A version of this article previously appeared in Fortune.
If you haven’t been paying attention Apple has started shipping its Apple Vision Pro, its take on a headset that combines Virtual Reality (VR) and Augmented Reality (AR). The product is an amazing technical tour de force.
But the product/market fit of this first iteration is a swing and a miss.
I’ve watched other world class consumer product companies make the same mistakes:
- Come up with amazing hardware that creates entirely new capabilities
- Forecast demand based on volumes of their previous consumer products
- Confuse consumers by defining a new category without a frame of reference
- Discover the hardware doesn’t match their existing consumer customer base needs
- Work hard (read spend a lot of money) on trying to “push” sales to their existing customers
- Revenue is woefully short of forecast. Marketing and capital expenses (new factory, high R&D expense) were predicated on consumer-scale sales. The new product is burning a ton of cash
- Ignore/not understand adjacent niche markets that would have “pulled” the product out of their hands, if they had developed niche-specific demos and outreach
- Eventually pivot to the niche markets that are excited about the product
- The niche markets make great beachhead markets, but are too small to match the inflated forecasts and the built-in burn rates of consumer scale sales
- Either…
- After multiple market pivots and changes in leadership, abandon the product
- Pivot and perserve
Déjà vu All Over Again
I lived the equivalent of this when Kodak (remember them?) launched a product in 1990 called PhotoCD. Kodak wanted consumers to put their film photos on their home CDROM drive and then display them on their televisions. You dropped off your film at a film processor and instead of just getting physical prints of your pictures they would scan the film, and burn them onto a Compact Disc. You’d go home with a Compact Disc with your pictures on it.
I got a preview of PhotoCD when I was the head of marketing at SuperMac, a supplier of hardware and software for graphics professionals. The moment I saw the product I knew every one of my professional graphics customers (ad agencies, freelancers, photo studios, etc.) would want to use it. In fact, they would have paid a premium for it. I was floored when Kodak told me they were launching PhotoCD as a consumer product.
The problem was that in 1990 consumers did not have CDROM drives to display the pictures. At the time even most personal computers lacked them. But every graphics professional did own a CDROM drive but most didn’t own a high-resolution film scanner – and PhotoCD would have been perfect for them – and the perfect launch customer. To this day I remember being lectured by a senior Kodak executive, “Steve you don’t get it, we’re experts at selling to consumers. We’ll sell them the CDROM drives as well.” (The Kodak CDROM drives were the size of professional audio equipment and depending on the model, costing $600-$1000 in today’s dollars.)
(And when consumer CDROM drives became available they couldn’t play the PhotoCD disks as they were encoded in a proprietary Kodak standard to lock you into their drives!) The result was that PhotoCD failed miserably as a consumer product. Subsequent pivots to professional graphics users (a segment another part of Kodak knew well) came too late, as low cost scanners and non-proprietary standards (JPEG) prevailed.
So what’s the lesson for Apple?
- Apple is trying to push Vision Pro into their existing consumer customers
- All the demos and existing applications are oriented to their consumer customers
- Apple did not create demos for how the Vision Pro could be used in new markets where users would jump on buying a Vision Pro. For example,
- There is proof of demand (here, here and here) of an adjacent mass market, helping millions of home owners repair things around the home
- There is proof of demand in industrial applications outside of the consumer space (here.) Every company that has complex machinery have been experimenting with AR for years. Imagine car repair with a Vision Pro AR tutorial. Or jet engine maintenance. Or the entire gamut of complex machinery.
All of these would have been great Vision Pro demos for training and repair. It’s hard to understand why Apple ignored these easy wins.
Getting it Right
Apple’s entry into new markets by creating new product categories – iPods, iPads, iPhones – is unprecedented in the history of the modern corporation – $300 billion (75% of their revenue) is from non-computer hardware. In addition, they’ve created an entirely new $85+ billion subscription business model; the App Store, iTunes, Apple Care, Apple Pay, Apple Cash, Apple Arcade, Apple Music, Apple TV.
It’s hard to remember, but the first version of these products launched with serious limitations that follow-on versions remedied. The first version of the iPhone only ran Apple software, it was a closed system without an app store, had no copy and paste, couldn’t record video, etc. The original Apple Watch was positioned as a fashion accessory. It wasn’t until later that Apple realized that the killer apps for the Watch were fitness and health. Fixing the technical flaws while finding the right markets for all these products took time and commitment.
The same will likely be true for the Vision Pro. Apple marketers will realize that adjacent spaces they are less familiar with will provide the first “got to have it” beachhead markets. Newer versions will ride the technology wave of lighter, and cheaper versions.
Apple’s CEO Tim Cook has made a personal bet on the Vision Pro. More than any other company they have sufficient resources (cash on hand and engineering talent) to pivot their way to product/market fit in the real markets that need it.
Here’s hoping they find it.
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Filed under: Customer Development |
Complete agreement with product/fit. But another thought comes to mind that the collateral innovation that is derived from products that aren’t home runs – and we are so used to Apple getting it right every time (Newton?) If you set the marketing aside, it weren’t for the pure R&D of the Newton, the Apple team wouldn’t have left and created the Palm Pilot. The Palm Pilot was an iteration prior to the iPhone – but proved many uses that were not yet imagined.
So I would not want to be the product manager for Vision – but the world might be better off with some of the learnings from failures. We really don’t learn much when we get it right, but we do learn from our mistakes, costly as they may be.
The Kodak story is a great case study to illustrate the challenges that Apple faces. Your insights are, I believe, spot on.
I look forward to watching as this develops.
Thanks, as always, for your incisive blog
So true… It amazes me that such a sophisticated and experienced company like Apple can make such a mistake, i.e. the wrong target market. Did they run experiments to test problem-solution fit with the target market? Did they run experiments to test product-market fit? Of course, the regular rules of Lean Startup and Customer Development probably don’t apply to Apple because they are so unique, have so much cash,… but still it’s wasteful.
Thanks Ed. For me, your last comment is critical. Apple is not like most companies, who tend to give it up at the first sign of failure. The difference is in Apple’s mindset, brand equity and massive cash reserve. They can afford to make an actual market launch a part of the product-market fit process. The only requirement is that they be absolutely convinced that this is the future. If this is the way they are thinking about it, you can then understand why a broad consumer launch is a better market test than a niche market test.
“But the product/market fit of this first iteration is a swing and a miss.”
Vision Pro was launched 11 days ago. Seems presumptuous to declare rollout is not going well.
This seems like Apple’s lowest key rollout of a major project that I can recall. They didn’t even hold a launch event.
I see Apple as realizing that customers, app developers and the market will dictate the sweet spot for this new product category.
I have my Vision Pro demo scheduled for this afternoon. Quite curious to experience it in person.
Provocative assertions, how long have you been using Apple Vision Pro?
I don’t agree with niche industrial use-cases as easy wins for the reason you state: they are experiments which haven’t taken root, even with years of investment and iteration. I’m not suggesting Vision Pro is an obvious and immediate success, and I haven’t even tried it yet myself.
Apple has a huge number of consumer customers, and I expect a meaningful number to realize value from the foundational experiences available at-launch. Experimentation and iteration between Apple, Developers and Customers will create new uses and sources of value. Finally “time and commitment” are also abundant resources within Apple…
The Vision Pro is their Tesla Roadster. High end enthusiast product, very expensive. Offset some r&d costs with sales to early adopters but learn a lot in the direction of what’s likely the next big computing platform (in this case). This explains the minimal hardware innovation at Apple the past couple of years. All the best hardware people probably got on this team. As a first day buyer, I’m happy with my purchase. I feel more productive and focused when I use it. I didn’t anticipate being able to ever justify the expense, but I think I can in terms of work productivity improvements. It’s like one big focus mode.
Separately they seem to be way behind on AI. They may *need* this to work. I think it will. Hardware is so hard.
I wouldn’t worry about Apple and Ai. When Apple launches something, it is because it took it’s time to get it right (except Siri on iPhone). Their market is the consumer (by and large) they cannot afford anything but the best consumer feedback. I assume we will see a launch this year. Hopefully it will improve Siri on iPhone (Grin)
Thanks Steve for pointing to the merit of targeting the non-consumption market as an entry strategy. Further to it could be found here: https://www.the-waves.org/2024/02/04/high-tech-market-how-to-segment-it/
Steve, I’ve loved your work over time, but I feel like this one is off. While the use cases may not appear to be obvious to people without hands on experience (or experience clouded by experience with traditional Windows or Android based “VR” gaming systems), it’s laser sharp for the intended audience. To start, Apple’s platform integration with iCloud and screen sharing with Mac makes this device usable for work from the minute you see your environment through the headset.
Comparing this Apple Vision Pro to PhotoCD is weird. The people that needed PhotoCD were well equipped to use it (I was one). It failed, ultimately, because of digital cameras and the open architecture that followed (.jpg).
In summary, this is a new device from Apple. Each new device has a base level of functionality that matures over time. The folly is in comparing this device to other devices with wholly different use cases (gaming, etc.).
Give it at least a few software updates before developers can truly see it in action as opposed to a two dimensional representation in Xcode. 🙂
Steve I disagree with Mike and feel your article is spot on. This product is not have a laser sharp audience. Uber wealthy or just plain Apple loyalists are walking around with the product lost and mostly to brag. Yes there are some that might have a set use case but if you search the posts in YouTube or instagram, these users don’t have a product with much utility value. These are the same users who bought the Kodak, Google Glasses and more. The difference here is – Apple / Tim Cook have the passion and money to figure this product out.
I wish you went back to the Steve from the old days where your message would be more bold. Something like – calling all entrepreneurs – go take a look at this $4,000 product and enjoy the 14 day return policy. . Entrepreneurs should enjoy the early demo and start to explore ideas.
I think you would think about them differently if you fully ‘moved in’ to a headset (sync email, iCloud, etc), made the background darker, then did your work for the day. It’s a next level work environment, which will only get better. I can nitpick it, but they certainly already know the issues and will smooth them out over time. This is a one way street that’s not worth us resisting. Someone is going to pull this off and change computing- either apple, meta, microsoft, or google (and the top Chinese companies). It’s very hard to imagine a startup competing in this arena without these massive r&d budgets.
I think Steve’s example is more applicable to google glass. Apple at least had the entire ecosystem worked out before they attempted to move people to the new device with additional capabilities. In a sense, it’s just adding an apple screen with unique functionality. These cost less money than apple’s highest end monitors.
Scott –
I think you are either delusional or completely missing reality. List out the market within the top 100, hell 1000 companies on any top company list and let me know which one has a culture where everyone should sit all day with a headset on in a dark room. Hell I emailed 1,000 k-12 schools asking if any of their teachers were needing or felt there was a market fit for this product and no one said yes.
We can all nit pick it like anyone can do to a new product, but there simply is no market fit – yet.
1) Market Need Mismath – The Apple Vision Pro didn’t adequately address a significant market need. Despite advancement in augmented reality, there is not a clear demand for this yet. Yes here are some niche demands that they will pivot to
2) Price – It is priced way too high for any scalable use with right now it simply being a bookshelf gadget.
I can go on and on, but like Steve said, Tim Cook will pivot and v2 or v3 will have a market.
I stand with my first comment – Steve missed the mark with his post and should have written this to his audience –
GO OUT AND TAKE ADVANTAGE OF THE 14 DAY RETURN POLICY AT APPLE WITH THE APPLE VISION PRO. APPLE NEEDS MY FOLLOWING TO FIND A MARKET FIT AND ENTREPRENEURS CAN MAKE A FORTURE. RUN DON’T WALK.
Steve’s followers (market) are entrepreneurs. Innovators like us this blog for inspiration and enjoyment. Yes Steve has taken us on a weird journey since his early days with Ries and Osterwalder when they were the pioneers on blogging about entrepreneurship, but his market is still a bunch of entrepreneurs.
As I understand it, there are government contracts that have been out for these devices for military use (battlefield training simulations) since 2019. It’s one reason Microsoft produced and continues to produce theirs. My guess is that this first release, 1.0 of these will be used to compete in government contracts, field training (Boeing? and other industrial uses), educational uses, non profit uses (already some of my clients are testing their use in field education projects), etc. As far as home users go, early adopters will be developers looking to gaming and I they mentioned at launch that Disney was looking at using them at Disneyland or perhaps a home tour of Disneyland for pay. I think we won’t know for 5 years whether these succeed or not.
As I followed this project through the years (it´s still a Steve project, not a Tim project btw.) I have a slightly different opinion.
I strongly believe, that Apple is well aware, that this is an open beta – as they were with the iPhone, but this time it is not available for a broad market. Not only because the pricing is prohibitive but also because they would never be able to ship consumer typical qtys.
What we get to see is a peek through the keyhole and a hardware platform, that targets mainly Application developers and Enthusiasts.