Apple did not come by its present success easily. Before the iPod, iPhone, and iPad became profitable icons of high-tech fashion, Steve Jobs suffered a long series of failures. Apple’s Pippin game player, the Next computer, Apple TV, the Lisa computer, the Newton PDA, and the Apple mouse are among the many products that are barely known because they were dismal flops. For many years, there were serious doubts if Apple could survive the battles it was losing to competitors like Microsoft.

In contrast, Apple is now expected to sell 30 million iPads in 2011 — two-thirds of all tablet computers sold globally. Although the iPhone is fighting off 90 different smart phones, Apple’s sales are up 60% and could reach 100 million iPhones in 2011. The source of this staying power is seen in the fact that the Apple iPhone has the highest consumer satisfaction scores ever recorded. Apple’s profits exceed those of IBM, and it is considered one of the most Innovative and valuable companies in the world, Such stunning success always raises questions over its origins.

How did a struggling company run by a charismatic but somewhat erratic CEO learn to excel in the brutal battle among emerging technologies? Can the factors of this success be identified and used to guide others?

The most striking conclusion about Apple’s rise is that Steve Jobs learned bitter but crucial lessons from failure. After years of autocratic leadership, dismal sales, and temperamental behavior demoralized the company, John Sculley became CEO in 1985 and Jobs was sent into the computing wilderness. For 12 years, he suffered losses such as the Next computer, which was overpriced and sold only 50,000 units in seven years. When Jobs returned to head Apple, he had learned to focus on good design, to treat people well, and to develop winning strategy. Tim Bajarin, president of a consulting firm, said “[Steve Jobs] would not have been successful if he hadn’t gone through his wilderness experience.”

The main lesson from Apple’s success, however, is the central importance of focusing on strong products that are well-designed for the market. Jobs is a genius at minimalist designs that integrate technology breakthroughs to fill a newly emerging need with unusual style. He thinks success requires “listening to the technology” in order to “discover” the potential products waiting to be invented. The result can be seen in the way Jobs describes the attraction of the iPad – “It’s like holding the Internet in your hands,” he told a crowd. “It’s so much more intimate than a laptop and more capable than an iPhone. It’s truly magical.”

This keen sense of anticipating where emerging technologies are leading comprises the central talent that allowed Jobs to create revolutionary breakthroughs like the first personal computer (Apple 1), the first graphical interface (Mac), the first Unix PC (Next), the first successor to Sony’s Walkman (iPod), the first online music store (iTunes), the first widely used smart phone (iPhone), and the first successful tablet (iPad). Serious processes are needed to closely follow advances in technologies that will impact your organization and to find creative new solutions for the market. That’s why Apple does far less conventional product research than other companies, and focuses instead on product discovery. Here’s how Jobs described his approach: If I had asked someone who only used a calculator what a Mac should be like, they couldn’t have told me. There’s no way to do consumer research so I had to go and create it, and then show it to them.”

Behind such great products, Apple thrives because it has been described as a “well-oiled machine.” Jobs learned to delegate, so his COO, Tim Cook, now runs a tight ship, and a cadre of managers and designers have learned to “think like Steve.” The company has outsourced its manufacturing operations, while 317 Apple stores are wildly popular and profitable. The Apple music store – iTunes – has expanded into a powerful vehicle for trading videos, movies, and possibly other information products.

Even with these stunning achievements, Apple faces enormous new challenges as competition among other smart phones and tablets heats up. There are at least 20 versions of Android phones alone, slowly taking Apple’s market share. In 2011, Americans will buy more Androids than iPhones.

The main issue, of course, is what happens when Jobs’ illness requires a successor? Despite claims that Apple has institutionalized practices that foster creativity, innovation, good design, and other legacies of Steve Jobs, it is really impossible to replace true genius. When Jobs returned from the wilderness to save Apple, John Sculley acknowledged “I’m convinced that if Steve hadn’t come back when he did… Apple would have been history.”

References:  See my article at Government CIO Magazine.

Just a decade ago, Blockbuster ruled the movie rental business about the way its name implies. With 25,500 employees at 8,000 stores dispensing movie rentals and a parallel distribution system of 6,000 DVD public vending machines, it had $500 million in annual cash flow and was valued at $ 3 billion.  About 2005 it was valued at $ 8 billion. [1]

Meanwhile, Netflix was using the postal service to distribute DVDs, and it didn’t seem to have a chance.  Founded in 1997 by Reed Hastings, its prospects of surviving battles against Blockbuster, Wal-Mart, Amazon, Google, Microsoft, and other competitors looked so poor that a Wall Street analyst labeled its stock “a worthless piece of crap.”  

Yet Blockbuster soon filed for bankruptcy, while Netflix gained leadership of the industry. Blockbuster lost $518 billion in 2010, running $ 1 billion in debt, and is closing most outlets. Netflix gained 16 million subscribers by running a well-executed operation and streaming movies online. The company earned $116 million in 2010, and its stock soared from $11 in 2005 to above $200 today, making Netflix worth about $13 billion. [2]

How did an upstart like Netflix succeed in beating an entrenched opponent like Blockbuster? It took good leadership, of course, but fundamentally it was because NetFlix executives understood that an emerging technology was rapidly changing the delivery of movie rentals. Hastings developed a strategy of Internet streaming, convenient customer service, and a virtual organization to deliver it cheaply and flawlessly. John Doerr, a partner at the venture capital firm Kleiner Perkins, said “Reed was ahead of the technology curve, and completely changed the industry.” [3]

Even when only few Americans had broadband in 2000, Hastings knew that renting video cassettes would soon yield to streaming movies over the Internet. Netflix was working on a TV box that would stream movies, but it required 16 hours of download time. Blockbuster also knew it was coming but would not take the plunge. Instead, they tried to beef up sales by expanding their stores into outlets for books, toys, and other merchandise – back to the future. [4]

When faster broadband and better video compression allowed YouTube and other Web 2.0 sites to erupt on the scene about 2005, Hastings realized that the time has come to cannibalize his DVD rental business in favor of streaming video. He also knew that developing a “box” was too limiting, and that an open-source approach would allow Netflix to distribute movies on TVs, DVD players, desk-top computers, mobile phones or almost any device. To help their customers give up DVDs, NetFlix did the unthinkable – they gave away streaming movies and made it easy. [5]

The second part of NetFlix’s technology strategy was to avoid the burden of retail outlets by operating online. With only a few warehouses and offices, the company became a virtual organization with no retail stores and no sales employees. A small staff operates on what Hastings calls their “Freedom and Responsibility Culture.”  Instead of authorized vacations, sick days, and fixed work hours, people work when they choose as long as their job gets done. Titles and even compensation are up to the individual.  

Finally, NetFlix improved on Blockbuster’s lackluster service and outmoded pricing.  Blockbuster charged $5 cost for each movie, and people especially hated the fees for late returns. So Hastings used a monthly subscription that allows unlimited rentals and no late fees.  Instead of renting movies, the focus is on providing a convenient service. To make it inviting to order movies online, NetFlix developed what is possibly the best software in the industry. At a time when most websites are a confusing mess, the website is a model of clean organization and intuitive clarity.  Like most Web 2.0 sites, Netflix uses client responses to recommend movies for individual taste. They even offered a $1 million prize to anyone able to improve the rating system.

For the time being at least, NetFlix has set a new standard for the exploding market in movies and video – much the way Microsoft set the standard for desktops, the way Amazon gained dominance of book sales, and Goggle gets the majority of search. This stunning success propelled Hastings to the top of Fortune’s “2010  Businessperson of the Year” award.

What can be learned from this case? Netflix illustrates the central role that emeerging technology plays in transforming an industry. Because Hastings is a Stanford computer scientist and a Silicon Valley entrepreneur, he knew it would soon be feasible to stream movies, but he also knew the switch had to be timed quite precisely. Taking such a big risk too early would invite a bleeding-edge failure, while a few years later the field would be left to competitors. He also knew that having employees run shops, charging for rentals, late fees, etc. were outmoded relics of the past, while online service delivered by a virtual organization offered unbeatable value.

 Following up my last blog, here are more interesting emerging technologies that are likely to transform life soon:

Really Smart Phones: Google, Intel and other companies are leading the way to phones that talk, do intelligent search, and more.

An intelligent world is forming all around us. With continual gains in computer power, bandwidth, and good AI systems like GPS navigation, we are likely see smart phones that listen, talk, and solve problems. Intelligent search that provides precise answers to difficult questions. Intel is working on smart phones that are aware of their surroundings and act as virtual assistants. The company’s CTO, Justin Rattner, said “Within 5 years, smart phones will be aware of the information on your laptop, desktop, and tablet, and they will use that knowledge to help guide you through the day.”

Google is using AI to improve search results. It is using speech recognition to take instructions by voice and respond in kind. They can automatically translate among 57 languages. Google Goggles lets an Android phone recognize an image. Eric Schmidt, Google’s CEO, said: “AI might remind us of appointments and connect us with friends. Imagine a future when you don’t forget anything because the computer remembers. You are never lost. Never lonely.” Well, the latter may be asking too much.

Thought Power: Using brain-computer interfaces, scientists have taught a monkey to “walk” a robot by simply thinking.

Researchers at Duke University trained a monkey (Idoya) to walk on a treadmill, and electrodes were implanted in her brain to capture electronic signals. The signals were translated into computer instructions and sent via high-speed Internet to the lab in Kyoto, Japan, where the robot “Computational Brain” (CB) resides. The monkey could watch the robot on a large monitor and was instructed to control CB through her own walking motion. As Idoya walked, CB also walked at roughly the same pace with minor time delays. The lead scientist, Dr. Migeul Nicolelis, said “We have shown that you can carry brain signals across the planet to control devices in the time scale that a biological system works.”

But that’s just the beginning. The researchers stopped the treadmill, leaving the monkey standing still and continuing to stare at the video of the robot. Whereas before Idoya was merely thinking about its own walking, now it was asked to make the robot walk using its thought alone.  For 3 minutes, Idoya “walked” the robot using sheer thought power. The team plans to demonstrate by the end of 2008 that human thought can operate an exoskeleton (robotic body suit). Intelligent brain-computer interfaces enabling people to communicate mentally with distant objects and people are likely to arrive commercially in about 1 decade.

Space Tourism: First Flight Due Soon

Virgin Galactic, the space tourism venture of Richard Branson, broke ground on their $300 million Spaceport America launch facilty in New Mexico, and also tested the mother ship that will carry the space ship itself to launch. The first space tourism flight is scheduled to launch in 2011, and will take tourists paying $200,000 each into suborbital flight.

For more on  emerging tecchnology, see www.TechCast.org

With the Technology Revolution heating up very quickly, I thought a quick summary of some technology breakthroughs we have been following at www.TechCast.org would be interesting. The TechCast Project at George Washington University pools the knowledge of 100 experts globally to produce authoritative technology forecasts of emerging technologies in all fields. Here are a few items that highlight the striking advances that are changing the world:

High Power Batteries: To boldly demonstrate the enormous advances in batteries and efficient aircraft, the world’s first “Solar Aircraft” is planned to fly around the globe nonstop – even through the dark of night.

The Solar Impulse is the world’s first solar-powered aircraft, and it is planned to circle the globe non stop about 2012. Created by Andre Borschberg of Switzerland, the plane’s wings span 208 feet, the size of an Airbus, while its weight is about 3,000 pounds, comparable to a small car. It has 11,629 photovoltaic cells that store energy in 400 kilograms of batteries, which in turn power electric engines. The plane was tested in July of 2010 to demonstrate it’s ability to fly though the night. Bertrand Piccard, the company’s president, said “Flying by night is a stunning manifestation of the potential that clean technologies offer.” (Emerging Technologies Magazine, July 10, 2010)

Fusion Nuclear Energy: Lasers are being used to create net energy gains and look promising for commercial fusion.

The U.S. Lawrence Livermore National Lab has created the most powerful laser ever built, and expects to use 192 of these to ignite a fusion explosion of 3 million degrees Celsius in 2-3 years. If this goes well, this approach could beat the ITER fusion reactor in France to the goal of producing the world’s first net energy gain in a fusion reaction. ITER uses magnetic fields to ignite nuclear plasma, while this approach concentrates laser beams to cause a small pellet of Hydrogen to ignite.  Either way, researchers estimate we could see a commercial fusion reactor operating in about one decade.  

Good Video Conferencing: Lower costs and good quality have allowed companies like Cisco to delivery video conferencing to the masses.

Cisco is leading a host of new entries into videoconferencing now that decent broadband permits good quality images and costs are dropping to affordable levels. This also comes at a difficult  economic time when business is trying to cut travel costs. Preliminary TechCast data show 30% of all communications are likely to include videoconferencing about 2014, producing a market of $450 billion in the U.S. and almost 2 trillion worldwide. Our experts give this forecast high confidence of 72%, so it looks promising.

These are just a few examples of the wide range of emerging technologies forecast by TechCast – possibly the best technology forecasting system in the world.  Collectively, it’s a convincing demonstration that a Technology Revolution is advancing rapidly. To see more, go to www.TechCast.org

Economists have long understood market failures, but the failures were always rather esoteric, like externalities, price fixing, lack of information, and other things that rarely caught much attention.Within the past few years, however, we have seen market failures so massive that they can not be ignored.

Unguided markets focused on short-term profit were largely responsible for the financial meltdown of 2008 and the near-collapse of the U.S. auto industry. Politicians were complicit by allowing the corrupting money of corporate lobbyists to grease palms and avert regulations. And the security rating companies, Moody’s and Standard & Poor, failed to note the risks in subprime mortgages because they were actually working for the banks that issued the securities. There’s plenty of blame to go around because everybody benefits from a bubble – that what makes it a bubble.

As another example, American presidents have tried to introduce a national heath care system since the time of Teddy Roosevelt, but they were always blocked by the conviction that free enteprise medicine was best. After almost a century of this, it is now clear that American health care costs twice as much as other nations, it produces poorer results, and has left 50 million uninsured. ObamaCare may not be perfect – or even great – but at least it is the beginning of a coherent system of some sort.

A final example can be seen in the failure of the trickle-down theory of wealth. The American middle class gained little during the Reagan-Bush Boom, while the wealthy profited handsomely. The top 10% of Americans kept almost all of the economic gains of the past 30 years, and the top 1% gained about half of all growth. The gap between the rich and poor in the United States is as great as it was during the Roaring Twenties, which produced the Great Depression.

This more pure form of Capitalism was justified on the grounds of superior growth and innovation, but overall returns declined somewhat during the Reagan-Bush era, investment in R&D was low, and the US lags other modern nations in energy, climate change, robotics, wireless, broadband, autos, health care, education, and many other crucial fields.

There are other examples, but these stand out as crucial signals that the American economic system is not working and needs to be redesigned for a more difficult era. World leaders from the Pope to Bill Gates are critical of these moral failings of an economic system based on narrow self-interest that threatens the stability of the world economy. Just as the collapse of Communism resulted from an over-controlled planned economy, this “collapse of Capitalism” can be viewed as the result of an under-controlled market economy. Nobel economist George Stiglitz wrote “Markets are not efficient and self-correcting….the financial collapse of 2008 may be to market fundamentalism what the Berlin Wall was to Communism.” And financier-philosopher George Soros said it marks “the end of free market capitalism.”

Markets are essential, of course, and this hard reality poses a huge challenge. How can we invent some new form of enterprise that provides a more equitable and less risky basis for economic vitality in a world that has changed so fundamentally ? Borrowing a phrase the English have used on such occasions, one might proclaim “Capitalism is dead. Long live Free Enterprise.”

I was speaking with a friend who’s an executive in large US corporation, and our conversation made the cause of the Great Recession more clear.

Business people are holding almost $2 trillion in cash that should be used to create new products, jobs, and sustainable economic growth. My friend said they dislike the uncertainty and change caused by Obama’s restructuring of health care and financial markets. They are angry at seeing business criticized, and they are afraid  “the U.S. is becoming like Europe.” The general impression is that they want to return to business as usual.

This seems unlikely because Obama represents a wave of change that requires a different form of business, especially for large corporations. It was primary the single-minded focus on money and self-interest that almost brought down Wall Street and the rest of the world. In health care, this country allowed free enterprise medicine to create such a mess that our system is twice as expensive as other nations — and less effective — while leaving the poor uninsured. Free enterprise has done little to address the climate change, energy, and environment crisis, and the U.S. is losing the global race to green technologies.

These failures means there is no turning back. The Reagan Revolution was important in encouraging the creative free enterprise that drove the boom of 1990-2000. But that era is passing as we increasingly see the limits of free markets and a obsolete form of business based on profit alone.

Other nations are facing the same challenges to manage their markets effectively – a stunning example being the huge success of “state capitalism” in China.  The world badly needs to transform business into a more powerful system that serves society as well as making money. It’s hard to know what the U.S. will do because we are so Mercurial. Other nations may take the lead.

There always exists the possibility that Americans could rise to this challenge by drawing on their ideals of democracy, human rights, community, problem-solving, etc. to create a “democratic corporation/collaborative enterprise/corporate community” and other concepts being explored. [1] We could give the world an update on the principles of democracy we invented more than 200 years ago.

Without transformational change of this type, business people are likely to remain stuck in an outmoded institution that continues to struggle with business-society conflicts that sap the strength of the nation.

I was invited back to Singapore to keynote the International Risk Assessment and Horizon Scanning Symposium with hundreds of the world’s best futurists, planners, forecasters, government policy-makers, entrepreneurs, business executives, and other interesting people. Singapore is always a luxury to visit, of course, but the focus was on where does the world go from here? There was a palpable sense that everything has been changed with the 2008 near-collapse of Wall Street.

Few had good answers, although my TechCast data made a convincing case that the Technology Revolution is driving a boom in green technologies, IT, e-commerce, and other emerging fields that are likely to form an economic revival about 1015. I also outlined a global boom based on high-tech and sustainability about 2020.  See www.TechCast.org for more.

I then spoke at Tamkang University and the National Chengchi University in Taiwan. These were lively visits, and faculty and students not only accepted the impacts of the Technology Revolution but are even excited by the prospect. Throughout SE Asia, one gets the impression that these cultures are better equipped for the uncertainty and complexity of the high-tech landscape we are entering. These societies have their problems, of course, but they do not have endless political stalemates over liberals vs. conservatives, big-government vs. free markets, environmental safety, energy policy, gun control, abortion, immigration, and the hundreds of contentious issues Americans fight over. These societies seem to work.

Seoul was the highlight of this trip. My lovely wife was with me, and we had a marvelous time enjoying the bright lights of modern Seoul, great Korean food, and a strong, vibrant culture. I found myself explaining my experience by noting that Koreans seem to be the “Germans” of Asia – technically superior, hard working, ambitious, etc. But maybe it’s not such a good analogy to make.

I greatly enjoyed speaking to large groups of 100-300 CEOs, politicians, academics, consultants, media people, and other influential Korean professionals. These are very competent people, steering their society through difficult times in a very adroit and collaborative spirit. I especially like the small courtesies and rituals that govern Asian culture – bowing slightly when meeting, placing palms together in a prayerful sign of peace, removing shoes indoors, and always supping tea. I am fortunate to know a few words of Korean, and it is a delight to share their culture briefly when saying “hello” and “thank you” in my pretty good accent of these admittedly simple phrases.

The highlight of this trip came unexpectedly when I was asked to speak with a large group of high school students in Seoul. I gave them a peppy version of my talk, pointing out how the Technology Revolution will change the world, but also noting that this growth process presents us with a massive Global MegaCrisis. They were excited, but the shock came after my closing comments.

I reminded them they this meant they will have adventurous lives that are likely to include more than 100 years spanning several careers in a high-tech world  — but that they would also have to solve the MegaCrisis !!! They erupted with pure joy, and even glee. The Global MegaCrisis didn’t faze them. It was challenging.

Then all these lovely, bright children swarmed me for photos, autographs, and endless questions. I have had wonderful experiences when connecting to audiences, but this was a new high. It was like being a rock star.  More importantly, it gave me a burst of hope in the prospects for this generation.

The 2010 Massachusetts election for U.S. Senate marks the resurgence of Republican power to counter the Democratic revolution that elected Barak Obama. Both parties should feel proud that they have carried their ideals to the point where the nation is now effectively stalled in political gridlock.

Yes, the Republicans have been brutal in their attempt to claw back to power, and they were clear about it at the onset. Rush Limbaugh, Bill Kristol, and many others urged people to do all in they can to cause our elected government to fail, and they may have succeeded. Obama’s approval ratings have fallen, Republicans have won back crucial posts like the Governorship of Virginia, most Americans now oppose the health care bill, and 70% or so think the nation in “on the wrong track.”  To accomplish all this in less than one year after a resounding loss is truly amazing. How did it happen?

The fault lies not in the stars, dear Horatio, but in ourselves. Democrats must have been dazed from their great victory because they reverted to old habits and branded themselves once again with the curse of “big government.” They couldn’t resist getting their share of pork into the stimulus bill, failed to get Republicans engaged in solving the health care mess, and generally reminded people of old fears about taxes, debt, and bad government. Perhaps we were expecting too much when Obama was elected, but this is a reversion back to the liberalism that Americans condemned 30 years ago.

The U. S. stands at a time when both of its political ideologies have been tested and found seriously wanting.  With its reversion to the left, Democrats demonstrate that they have not learned how to govern from the center. And Republicans are not likely to find a solution to the massive challenges facing the U.S. in their fetish for free markets.

It is amazing how conservatives are unable to allow the massive failings of their ideology to penetrate. It was precisely the limits of overly free markets focused on profit-making that caused the financial meltdown, the collapse of our auto industry, the horrible mess in health care, two recent booms and busts, massive debt, and the yawning gap between the wealthy and the middle class. The beliefs of Sarah Palin and other Republican leaders today are so detached from reality that they sound like the Marxist ideologues conservatives condemn.

It’s hard to see a way out of this impasse that grips the nation. In theory, a lovely solution is possible in which corporations assume responsibility for their vast social impacts by collaborating with their employees, clients, and the public in a productive way. This “Collaborative Enterprise” concept could transform the economy into a free market composed of self-regulating “corporate communities” that serve the broader public welfare as well as investors, thereby creating an historic breakthrough. (See “Business Collaboration Could Transform the Economy” under my Articles page). This is a tested concept that thrives in a marginal sector of business, but moving it into the mainstream would require great leadership.

I continue to think that President Obama has the potential for this type of transformative leadership, and I suspect that moderate Republicans could be receptive. Possibly new voices could be heard at this difficult time to move the national conversation into more creative directions. They are certainly needed.

I’d like to give you a report on my trip to Singapore and what it means about my work as President of TechCast. I keynoted a conference for the International Congress on Industrial Design, the major association for architects and product designers.

Although they were keen on planning for the future, they were fascinated about our work forecasting breakthroughs in all fields.  They loved our bubble charts summarizing the results, the crisp forecasts on Alternative Energy, IT, Robotics, AI, and the scenarios. Below is the longitudinal summary of our forecasts that I use for macro-forecasting:

The big social ideas – the global megacrisis, the emerging world brain, the crisis/transition to maturity, consciousness as the next great frontier, and technologies of consciousness — blew them away.  Here’s the summary of our forecasts for the critical period of 2020 –

I do a lot of this, and it always confirms the value of our work at TechCast. Defining these technology breakthroughs in an incisive way requires great skill and lots of good scanning work. And our 100 experts have to make carefully thought-out estimates on these technologies and pay attention to tons of detail.  But the results are unique and powerful.

Bill was interviewed on WAMU’s The Kojo Nnamdi Show.  They discussed TechCast’s forecasts on the Economic Crisis, indicating that the Green Revolution, global E-Commerce, and other emerging business sectors are likely to lead the world out of recession in 2-3 years and to create a new economic boom about 2015.

For an audio of the show, see “Economic Realities & the Future of Technology” at http://wamu.org/programs/kn/09/03/17.php#25115