The Mac exploded with the introduction of expandable machines (you know upgrade slots those things Jobs hated), not the closed dead end compacts. Jobs was big into killing off the Apple II which was all that kept the company afloat when the original compacts did not sell well.

Inovation is over rated (ask the original portable MP3 player makers, PDA makers, etc), people want something that works, looks decent, and at a specific price point. It costs a bunch to do something new, and then you go broke with the R&D expenses when some other company brings out a better version of what you spent a ton of money inovating.