player market was nascent, and, frankly, the products were all flawed. Either the player was small with a small amount of memory or they were large and bulky with a full-sized hard drive and bad battery life.

Given Apple’s extensive experience with music players, Steve Jobs — a music lover at heart — began talking to his executives about finding a solution. He saw a niche, but given his “4 product” strategy, he didn’t want to hypocritically dive into a new market.

A Solution without a Product

In February 2001, after the launch of iTunes, Apple engineer Jon Rubinstein met with Toshiba on a routine trip to Japan. During that visit, Toshiba showed a 1.8 inch 5-gigabyte hard drive, though they didn’t know what to do with it. Perhaps it would be good for a digital camera, but they had no plans. Rubinstein saw the piece to a puzzle: a hard drive that was small enough to put in a pocket-sized music player.

Rubinstein asked Jobs for $10 million to acquire rights to the Toshiba drive for a new music device. Apple had recently reported a $247 million quarterly loss — its first loss in 3 years — though it kept $5 billion in cash in the bank. It was not a significant investment in cash, but the project would require the attention of senior staff, which Jobs knew was a slippery slope.

Fast and Cheap

Jobs agreed to the project with the stipulation that the product would be on shelves by the holidays. In reality, that meant the product needed to be completed by August, only six months away.

Jobs didn’t just limit the scope in terms of capital, but the timeline was nearly impossible. Whereas many companies would see this project as an exciting new launch, the Apple team needed to go fast, cheap, or go home. It wasn’t a revolution nor was it a strategic shift. It was a 6-month experiment to see if Apple could build a better device. Had the team not met the August deadline, it’s conceivable that the whole project would have been written off.

Apple didn’t re-invent the wheel (yet) with their music player. Rather, they were connected with Tony Fadell, a designer/engineer that had been shopping around an in-dash music player concept for cars with little success. Fadell’s 12-person firm was awarded an 8-week contract to figure out how to build a music player, which he reluctantly accepted.

Like a LEGO Set

With the drive from Toshiba, they sourced cell phone parts from Sony, and an MP3 decoded and controller from PortalPlayer. The pieces fit together like a LEGO set into a handheld device exactly as planned.

However, after the engineering feasibility was established, Jobs was excited. Phil Schiller, Apple’s head of marketing, interrupted the product meeting and returned with phones and mice with scroll wheels. He provided a key design insight that would define Apple’s music players; instead of pushing up and down buttons hundreds of times, the user would scroll easily. It all fit together with almost zero Apple technology.

Join or Else

At this point in April 2001, only a few people at Apple had any knowledge of the music player project. Fadell’s company worked independently, and after the feasibility meeting with Jobs, they planned a meeting in 4 weeks to introduce the concept to 25 high-level executives at Apple.

Rubinstein’s discomfort with the project’s arrangement grew and he continued to push Fadell to join Apple instead of working as an external contractor. Directly prior to the introductory meeting with Apple executives, Rubinstein is said to have given Fadell an ultimatum: either he joins Apple or the music player project is done. Fadell joined and led the team while Apple had secured a top engineering leader.

What if…

So many aspects of the Apple music player story leading up to the internal introduction could have gone differently. If Rubenstein hadn’t seen the Toshiba hard drive, if Tony Fadell hadn’t done the groundwork for a music player, and if suppliers were unable to fill the unique needs of a compact device, the project would have died before the first deadline. And Apple, knowing the value of a great product leader, would not continue the project without Tony Fadell.

What if?

Given that Apple had invested little money and only a few weeks of executive time, it wasn’t a huge loss to cut bait and walk. The world was very close to never meeting the iPod because, at that point, it was just a side project.

To be continued…