Apple has begun shipping its Apple Vision Prois a headset that combines virtual reality (VR) and augmented reality (AR).
While this product is a remarkable technical achievement, I believe the product-market fit of this first iteration is a falter and a miss.
I’ve seen other world-class consumer product companies make the same mistakes over and over again:
- Come up with amazing equipment that creates completely new possibilities.
- Forecast demand based on the volumes of their previous consumer products.
- Confuse consumers by defining a new category without a frame of reference.
- It turned out that the equipment did not meet the needs of the existing customer base.
- Work hard and spend a lot of money trying to increase sales to existing customers.
- Revenue falls woefully short of forecast. Marketing and capital expenditures (new plant, high R&D costs) were based on consumer scale sales. A new product burns a ton of money.
- Ignore or misunderstand neighboring niche industrial markets that would rush to buy the product if the company developed niche-specific demos and outreach.
- Ultimately, focus on niche markets that are excited about the product.
- Niche markets provide excellent footholds, but they are too small to match the inflated projections and built-in sales rates at consumer scale.
- After numerous market turns and management changes, abandon the product.
Kodak deja vu
I experienced something similar when Kodak (remember them?) launched a product in 1990 called PhotoCD. Kodak wanted consumers to put their movie photos on their home CD drives and then display them on their televisions. You took the film to the movie distributor, and instead of just getting physical prints of your photos, they scanned the film and burned them onto a CD. You walked home with a CD of your photos.
I was introduced to PhotoCD when I was head of marketing at SuperMac, a provider of hardware and software for graphics professionals. The moment I saw the product, I knew that every one of my professional graphics clients (advertising agencies, freelancers, photography studios, etc.) would want to use it. In fact, they would pay a premium for it. I was shocked when Kodak informed me that they were launching PhotoCD as consumer product.
The problem was that in 1990, consumers didn’t have CDROMs. disks to display images. At that time they were not even available on most personal computers. Meanwhile, every graphics specialist had a CD drive, but most did not have a high-definition film scanner. They would be ideal clients to launch PhotoCD. To this day, I remember a senior Kodak executive giving me a lecture: “Steve, you don’t understand, we are experts at selling to consumers. We will also sell them CDROM drives.”
Except Kodak CDROM drives were the size of professional audio equipment and, depending on the model, cost between $600 and $1,000 in today’s dollars. And when consumer CDROM drives became available, they couldn’t play PhotoCDs because they were encoded in Kodak’s own standard to lock you out of their drives!
Result? PhotoCD failed miserably as a consumer product. The subsequent turn to professional graphics users (a segment they knew well) came too late, as low-cost scanners and non-proprietary standards (JPEG) prevailed.
Let’s do it right
Similarly, Apple is trying to implement Vision Pro on its existing consumer clients. All demos and existing applications are tailored to the consumer market.
Additionally, Apple has not created any demos of how Vision Pro can be used in new markets where users would take the opportunity to buy Vision Pro. For example, the Internet is replete with evidence of demand in the adjacent mass market: helping millions of homeowners fix things around their properties.
There is also proven demand for industrial applications outside of the consumer space. Every company with sophisticated equipment has been experimenting with AR for years. Imagine repairing your car with the Vision Pro AR manual. Or jet engine maintenance. Or the whole range of complex technology. These would all make great Vision Pro demos for training and repair purposes. It’s hard to understand why Apple ignored these easy wins.
Apple’s entry into new markets by creating new product categories – iPod, iPad, iPhone – is unprecedented in the history of modern corporations. $300 billion (75% of their revenue) comes from non-computer hardware. Additionally, they have created an entirely new subscription business model worth over $85 billion with the App Store, iTunes, Apple Care, Apple Pay, Apple Cash, Apple Arcade, Apple Music and Apple TV.
It’s hard to remember, but the first versions of these products were released with serious limitations that were corrected in subsequent versions. The first version of the iPhone ran only Apple software and did not have an app store. It was a closed system. It didn’t have copy and paste functionality and couldn’t record video, among other limitations. The original Apple Watch was positioned as a fashion accessory. It wasn’t until later that Apple realized that the killer watch apps were fitness and health. Eliminating technical shortcomings and finding suitable markets took time and effort.
The same will likely be true for the Vision Pro. Apple’s model is to provide the hardware and then let the developer community come up with these types of applications. However, all applications in this first release are in their current markets (entertainment, music, etc.). None of these applications are product killers.
Apple marketers will realize that adjacent spaces with which they are less familiar will be the first beachheads of “must haves.” The new versions will follow the technological wave of lighter and cheaper versions.
Apple CEO Tim Cook has made a personal bet on Vision Pro. More than any other company, they have the resources (cash and engineering talent) to pivot and ensure Vision Pro’s product market fits the real markets that need it. Let’s hope they find him.
Steve Blank is an adjunct professor at Stanford and co-founder of the Gordian Knot Center for National Security Innovation.
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The views expressed in Fortune.com comments are solely the views of the authors and do not necessarily reflect the opinions and beliefs Luck.