Sunday, April 28, 2013

Steve Jobs era at Apple over...again?

@gkaizer's recent Computerworld article, Moves, mistakes prove Steve Jobs era at Apple over, say analysts covers analyst reactions to Apple's recent moves under Tim Cook's leadership as indicative that the company Steven Jobs built is now a "very different company." The differences are, indeed, very concerning, but not for the reasons cited - those reasons are actually symptoms of one reason that went unrecognized and, even though it is no secret, it apparently still needs to be spelled out.

Before I get into the real reason that Apple may be headed for fundamental trouble, it needs to be noted that this is not the first time Apple has strayed from Jobs' focus. Recall that he was fired in 1986. Recall also that, within ten years, Apple was nearly bankrupt, brought Jobs back in 1996 and, within four years after receiving $150 million and other strategic helps from Microsoft in 1997, would develop the iPod, iTunes and begin their meteoric rise to corporate history.

In short, Apple should have learned to stick with Jobs' philosophies. This time around, he's no longer alive to "return" and right the ship again. However, there's enough documentation and anecdote to readily grasp what the real issue is, and it reaches back into the earliest emergence of Apple and Microsoft.

In a nutshell, Microsoft licensed, Apple kept its stuff proprietary. Licensing supported Microsoft's growth and ubiquity, as any manufacturer could slap Windows on its grey boxes and ship them out. Licensing was also a cheaper alternative, at the time, allowing companies to buy Windows for all their users more easily than buying a proprietary hardware/software unit that was Apple's approach. Thus, Apple was typically bought by high-tech proprietors (individuals) and small boutique shops; they bought less volume, but paid a premium for the units they did buy, providing Apple with profit.

Steve Jobs had said he was never interested in high volume to corporate clients, because he wanted to sell to someone who could buy a higher-priced system in a single emotional decision that did not require levels of red tape that a corporate purchaser had to cut through; when that someone made a purchase decision based on emotions, they spent more money, and gave Apple more profit on each sale transaction. The rise of iPod and iTunes cemented that focus - these were not tools for work, they were toys for play, and people emotionally like to spend lots of money to treat themselves on things they want; whereas they will tend to seek a deal on things they need. 

People tend resent being forced to pay big money for necessities, it feels like extortion. People tend to have a higher degree of tolerance for higher prices on things they don't need because, well, they don't need them - if they perceive they are making a choice to buy something they don't need, then they're accepting that they have the choice to walk away; thus, spending money on things they don't need is an expression of choice, which is an expression of individuality, which is highly prized.

Apple products are more expensive. That was by design. That extra margin, profit, is part of what had taken Apple stock to heights never before achieved in American corporate history.

Now that Jobs has died, Apple's even thinking about entering a competitive space by competing on price is a travesty. Apple did not become Apple by essentially buying market share through cutting margins and hoping to recoup in volumes of sales. 

This "strategy" is contrary to what Apple was built to be. This is not an expression of Apple's brand identity. They do not have the savvy, or the moxie, to pursue success in this manner, it's not their schtick. Mr. Kaizer is absolutely right to state that Jobs would have dismissed it out of hand...if only he were still here to do so. Even so, we have come to know enough to know that such is the case - and if we know, Apple's board oughtta know, and Apple's shareholders will find out soon enough if they don't already know (or can give attention beyond the distraction of the falling stock price).

Apple had a style, a culture, and it was happy with its niche. Compromising that culture to chase after more market share is a bad idea. It almost always is. That is the fundamental issue at play here. Ask Toyota (they committed the same mistake, they should have consulted with me). Or RIM (yeah yeah, they are called Blackberry now, a stupid decision not worth getting into here; but the dumb decision to attempt to compete in the consumer space was made when they were still RIM; discussing that will require some expansion - I touched very briefly on RIM's faux pas here, but it really demands more elaboration, which I will get to before too long).


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