At the end of the '90s, Apple's prospects were looking dim – and investors knew it. When Steve Jobs returned to the company in 1997, it was on the brink of bankruptcy after suffering annual losses of more than a billion dollars.
Apple had a paltry 5 percent share of the personal computer market, and the stock had cratered. Michael Dell famously said at the time that if he were running Apple, he'd "shut it down and give the money back to shareholders."
Then, in 2001, the iPod debuted to rave reviews. The company had revisited the shopworn Walkman concept and taken it digital, producing headphone sound that rivaled a concert hall. Apple went on to reinvent the recorded music business.
The iPod and the stream of products that followed – increasingly advanced generations of iPods and iPhone and the iPad — came not just from the late Steve Jobs' genius, but from his company's dogged dedication to innovation.
These innovations have made Apple the biggest company in the world. Apple sales in the last quarter topped $35 billion – 43 percent of it from iPhones. About 75 percent of Apple's revenue is from products that didn't exist 11 years ago.
Innovation is one of the few economic factors that is extremely hard to measure. It is often ignored by investors and missed by Wall Street analysts. But it's always there at the core of high-performing companies, like the gleam in the eye of a progenitor.
How long an innovation lasts as a competitive advantage is anybody's guess. Yet one thing is certain: Without innovation, most companies cannot succeed initially or remain successful. Michael Porter, a global authority on competitive strategy and a Harvard Business School professor, has said: "The only way to have an advantage is through innovation."
Typically, innovative products and services embody new technology. Virtually every industrial revolution in the world's history has been spurred, at least in part, by technological advances stemming from innovation.
Amazon saw the Internet as the wave of the future for shopping. As ordering books online rose, old-style book stores like Barnes & Noble and Borders fell. Amazon's business model wasn't limited to books, of course, and now the company may be eating Best Buy's lunch and has emerged as the champion of e-commerce.
The company's most recent innovations include venturing into web services and the Kindle. Amazon is expected to announce a new Kindle generation early this week.) The rise of Amazon and Apple are common parables of contemporary business because they are examples of a new model that is changing the way we do business.
In Creative Destruction: Why Companies That Are Built to Last Underperform the Market--And How to Successfully Transform Them, authors Richard Foster and Sarah Kaplan show how innovation has transformed the global business landscape over the past 100 years. This new guard has succeeded by attacking the old guard -- mature companies that have failed to innovate and thus are vulnerable.
Apple is in a class by itself because it's a company that continues to innovate by jumping back on what Paul Nunes, executive director of research at the Institute of High Performance at Accenture, and Tim Breene, the CEO of Accenture Interactive, call the S-curve in their book, Jumping the S-Curve: How to Beat the Growth Cycle, Get on Top, and Stay There.