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A Story of Achievement and Resilience

30 years ago Steve Jobs dropped out of Reed College, went to his garage with a friend and invented the PC. Ten years later he was fired from the company he started. Undeterred, he started NeXt computing and then Pixar Animation.  Upon returning to Apple, he led the creation of the Mac, the iPod, the iPhone and, now, the iPad.  Along the way he was diagnosed with pancreatic cancer and underwent a liver transplant. 

Market Cap of $222 billion  

Last week, Apple's market cap of $222 billion exceeded that of Microsoft and was the second largest US market cap company behind Exxon Mobil. Jobs is known for his controlling, perfectionist approach, throwing himself into all aspects of the business. I've read that Jobs' aggressive and demanding personality might not win him awards as the nicest guy  around. Still, he is recognized and respected as one of the greatest CEOs of the past two decades.

The iPad

Last month, I purchased an iPad. My experience is that this is a revolutionary device.  The cocky consultant in me couldn't resist the opportunity to give Jobs some advice.  Here is the letter I wrote to him on May 5:

                Steve Jobs                                                                        May 5, 2010

CEO

Apple Computer

1 Infinite Loop
Cupertino, CA 95014

Dear Steve,

Congratulations on the launch of the iPad! 

Every now and then a technology comes along that changes the way we live.  I believe the iPad has that potential.  As revolutionary as the iPad may be, its key to success is your marketing and business model.

Let me take you back to October 23, 2001 to illustrate. What if I had told you back then that everyone would own an iPod and iTunes would be the dominant distribution vehicle for other people's digital music?  You would declare victory and want to know how much revenue you could garner from selling music.

What if everyone owned an iPad and the iStore was the dominant distribution vehicle for other people's digital content (music, videos, text books, eBooks, newspapers and magazines?  You would declare victory and want to know how much revenue you could garner from selling digital content.  Here are the critical questions around the iPad:

·        Are you a hardware manufacturer or a digital retailer or both?

·        What business model fits both?

·        How can you create and dominate that industry?

I believe you should view the digital retailing business similar to the cell phone industry - hardware discounts in return for multiyear "service" contracts.  Instead of minutes being the currency of service contracts, create the iBuck currency to purchase digital content.  For example, a consumer might sign a two-year contract through the iStore for $50 per month.  In return, the consumer may purchase an iPad for $99 ($499+ retail) and receive 50 iBucks per month to buy or subscribe to digital content.  The iBucks could be used to purchase eBooks or subscriptions to movies, eNewspapers or eMagazines.  The objective is to penetrate and dominate the market with iPads fast and use that penetration to create an annuity revenue stream.

Does this sound interesting or far fetched?  Imagine if Amazon or Barnes & Noble did this with their hardware. What do you think?

Yours truly,

Glenn Mangurian

As of today, I haven't heard from Jobs or anyone at Apple.  What advice might you give him?