Apple and Tim Cook’s next steps by Prasad Kaipa @FortuneMagazine April 25, 2013, 1:31 PM EST E-mail Tweet Facebook Google Plus Linkedin Share icons FORTUNE – In the wake of Apple’s AAPL better-than-expected earnings report on Tuesday, many are giving the company’s cheap stock a second look. There’s an even better reason to revisit Apple, however. Tim Cook has been humbled, and now he’s reintroducing the company’s original profit driver: disruptive innovation. Cook has always been a smart leader when it comes to operations. He built his reputation by building a global supply chain that reliably delivers millions of products at managed costs to consumers all over the world. He also knew when to build bridges (like he did with HTC), when to fight (like he is doing with Samsung), and when to apologize (like he did with Apple Maps and service in China). Under Cook’s leadership, we’ve seen Apple Maps, a new (thicker, heavier) iPad, the iPad mini, and many smaller product improvements across the board. But we received no new products in March. Can Apple turn this trend around? MORE: Apple’s iCar is finally here We believe it can, and we believe Tim Cook is the man to do it. That’s because, like many leaders who evolve from being merely smart to wise, he is showing evidence of leadership changes. Rumors are circulating that the iPhone will be coming in three different sizes this summer. Following the small-medium-large pattern of Apple’s other products, the iPhone may finally break through its singular form factor to appeal to different people for different reasons in different markets. Presumably, this change will help Apple compete on price with Samsung and others that occupy the space between smartphones and tablets. The smaller iPad, the Mini, forged this terrain in a similar way, responding to the success of Android tablets in that format. Where is the disruptive design innovation and charisma that Apple sustained for over a decade? They are going to spring from Tim Cook’s willingness to give freer rein to Jonathan Ive, Apple’s senior vice president of industrial design and the genius behind many of Apple’s marquee products. Cheap, humbled, and now disruptive. This is the vector along which Apple is going to succeed. With the recent departures in Apple’s executive suite, Ive has more power and influence than ever. It takes a wise leader to let another person soar in the power hierarchy, but Cook is doing precisely that. To quote industry analyst Horace Dediu, disruption “in the literal sense implies discomfort, displacement, and even destruction. But it’s necessary to the health of any economy. The analogy to biology is that death is the most important thing in life.” How can Apple rise anew? Here are three areas where Apple may surprise us: iWatch. This won’t be anything like what we’ve seen predicted online. This won’t be a shrunken iPhone that we strap to our wrists, and it won’t be a regurgitated version of the Nike Fuelband or FitBit. It will be a uniquely Apple twist on what you could do with a cluster of sensors on your wrist. And it will be seductive. Glimmers of hope come from the rumors of the iWatch. Unlike others, we imagine that this will be a wearable mouse of sorts. Sensors on your body will make interaction with any Apple product better. It will eliminate the lock screen because it self-identifies. Could this be a vehicle for iTunes store-based brick-and-mortar purchases? A physical 3-D mouse interface for your devices? A Dick Tracy device for face-to-face conversations? Home automation. This is a category that is already exploding, and Apple is a bit late. But a natural fit would be the Apple spinout, Nest, which produces smart thermostats. Led by former iPod and iPhone executive, Tony Fadell, Nest would make a perfect acquisition for Apple. Revamp the look and feel. This is surely coming, with the ouster of iOS senior VP Scott Forstall after last year’s failed Apple Maps launch and when Jony Ive took over control of the UI (user interface) development. Ive has not been a fan of the way Apple interfaces have been designed to look like metaphors of the real world and is surely working on a new look for Mac and iOS. MORE: Want to have coffee with Tim Cook? Bidding starts at $50K Some critics say Cook has become weak, arguing that Ive’s team is taking over Apple and the pendulum has swung too far in the direction of design. In our minds, that is exactly what Apple needs. For Apple to design like the Apple of the past, Cook and Ive have to become as close as Jobs and Ive once were. Both are wise enough to see the need and opportunity. It is just a matter of time before Apple starts its disruptive journey all over again. Prasad Kaipa is an executive coach and co-author, with innovation expert Navi Radjou, of From Smart to Wise: Acting and Leading with Wisdom (Jossey-Bass, April 2013). John Edson is president of Lunar Design and author of Design Like Apple: Seven Principles For Creating Insanely Great Products, Services, and Experiences (Wiley, 2012). Editor’s note: A previous version of this story incorrectly stated that Apple announced its second quarter earnings on Monday of this week. The company released its earnings on Tuesday.