5 - 5 2 3 -0 7 0
DECEMBER 21, 2022
T E AC HI N G N OT E
iPod: The Perfect Thing?
Synopsis
This case sets out the evolution of the iPod product line from its introduction in 2001 to its essential
phase out in 2014 as the iPhone takes over. The case and its positioning was inspired by Steven Levy’s
book, The Perfect Thing: How The iPod Shuffles Commerce, Culture, and Coolness. Levy wrote his book in
2006. At that time, Apple had sold about 67 million iPod units. Over the next nine years, it would sell
an additional 350 million, so there was still a lot of the iPod story to come.
The case is not decision focused, i.e., there is no “What should Steve Jobs do?” perspective. Rather
it poses the evaluative question of the case title, was “iPod: The Perfect Thing?” The answer is that even
if one judges the product in and of itself not worthy of such an accolade, the way that Apple managed
the evolution of the entire ecosystem, e.g., device plus iTunes Music Store, was pretty close to perfect.
So, the learning for the students here derives from an examination of what Apple did: to (i) sell over
350 million iPod units, (ii) gain clear leadership in MP3 players despite being a late entrant, and (iii) set
the foundation for the iPhone – introduced as a “three-in-one” device adding a phone and internet
connectivity to the iPod. It has been used as an introductory case in the HBS Elective Course
“Innovation and Renovation” to set out the importance not only of the innovation but how its continual
improvement is managed over time, i.e., the “renovation” phase. Despite covering the period 2001-
2014 largely, student interest is sustained by the gradual uncovering of a remarkable marketing
approach with significant lessons for today’s environment.
Discussion Questions
1. Does the iPod deserve the designation “The Perfect Thing?” Why or why not?
2. What were the key factors in Apple’s ability to dominate the portable music player market,
despite being a late entrant?
3. What role was played by the product line expansion with the iPod mini, iPod nano and iPod
shuffle models?
4. What general lessons about new products and their successful management/evolution over
time can be drawn from the iPod story?
, 523-070 Teaching Note—iPod: The Perfect Thing?
Case Analysis
TN Exhibit 1 gives the key event chronology for the iPod. The first paragraph of the case notes that
by 2014, iPod sales topped 350 million units, holding 70% share of the MP3 market for much of that
time. Case Figure 1 shows unit sales from 2002-2014. The total units sold over the 13 years in Figure 1
is 397 million units. The appropriate case analysis addresses the question – how was Apple able to do
this?
First, the iPod introduced in October 2001 was a true innovation, an innovation with a capital I,
despite being placed in an “already crowded market for MP3 players” (case, p.1). While the market
was crowded with MP3 players, most were “poorly designed and clumsy.” The most successful of
these incumbents was the Rio. The first iPod at $399 was double Rio’s price but vastly superior in key
ways:
• Storage Capacity: iPod offered 5GB vs. Rio’s 32M or 5000/32 = 156X as much. Thus, while Rio
stored 30 minutes of music (case, p.2) or about, 7 songs, iPod stored 7 X 156 = 1,092, thus the
iPod tagline “1,000 songs in your pocket.”
• Ease of use: Scroll wheel for quick access among the 1,000 songs.
• Weight: Only 6.5 ounces
• Download Time: 30x faster (case, p.6)
How was Apple able to achieve this? Note that market research was not key here. Rather, Apple
pursued improvement along easily recognizable dimensions of merit. Everyone would like lighter
weight, more capacity, faster download time, and ease of use. Why was Apple able to deliver this when
others would not? Some answers students should derive are:
1. Apple developed both the software (iTunes) and hardware (iPod) jointly – putting lots of the
functionality back in the computer with iTunes and keeping iPod simple.
2. Apple had the FireWire technology in house, enabling fast downloads.
3. Rubinstein, Apple’s SVP of hardware, “always kept his eyes open” and found the key
component, the mini 5GB disk drive at Toshiba (case, p.5) and also Sony batteries.
4. Rubenstein recruited needed MP3 player talent (Tony Fadell – case, p.5)
5. Apple recruited talent necessary for iTunes development (Kincaid and Robbin, the developers
of SoundJam) and applied “the iron fist of Apple’s simplicity cops” (case, p.4) to their efforts.
So, Act 1 was putting all the pieces together to bring a truly superior product to market. Act 2 was
developing the whole music acquisition, management, and playing ecosystem to enhance the value of
the iPod. The music ecosystem can be mapped out as follows in TN Figure 1.
2
DECEMBER 21, 2022
T E AC HI N G N OT E
iPod: The Perfect Thing?
Synopsis
This case sets out the evolution of the iPod product line from its introduction in 2001 to its essential
phase out in 2014 as the iPhone takes over. The case and its positioning was inspired by Steven Levy’s
book, The Perfect Thing: How The iPod Shuffles Commerce, Culture, and Coolness. Levy wrote his book in
2006. At that time, Apple had sold about 67 million iPod units. Over the next nine years, it would sell
an additional 350 million, so there was still a lot of the iPod story to come.
The case is not decision focused, i.e., there is no “What should Steve Jobs do?” perspective. Rather
it poses the evaluative question of the case title, was “iPod: The Perfect Thing?” The answer is that even
if one judges the product in and of itself not worthy of such an accolade, the way that Apple managed
the evolution of the entire ecosystem, e.g., device plus iTunes Music Store, was pretty close to perfect.
So, the learning for the students here derives from an examination of what Apple did: to (i) sell over
350 million iPod units, (ii) gain clear leadership in MP3 players despite being a late entrant, and (iii) set
the foundation for the iPhone – introduced as a “three-in-one” device adding a phone and internet
connectivity to the iPod. It has been used as an introductory case in the HBS Elective Course
“Innovation and Renovation” to set out the importance not only of the innovation but how its continual
improvement is managed over time, i.e., the “renovation” phase. Despite covering the period 2001-
2014 largely, student interest is sustained by the gradual uncovering of a remarkable marketing
approach with significant lessons for today’s environment.
Discussion Questions
1. Does the iPod deserve the designation “The Perfect Thing?” Why or why not?
2. What were the key factors in Apple’s ability to dominate the portable music player market,
despite being a late entrant?
3. What role was played by the product line expansion with the iPod mini, iPod nano and iPod
shuffle models?
4. What general lessons about new products and their successful management/evolution over
time can be drawn from the iPod story?
, 523-070 Teaching Note—iPod: The Perfect Thing?
Case Analysis
TN Exhibit 1 gives the key event chronology for the iPod. The first paragraph of the case notes that
by 2014, iPod sales topped 350 million units, holding 70% share of the MP3 market for much of that
time. Case Figure 1 shows unit sales from 2002-2014. The total units sold over the 13 years in Figure 1
is 397 million units. The appropriate case analysis addresses the question – how was Apple able to do
this?
First, the iPod introduced in October 2001 was a true innovation, an innovation with a capital I,
despite being placed in an “already crowded market for MP3 players” (case, p.1). While the market
was crowded with MP3 players, most were “poorly designed and clumsy.” The most successful of
these incumbents was the Rio. The first iPod at $399 was double Rio’s price but vastly superior in key
ways:
• Storage Capacity: iPod offered 5GB vs. Rio’s 32M or 5000/32 = 156X as much. Thus, while Rio
stored 30 minutes of music (case, p.2) or about, 7 songs, iPod stored 7 X 156 = 1,092, thus the
iPod tagline “1,000 songs in your pocket.”
• Ease of use: Scroll wheel for quick access among the 1,000 songs.
• Weight: Only 6.5 ounces
• Download Time: 30x faster (case, p.6)
How was Apple able to achieve this? Note that market research was not key here. Rather, Apple
pursued improvement along easily recognizable dimensions of merit. Everyone would like lighter
weight, more capacity, faster download time, and ease of use. Why was Apple able to deliver this when
others would not? Some answers students should derive are:
1. Apple developed both the software (iTunes) and hardware (iPod) jointly – putting lots of the
functionality back in the computer with iTunes and keeping iPod simple.
2. Apple had the FireWire technology in house, enabling fast downloads.
3. Rubinstein, Apple’s SVP of hardware, “always kept his eyes open” and found the key
component, the mini 5GB disk drive at Toshiba (case, p.5) and also Sony batteries.
4. Rubenstein recruited needed MP3 player talent (Tony Fadell – case, p.5)
5. Apple recruited talent necessary for iTunes development (Kincaid and Robbin, the developers
of SoundJam) and applied “the iron fist of Apple’s simplicity cops” (case, p.4) to their efforts.
So, Act 1 was putting all the pieces together to bring a truly superior product to market. Act 2 was
developing the whole music acquisition, management, and playing ecosystem to enhance the value of
the iPod. The music ecosystem can be mapped out as follows in TN Figure 1.
2
