Apple's Creeping Product Problem

Soon after Steve Jobs took over Apple (AAPL 0.52%) in 1997, he drew a box on a board with four squares. He wanted Apple to go from a sprawling product line to four products. Computers for work and home with only two versions -- mobile and desktop. He consolidated development  into these four main products:

This simple grid became a symbol of Apple's product line in the early years of its recovery. When the iPod was introduced, it had one form factor and just a few memory sizes. The next generations of iPods included Nano, Shuffle, and Touch, but there were still only limited offerings. The iPhone and iPads started as single products with three memory options -- that's it.

Today, Apple has expanded offerings to five different iPods, three iPads, three iPhones, five different Macs, and Apple TV. Walk into an Apple Store and you could walk out with one of 17 products, not to mention size variations and any number of covers and accessories Apple makes. Plus, there's word that more variations of the iPhone are in the works -- and who knows what on the TV front. The simple table above has become a solution for everyone, losing focus on only the most important things, something we used to call product creep.

The curse of the giant company
Apple has done some of this product expansion out of necessity. Samsung was taking smartphone share with larger screens at lower price points so Apple responded by keeping the iPhone 4 and 4S in inventory and growing the size of the iPhone 5. The next generation will reportedly come with even more varieties, both larger and smaller. It's a natural response to competition.

The Mac lineup has also grown as competition added options for customers. The Macbook Air for travelers, the Retina Display for premium users, the Pro for pros. Apple is making a product to fit every possible need.

Fighting product creep
The challenge for Apple is to not fight every fad or trend in consumer products. Google (GOOGL -1.97%) and Amazon seemed to be successful in expanding the tablet market to 7-inch devices, and Apple may have needed to respond with the iPad Mini, but where does it end? Google, in particular, can allow manufacturers using its OS to test markets and add products with less risk than Apple has with each product launch.

Smartphones are even more complicated. Google's operating system is being used by a number of suppliers and they can grow and shrink sizes and features with the trends of the market. Microsoft's Windows 8 operating system will allow a similar range of products for both smartphones and tablets. These two companies don't need to worry about form factor nearly as much as Apple, opening a world of possibilities for manufacturers.

The challenge for Apple
So, how does Apple respond to customer taste without making 50 different products? It comes down to management having the guts to keep it simple. But there's a double-edged sword. If Apple doesn't create more product offerings, it risks losing share to growing competitors. It's happened to others in the past.

This is how both Nokia and Research In Motion went from dominant market positions in mobile to passe brands overnight. Blackberry, in particular, was extremely popular, but the combination of hardware and software made it difficult to adapt to customer demands when new competitors like Apple entered the fold. Nokia has had to move to both Google and Microsoft for OS support after dominating mobile for years. The mobile consumer can have a change of heart overnight, a challenge for Apple.

When you're relying on so few products for your revenue, the rise can be fast and so can the fall. What Apple has to do is get every product right, something Steve Jobs had a very good record with, but given Apple's size it's a huge risk for the company and investors. If the look of iOS changed, can you imagine the response from that alone?

Foolish bottom line
I think Apple has tried too hard to be all things for everyone and it's hurting the simplicity that made the company so successful. Slowly, product creep takes focus away from the factors that made Apple the dominant company is has become.