For all its flaws and quirks, Apple has at least four important wider lessons to teach other companies.

 

The first is that innovation can come from without as well as within. Apple is widely assumed to be an innovator in the tradition of Thomas Edison or Bell Laboratories, locking its engineers away to cook up new ideas and basing products on their moments of inspiration. In fact, its real skill lies in stitching together its own ideas with technologies from outside and then wrapping the results in elegant software and stylish design. The idea for the iPod, for example, was originally dreamt up by a consultant whom Apple hired to run the project. It was assembled by combining off-the-shelf parts with in-house ingredients such as its distinctive, easily used system of controls. And it was designed to work closely with Apple's iTunes jukebox software, which was also bought in and then overhauled and improved. Apple is, in short, an orchestrator and integrator of technologies, unafraid to bring in ideas from outside but always adding its own twists.

 

Second, Apple illustrates the importance of designing new products around the needs of the user, not the demands of the technology. Too many technology firms think that clever innards are enough to sell their products, resulting in gizmos designed by engineers for engineers. Apple has consistently combined clever technology with simplicity and ease of use. The iPod was not the first digital-music player, but it was the first to make transferring and organising music, and buying it online, easy enough for almost anyone to have a go. Similarly, the iPhone is not the first mobile phone to incorporate a music-player, web browser or e-mail software. But most existing “smartphones” require you to be pretty smart to use them.

 

Listening to customers is generally a good idea, but it is not the whole story. For all the talk of “user-centric innovation” and allowing feedback from customers to dictate new product designs, a third lesson from Apple is that smart companies should sometimes ignore what the market says it wants today. The iPod was ridiculed when it was launched in 2001, but Mr. Jobs stuck by his instinct. Nintendo has done something similar with its popular motion-controlled video-game console, the Wii. Rather than designing a machine for existing gamers, it gambled that non-gamers represented an untapped market and devised a machine with far broader appeal.

 

The fourth lesson from Apple is to “fail wisely”. The Macintosh was born from the wreckage of the Lisa, an earlier product that flopped; the iPhone is a response to the failure of Apple's original music phone, produced in conjunction with Motorola. Both times, Apple learned from its mistakes and tried again. Its recent computers have been based on technology developed at NeXT, a company Mr. Jobs set up in the 1980s that appeared to have failed and was then acquired by Apple. The wider lesson is not to stigmatize failure but to tolerate it and learn from it: Europe's inability to create a rival to Silicon Valley owes much to its tougher bankruptcy laws.

 

None of these things, of course, guarantees success: you can buy in clever ideas, pursue simplicity, ignore focus groups and fail wisely—and still go bust. Apple very nearly did so itself. No doubt the bumptious Mr. Jobs will overreach himself again: the iPhone's success is not guaranteed. But for the moment at least it is hard to think of a large company that better epitomises the art of innovation than Apple.

 

Article excerpted from The Economist, June 2007 issue. For more on this topic, go to www.economist.com.