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half as many as Microsoft, a company 145 times the size of Apple. Dell Computer, by contrast, has been granted half as many patents as Apple. Apple has invented, moreover, more businesses than just the personal computer. In 1984, Apple created the first computer network with its Macintosh machines, whereas Windows-based PC’s didn’t network until the mid-1990s. A decade ago, Apple introduced the first handheld, pen-based computing device known as the Newton and followed that up with a wireless mouse, ambient-lit keyboards for working in the dark, and the fastest computer on the market in 2003. In 2003, Apple also introduced the first legal, dig- ital music store for downloading songs—iTunes—along with its compatible technol- ogy, iPods. In other words, Apple has been at the forefront of product and techno- logical innovation for almost 30 years. Apple has been, hands down, the most innovative company in its industry and one of the most innovative companies on the planet.

Here’s the problem. Today, Apple commands just two percent of the $180 billion worldwide market for PCs. Apple’s rivals have followed its creative leads and snatched profits and market share from Apple with astonishing effectiveness. From its number one position two decades ago, Apple currently ranks as the ninth largest PC firm—behind name-brand firms such as Dell, Hewlett-Packard, and IBM, but embarrassingly, also behind no-name firms such as Acer and Legend. These clone- makers, from Taiwan and China respectively, have invented no new products.

Moreover, whereas Apple was once among the most profitable companies in the PC industry, its operating profits have shrunk from 20 percent in 1981 to 0.4 per- cent in 2004, one-tenth the industry average. Its chief competitor in software— Microsoft—sold $2.6 billion in software in the most recent quarter compared to $177 million for Apple.

What could possibly be wrong? If one takes serious the messages being declared loudly and prominently in the business press and in the broader global society today, innovation and creativity are the keys to success. “Change or die.” “Innovate or get passed over.” “Be creative to be successful.” A key tenant upon which progressive, market-based, capitalistic societies are based is the idea of creative destruction. That is, without creativity and innovation, individuals and organizations become casualties of the second law of thermodynamics—they disintegrate, wither, disorganize, and die. New products are needed to keep consumers happy. Obsolescence is ubiquitous. Innovation and creativity, consequently, are touted as being at the very heart of suc- cess. For more evidence, just skim over the more than 49,000 book titles when you log onto Amazon using “innovation.”

On the other hand, consider some of the most innovative companies in recent American history. Xerox Corporation’s famed Palo Alto Research Center gave the world laser printing, the Ethernet, Windows-type software, graphical user interfacing, and the mouse, yet it is notorious for not having made any money at all. Polaroid introduced the idea of instant images, yet it filed for bankruptcy in 2001. The Internet boom in the late 1990s was an explosion in what is now considered to be worthless innovation. And, Enron may have been the most innovative financial com- pany ever.

On the other hand, Amazon, Southwest Airlines, eBay, Wal-Mart, and Dell are examples of incredibly successful companies, but without inventing any new products or technologies. They are acknowledged as innovative and creative companies, but they don’t hold a candle to Apple. Instead of new products, they have invented new processes, new ways to deliver products, new distribution channels, new marketing approaches. It is well-known that Henry Ford didn’t invent the automobile. He simply invented a new way to assemble a car at a cost affordable to his own workers. The guy who invented the automobile hardly made a dime.




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