Why Apple Had to Choose

Fifteen years ago, in perhaps the most important article on business strategy ever written, Michael Porter wrote that “the essence of strategy is choosing what not to do.” He drew a critical distinction: many decisions lead to unambiguous improvement, but real strategy – the key to lasting competitive advantage – requires trade-offs: choosing to focus on doing A well, even if that requires you to sacrifice B. Porter’s idea is neither complex nor new, but it’s still hard-learned.

Apple recently released a completely redesigned version of its advanced video-editing software, Final Cut Pro X. Amateur movie-makers such as the New York Times’ David Pogue praised its ease of use, but the reaction among professional video editors was scathing. Missing features and other changes were slammed. With regard to the negative feedback he got following his review, Pogue said he’d “never encountered anything quite like this.” The pro crowd was so incensed with what was termed Apple’s “failure,” “worst launch,” and “biggest mistake in years” that speculation quickly turned to what Apple could have been thinking. Some suspected that it intentionally stripped away critical features to “dumb down” its product and appeal to the much larger amateur editing market – a theory that only angered the pros further. Pogue himself emphatically argued that Apple didn’t intentionally turn its back on the professional market – instead, Apple just “blew it.”

Pogue is wrong. As Sachin Agarwal (founder of Posterous and a former Final Cut Pro product designer at Apple) put it, they knew the Final Cut Pro X redesign would be controversial. He described the rationale for their decision bluntly: “Apple doesn’t care about the pro space.” Nor does it compete on features – it “doesn’t play that game.” Instead, Apple took a professional-grade product down-market by making it simpler, cheaper, and more intuitive – and to do this, they changed and eliminated functionality.

What’s funny is that this has always been Apple’s strategy. While IBM made faster and more powerful PCs for the technical elite in the 1980s, the Macintosh had less RAM but introduced a mouse and graphical interface that any user could understand. More recently, many critics thought the iPad would be dead on arrival because of the features it lacked, but a few, such as John Gruber, understood that Apple was making a conscious trade-off - ignoring the feature-seekers and tinkerers in order to create the world’s most intuitive computer, cheap and capable enough for the mass market.

Did Apple have to choose? If it tried to design software or devices for both laymen and the elite technical segment, it would be forced to make a thousand subtle sacrifices to pull off the straddle – on features, UI, price, marketing, etc. In the end, it might still have made great products, but not as good as those it has now.

The risks of failing to choose are all too apparent when you consider some of the biggest disasters in the high-tech industry recently. There are eerie parallels between last week’s anonymous Research in Motion open letter to the CEOs (“instead of chasing feature parity … [t]here is a serious need to consolidate our focus…. Strategy is often in the things you decide not to do”) and Yahoo’s infamous 2006 leaked “peanut butter” memo (“We want to do everything and be everything – to everyone…. The result: a thin layer of investment spread across everything we do and thus we focus on nothing in particular…. We need to boldly and definitively declare what we are and what we are not”).

Contrast these with Steve Jobs’ philosophy on strategy, repeated endlessly over the years: “People think focus means saying yes to the thing you’ve got to focus on. But that’s not what it means at all. It means saying no to the hundred other good ideas that there are. You have to pick carefully … We’re always thinking about new markets we could enter, but it’s only by saying no that you can concentrate on the things that are really important.”

RIM’s share value is down ~33% over the last month. Yahoo’s is down ~60% over the last five years. By contrast, since Jobs returned to Apple, its share value is up almost 10,000%.

Michael Porter might say that the Final Cut Pro X debacle is exactly why Apple is the most successful company in the world.