Apple's modern success story began with four investments made 10 years ago

First Applle Store Opening

Apple executive briefing at first Apple retail store, May 2001.

Ten years ago -- that's right, 2001 -- Apple made four investments that bore fruit in a 21st-century success story. Everything that came afterwards, even iPad and iPhone, traces back to what I call the "2001 Four."

Apple made these investments during difficult times. The dot-com bust rippled disastrously through the tech industry, the United States was gripped in recession and Apple's stock value had collapsed. Shares opened at $343.72 today about four bucks off the 52-week high. Apple's market capitalization was $317.21 billion at yesterday's close. Going back in time, Apple shares traded for less than $10 a decade ago. As I explained last month, Apple's fortunes have dramatically changed.

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The four investments all turn 10 this year, and there surely will be anniversary stories from Mac enthusiast blogs and news sites, perhaps even from more mainstream media. But I expect few, if any, will capture the significance of the 2001 four:

1. In January, Apple unveiled the iTunes music player.

2. In March, Apple launched troubled Mac OS X 10.0 and relaunched as 10.1 in September.

3. In May, the company opened Apple Store, in two locations -- California and Virginia.

4. In October, the first iPod debuted.

Apple's Gang of Four

At the time, iTunes, Mac OS X, Apple Store and iPod, seemed like innocuous launches, but they would later be the four pillars raising Apple's brand from obscurity to mass popularity. There was no active blogging community in 2001, just a grabbag of early adopters; the tech news media covered each product's introduction, and there was plenty of skepticism. No one, except some visionaries inside of Apple, saw the potential.

In January 2001, Apple debuted iTunes for Macintosh, a catchup product released late during the early file-trading era, amid mainstream media skepticism. The world used Windows and Microsoft would greatly update its media player for Windows XP, which shipped in October 2001. There was RealPlayer to compete with, too.

But the software would eventually morph into a music store, and later one for videos and applications. More importantly, iTunes would become Apple's synchronization engine for all kinds of content.

In March 2001, Mac enthusiasts were hugely excited about Mac OS X, but it caused Apple to go two, or even three, steps back before taking any forward. Major developers would take years supporting the new operating system. Who could imagine that from Mac OS X, Apple would later create iOS, which today is its most important operating system; iOS products accounted for about 65 percent of Apple revenue during fiscal 2011 first quarter. The developer ecosystem that would later support Apple's App Store cut its teeth on Mac OS X.

In May 2001, the first Apple Store opened in McLean, Va. I was there for the official news media unveiling and launch days later. Timing struck most analysts I interviewed as strange: Gateway was getting out of retail just as Apple wanted in. But the stores increased exposure to Apple's brand and provided a place to foster Mac community and lifestyle, around digital activities like listening to music and watching, making or sharing videos.

Apple CEO Steve Jobs started consistently talking about the Mac as digital lifestyle hub, from early 2000. But the company also later extended the Apple lifestyle to Windows PCs, through AirPort Extreme, Apple TV, iPad, iPhone, iPod, iTunes, iTunes Music Store, MobileMe and Time Capsule. Most of these products are sold through Apple Store.

More broadly, Apple honed its manufacturing and distribution channels to support its retail operations. As I explained last month, these channels proved essential to the success of iPod (in the mid Noughties), iPhone (from 2008) and iPad (2010).

In October 2001, Apple released iPod, a 5GB music player that excited enthusiasts but not the mainstream market. That success wouldn't really come until the release of iPod mini (2004) and successor iPod nano (2005). Meanwhile, Apple opened more stores and improved distribution logistics and marketing that proved crucial to driving interest in iPhone and iPad. Many of the supplier logistics and contracts crucial to supporting iPhone and iPad evolved from Apple's work on iPod.

If Not This, No That

All other major Apple products (but one) that followed derive from -- perhaps crucially depend on -- the 2001 Four:

  • If not Mac OS X, no iMac, MacBook/Mac Pro
  • If not iTunes and Mac OS X, no iLife
  • If not iTunes and iPod, no iTunes Music Store
  • If not iTunes and Mac OS X, no Apple TV
  • If not Mac OS X, no iOS
  • If not iPod, iTunes and Mac OS X, no iPhone
  • If not iPod, iTunes and Mac OS X, no App Store
  • If not iPod, iTunes and Mac OS X, no iPad
  • If not Apple Store, none of the above

Some people will call my approach simplistic, but think about it. A brief history of product launches based on the 2001 Four:

  • In 2002, Apple launches iLife and begins Switchers marketing campaign
  • In 2003, iTunes Music Store opens, first for Mac and later Windows
  • In 2004, iLife `04 launches with great marketing
  • In 2005, iPod nano makes stunning debut
  • In 2006, first Intel-based Macs ship; "Get a Mac" ads air
  • In 2007, iPhone launches
  • In 2008, App Store opens
  • In 2009, Apple products defy economic recession's gravity
  • In 2010, iPad launches, with nearly 15 million units shipped in first nine months
  • In 2011, the 10 billionth application is downloaded from the iOS App Store; Mac App Store launches

There is a fifth product that warrants calling out, and it came later: Safari. While Safari probably wouldn't exist without Mac OS X, the browser's lineage is really separate. Safari debuted on Mac OS X in 2003 and on Windows in 2008. The browser is an essential component of many Apple products -- modern iTunes, iPad, iPhone and iPod touch, among them. Safari's importance to Apple and even its competitors can't be understated. Google's Chrome uses the WebKit rendering engine Apple released as open source.

Few success stories are overnight sensations. Apple made crucial investments during hard times that transformed the company in 2010. Can it get any better than this?

[Photo Credit: Joe Wilcox]

12 Responses to Apple's modern success story began with four investments made 10 years ago

  1. Gene Vincent says:

    The original iMac is what got Apple going again. They were about to bite the dust. iMac got them on the map again before OSX. I have one in a closet, saving it for the grandkids and the big bucks they'll get for this antique one day.

  2. FalKirk says:

    Great Job, Joe. A very nicely written story.

    I certainly wouldn't call your approach simplistic. Understanding the pillars that support the Apple empire is a great way to see how they got from there to here and where they might go from here. Well done.

  3. os11 says:

    Just a slight correction, while the colored iMacs were what put Apple back to full health, (not the iPod) Apple was never close to going under like Steve and others would want you to believe. Apple was in danger of becoming a "much smaller company", from $11 Billion to $4 or $5 Billion, but at the time Apple had strong sales in education and publishing. Apple throughout this time remained quite wealthy, so bankruptcy was never on the horizon... but Steve wanted everyone to believe it was almost dead so he could have the joy in returning it to full health. This is no slam against Steve, it's the fact Apple was poorly managed at the time but could have lived for decades as a smaller company. (see Polaroid, Bell & Howell, RCA, etc)

    • Wodster says:

      I think you are right about this, Jobs dramatizing to make it sound even more like the company was in trouble without him.

      Another point that adds to this and seems to have been lost in the sauce, was that Jobs was paid for the acquisition of Next Inc. in Apple stock-

      which he then SOLD--

      causing a crisis of confidence, and AAPL plummeting down even more to hit the bottom that articles like this one ironically use as evidence of how much he saved the company- gotta love it, master at work

  4. nstrauss says:

    Interesting article, but a bit of a disappointment. I was hoping for an analysis of Apple's investments, not its product releases. The investment for Mac OS X came long before 2001, with the acquisition of NeXT in 1996 and the pouring of resources into the OS from 1996 to 2001. The investment in iTunes came in 2000 with the acquisition of SoundJamMP. I believe that the iPod and the Apple Store were truly 2001 projects.

    I personally think that the true linchpin of these four products was the iPod. Steve Jobs took a big chance on Tony Fadell in 2001, and Apple proved that it could dominate a young market with a strong user experience in what was essentially an appliance. It was only with that accomplishment that Apple had the confidence to move full-force into the gadget business.... which, in turn, has boosted the overall Apple brand and its computer sales.

    • montyaus says:

      @joewilcox - Joe- seems like you've just re-hashed this old post from 2009 - http://www.betanews.com/joewilcox/article/2001-An-Apple-Odyssey/1253576890

      Please give us something with some depth!

      The rest of the BN team are hitting the marks in 2011, but you are couching up the same old stuff over & over & this time it's re-working your old material.

      • PC_Tool says:

        *laughing*

        Good catch! At first glance, it appears half the current article was copied from that one nearly word-for-word. The "if-not, then no" is a near verbatim copy.

        ...that's just sad.

      • joewilcox says:

        @montyaus, @PC_Tool That's not sad but intentional. The earlier post is evergreen but 18 months old and didn't get the reads I felt it deserved in 2009. So I decided to update, for the 10-year anniversary. If you look at major news organizations like Bloomberg or CNN, they reuse background stuff regularly for breaking stories. So large chunks of what you read in a breaking story on Egyptian protests is the same as the story you read days earlier. I refreshed good content for the anniversary year of these products, which is from a news perspective is timely. This time, the story got the reads it deserved.

      • PC_Tool says:

        Heh....

        "Tastes better the second time 'round." isn't exactly something I'd really want anything to be described as, but hey...to each their own. ;)

  5. caveqat says:

    interesting, but I believe the savior and the new beginning of apple to todays icon, began first in the late 70's when microsoft first invested in them, save them from initial bankrutcy. Again in the 80's they again invested in them to keep the doors open. Same again in the 90's. Microsoft did that to supply a competion to their codes. No rivalry, your a monopoly. These other ideas, are rejects from other era's. Remember the walkman, Rember cable, remember vcr, remember microsofts first laptops, the one screen, hospital version.I'm no fanboy of apple, but give credit where it's due. Thanks to microsoft, nintendo, sony, and many others apple is now a king.

  6. robotchampion says:

    You could also argue that Apple's biggest breakthrough's have come after Steve Jobs returns from time away, check it out: http://1x57.com/2011/01/24/steve-jobs-health-forced-sabbaticals-and-his-brilliance/

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