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What’s Wrong with Apple?

2016 November 9
by Greg Satell

Apple is no longer the darling of the tech world it once was. It used to be that if you wrote something that even mildly suggested problems at the company, you were subjected to howls of execration by a seemingly endless legion of Apple fan boys. Yet clearly, those days are now over.

Consider this. In just the last few weeks, veteran tech journalist Walt Mossberg called Siri stupid, Silicon Valley guru Steve Blank questioned the company’s vision in Harvard Business Review and Business Insider reported that people are now saying that Microsoft is more innovative than Apple. Ouch!

How did what would have been considered heresy a few years ago become conventional wisdom today? The easiest answer is that Apple was unduly deified before and is now simply coming back to earth, but there’s something more at work as well. Technology cycles come and go and the present one simply doesn’t play to Apple’s strengths. It was bound to happen.

A Perfect Storm

To understand Apple’s incredible rise, let’s go back to the late 90’s, when Steve Jobs first returned to the company he co-founded, which was in absolute chaos at the time. In fact, things had gotten so bad that Apple needed to take a $150 million investment from Microsoft just to stay afloat. Oh, the horror!

The computer industry was going through a transitionary period as well. While the rise of the Internet was creating dotcom millionaires by the score, PC’s were becoming a mature, commodity product. Apple’s Macintosh, once exciting and hip, was beginning to look like a relic of a past age.

Yet as Walter Isaacson explained in his biography of Steve Jobs, where others saw malaise, Apple’s CEO saw opportunity. He envisioned a rebirth of the PC as a digital hub to connect other technologies already in place. The iPod, iTunes, iPhone and iPad were all manifestations of that vision and they made Apple the most valuable company on the planet.

The strategy was uniquely suited to Apple’s talents. It didn’t require major breakthroughs, but for products to be designed, engineered and integrated in new and imaginative ways. That’s not to say that Steve Jobs wasn’t a visionary or a genius. He was both. But he had a vision that matched the times. I doubt that he would fare as well today.

The New Era Of Cognitive And Cloud Computing

The present technological environment is vastly different than in the late 90’s. Today, the nascent technologies are cloud and cognitive computing, which require different culture and capabilities than devices do. Even if Steve Jobs were still alive and actively managing the company, it is not at all clear that Apple could retain its dominance.

The truth is that product innovation is fundamentally different than technological innovation. Apple excels at the former, which requires a deep understanding of the consumer, tightly integrated operations and strong engineering and design capabilities. It is much worse at the latter, which favors exploration and a more open approach.

Cognitive computing is a truly cutting edge technology that calls for a vigorous research effort. That means more than just investment, which Apple can certainly afford, but also requires an active collaboration with the academic community. To attract the world’s top researchers, you need to allow them to publish openly and consult with others in the field.

The cloud is essentially an enterprise market, which is why IBM and Microsoft have been able to so seamlessly adapt to it. For them, cloud computing is exciting distribution channel for their existing products and a great opportunity to develop new technologies for corporate customers. For Apple, there are few profitable opportunities in cloud computing.

Competing In An Open Ecosystem

Another aspect of the new technologies is that they thrive in an open ecosystem, which is the polar opposite of the tightly integrated approach that Apple favors. Steve Jobs, quite famously, wanted to control every aspect of how his customers experienced his products, from hardware to software to interface.

Now consider what’s been going on in the field of artificial intelligence. Google open-sourced TensorFlow, its library of machine learning tools. Microsoft and Facebook did the same with CNTK and Torch, respectively. IBM, for its part, has made Watson’s capabilities easily accessible through its developerWorks program.

When I asked Rajat Monga, who leads the TensorFlow team, about Google’s decision he told me, “Having this system open-sourced we’re able to collaborate with many other researchers at universities and startups, which gives us new ideas about how we can advance our technology. Since we made the decision to open-source, the code runs faster, it can do more things and it’s more flexible and convenient.”

The same trends can be seen in the cloud business. Both Microsoft’s Azure platform and IBM’s Bluemix are, at least to some extent, storefronts for their respective suites of cloud software and services. However, they also integrate competing services because that’s how you create the most complete ecosystem. Anything less would weaken the offering.

In a market made up of platforms, ecosystems and networks, the key to strategy is to widen and deepen connections. Those aren’t Apple’s strengths and never have been.

Is Tim Cook The New Steve Ballmer?

In Steve Blank’s Harvard Business Review article, he makes a parallel between Steve Ballmer and Tim Cook. He says they are both execution focused successors to visionary founders. There’s a certain amount of truth to that, but I think Blank is also selling Microsoft’s former CEO  somewhat short. Ballmer was no Bill Gates, but that doesn’t mean he lacked vision.

Consider the Servers and Tools division that Ballmer invested in early in his tenure. It developed the technology that is now making Microsoft’s success in the cloud possible. He also built up Sharepoint, another blockbuster product. These are, of course, enterprise products and don’t grab the headlines that a hit consumer device would, but they are still great businesses.

Tim Cook has shown similar savvy. Take his alliance with IBM. It’s something that Jobs would have probably never done, but has a certain genius to it. It allows Apple to combine its capabilities in interface design with IBM’s technological prowess and sales relationships. That’s given Apple a foothold in the enterprise market, something it never had before.

I think the best way to view Apple’s business today is to compare it to Toyota. It will likely never be as dominant as when Steve Jobs was running the company, but that would have been true even if he was still at the helm. What remains is an extremely well run company that makes great products. That may not be visionary, but it’s how businesses make money.

– Greg

One Response
  1. November 13, 2016

    Hi Greg,

    Based on my personal experience, there is one thing that is really wrong with Apple: they don’t treat customer with decency. When you charge such silly prices, you ought to give your customers the best experience ever. And not only with the product, but in all areas, such as after sales services for instance. In my case, I had purchased a “full option” Mac with a 3-year full warranty (“Apple Care”). To keep the story short: I realized after 4 years, and endless discussions with Apple’s support center that my Mac was buggy from the start. And when I say buggy, it was really bad: several fundamentals bugs (hard drive defect, wifi antenna bugged, battery issues, etc.). They even repaired stuff that wasn’t necessary and I had to pay for it. Eventually, I got the understand that Apple had never gotten any clue about what was going on with my Mac. But at the end, they just told me “it’s no longer under warranty so we can’t do anything for you”. Conclusion: it has been 2 years now that I decided not to by Mac stuff anymore. And I am happier than ever: I have an incredible smartphone for half the price of a silly iPhone and my next computer will be a PC.

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