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Why Apple’s Future Is Uncertain

2013 May 1
by Greg Satell

Ever since I bought my first Macintosh for college over 20 years ago, I’ve been a big fan of Apple.  I love their products.  I love their stores.  I even love the very idea of Apple.

My family and I are fully embedded in its technological ecosystem (2 Macbooks, 2 iPads, 2 iPhones, an AirPort and an Apple TV) and I have an indirect financial interest in the stock through a fund, so nobody wants Apple to do well more than I do.

Nevertheless, I’ve become skeptical about its future.  The death of Steve Jobs, the maps debacle, stiffening competition, a relative dearth of new product launches along with the recent earnings report give ample room for doubt whether Apple is still the company we once knew.  There is still have time to right the ship, but it’s running out.

The Greatest Comeback in Corporate History

As hard as it is to imagine now, not so long ago Apple was at death’s door.  When Steve Jobs returned to Apple in 1997, he found it in such bad shape that he had to convince Bill Gates to give the company a mercy loan, along with a promise to continue to develop software for the Mac.  Without those, it’s unlikely that Apple would be in business today.

Bowed but unbroken, he began the long journey back, paring back the product line, cutting costs and launching the gimmicky, yet successful iMac.  Within a few short years, Apple was off life support and Jobs began to actualize his new vision for technology, one in which the personal computer served as a hub for a variety of consumer devices.

Then came a string of hits, the iPod, iTunes, the iPhone, iPad, Apple stores and a host of smaller triumphs.  Each product built on the last, creating an integrated ecosystem.  Once you bought one Apple product you almost had to buy them all.  Each was merely a part of a seamless whole.

By August 2012 (just a few short months before the Steve Jobs passed away), Apple became the most valuable company on the planet.  For an entire decade, Apple wasn’t only the leading tech company, it almost seemed as if it were the only tech company.

However, there were (and are) other tech companies and they’ve been busy.

Meanwhile, Elsewhere in the World of Tech…

While Apple’s star was rising, Microsoft’s was falling.  Bill Gates left to save the world, leaving a bumbling Steve Ballmer, who completely missed the importance of smartphones and presided over Microsoft’s decline from a monopoly position with 95% market share of PC’s to about a 20% of all connected devices.  What a mess!

But look a little closer and it becomes clear that Ballmer is not the buffoon that he’s been made out to be.  Microsoft has retained its stranglehold on productivity with its Office software, has grown its servers and tools division into a $20 billion behemoth and is positioning XBox live to become a central hub for the living room.

Beyond Microsoft, Google has evolved from a purely search engine driven company to a highly exciting, multi-faceted enterprise, with Project Glass, autonomous cars and a dominant share of mobile devices.  IBM has been building a profit machine with the Smarter Planet initiative and its Watson platform might very well point the way to the future of computing.

Then you have Samsung, Amazon, Facebook, and a host of others all creating exciting new products, while start-ups like Instagram and Pinterest become billion dollar companies overnight.  What’s Apple working on?

Apple’s Innovation Problem

I don’t think anyone can deny that Steve Jobs was very special.  He was not only a visionary that could see what we wanted before we did, he had the tenacity and the discipline to boil a product down to its essence and eschew all the unnecessary bells and whistles that makes technology clunky.  The result was beautifully functional.

He also created his own problems.  Jobs was famously prickly and hard to work with.  He was easily distracted by unproductive vendettas and frequently fell out with important partners.  As he put it himself:

You know, because Woz and I started the company based on doing the whole banana, we weren’t so good at partnering with people. And, you know, actually, the funny thing is, Microsoft’s one of the few companies we were able to partner with that actually worked for both companies. And we weren’t so good at that, where Bill and Microsoft were really good at it because they didn’t make the whole thing in the early days and they learned how to partner with people really well.

That’s increasingly a problem.  Under Jobs, Apple effectively functioned as the last mile of technology, weaving existing protocols into an integrated, seamless whole and providing consumers with unparalleled experience.  However, even if Steve Jobs was still around, it’s doubtful that Apple can continue to go it alone.

If they are to create a competitive TV platform, they will need strong content partners, but so far have struggled to ink deals.  To compete with Google, Microsoft and IBM on cloud services delivered to mobile phones, they will need to develop Big Data and artificial intelligence solutions, but are far behind and, with their paltry R&D investment, are unlikely to catch up.

It’s becoming clear that Apple has an innovation problem.  While it seems to be slowing down, the competition is gearing up.

Where Does Apple Go From Here?

Even with all of its problems, Apple is still a great company with no shortage of important assets.  Tim Cook, the CEO is an immensely talented operational executive and design genius Jony Ive, will continue to put out great products.  Apple retains strong competitive positions in smartphones and tablets, two categories far from saturation.  Macbooks and iTunes will still bring in serious cash for the foreseeable future.

Still, Apple is no ordinary company.  To achieve even 10% profit growth, they need to find over $5 billion a year, which is more than most companies earn in total.  In other words, Apple needs more than good products, they need breakthroughs and right now the pipeline is looking pretty dry (apparently, no major new launches until this fall).

As the company struggles to maintain growth on an enormous revenue base, Tim Cook and his management team struggles to articulate any clear vision for the future.  They will need to do so and could probably benefit from bringing in some strong outside talent, as Microsoft did with Ray Ozzie and Google (more recently) did with Ray Kurzweil.

It wasn’t so long ago that Sony and Dell seemed unbeatable.  Now they’re basket cases. Other dominant technology companies, such as IBM and Microsoft, had their time in the sun before hitting on harder times, but were able to navigate their way out of it.  Every business needs to pivot sometime.

When will Apple?

– Greg

6 Responses leave one →
  1. May 1, 2013

    Hi Greg,

    You teaser, you 🙂

    Personally speaking, I believe Apple ‘won’ because of one single thing: Steve Jobs was driven by the behavioural aspects of technology. He understood that any product is only as good as the physical and emotional impact it has. He understood ‘mediums’ not just tech. Everything he every did was to improve this visceral experience.

    Without this, tech remains just tech and the brilliant Jonathan Ive is ‘just’ a great designer – who could work in any product sphere – equally brilliantly. (Watch out for his departure. And soon).

    Will Apple pivot?

    To be frank, I dont think so. Not unless they pull in another visionary who understands that what works best is what truly suits our behavioural needs – and I’m sure you know I’m not just talking UX.

    – Steve

    [Reply]

    Greg Reply:

    Time will tell…

    Greg

    [Reply]

  2. May 1, 2013

    Insightful article. Jobs was special, for sure. Now the company will suffer. Apple fanbois have to accept that ; )

    [Reply]

    Greg Reply:

    We’ll see. They have a couple of years to figure it out.

    [Reply]

  3. December 18, 2014

    Hey Greg, you don’t need to reply but have you written an update to this situation? Thanks! I use your articles to inform people.

    [Reply]

    Greg Reply:

    Hi Robin,

    That’s a very good question and, again, I think it’s unclear. Apple is certainly a different company under Tim Cook. It’s not nearly as innovative, but it’s an operational wunderkind and much more effective at partnering.

    So, while I don’t see any “insanely great” products coming(I think the iWatch will be a dud), there are other areas where the company is excelling. The IBM partnership has the potential to greatly improve its enterprise business and Apple Pay might be a real home run.

    The story with the stock is somewhat different. It’s vastly undervalued (less than the S&P average) and has been for a long time.

    – Greg

    [Reply]

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