Why Apple no longer innovates


The more I ponder Apple's Beats acquisition, the less sense it makes. Buying big well-known brands that compete with yours is usually a bad idea -- worse when the acquirer owns no foreign brands. Extinguishing the big name, as Microsoft does with Nokia, is marketing murder. There's no place for the Beats brand in the Apple lexicon. The gun is drawn and ready to fire.

What I do see is another sign that Apple has lost its way. Tim Cook is a very able CEO, but as stated previously he is Star Trek's Spock without Captain Kirk (Steve Jobs). Cook's approach to business logistics, while brilliant, unmakes Apple. Beats is an acquisition that is off-key -- out of tune with the culture that made the fruit-logo company great. As such, on this Thursday in May, comes my confession. I was wrong five years ago in post "Why Apple succeeds, and always will". That company is gone.

Dynamic Duo

Like Kirk and Spock, Jobs and Cook were complimentary, when working together: The inspired visionary looking to bring good taste and understated design to otherwise complex products and the man responsible for getting them to market. Kirk is the leader, the charismatic one. Spock is the empowering sidekick but not as effective leader.

Jobs, like Kirk, was a risk-taker who took logic-defying gambles that played to his strengths. Based on what Apple has done -- or hasn't -- since autumn 2011, Cook is more cautious, more corporate in approach. Mixing metaphors, he doesn't exhibit what I have long called "David Thinking".

David Thinking

During the Steve Jobs era, Apple repeatedly defied the status quo by using guerilla tactics that changed the rules of engagement. I wrote five years ago, when praising the approach:

Apple doesn't play by the rules. It reinvents them. Apple applies what I call 'David Thinking' to its broader business, product development and marketing. Apple is David to Microsoft Goliath -- and other ones, too. Goliath plays by one set of rules. David choses to change the rules, which favor his strengths rather than those of Goliath.

David Thinking derives from research political scientist Ivan Arreguín-Toft conducted. In 2005 book, How the Weak Win Wars: A Theory of Asymmetric Tactics, he explains how seemingly weaker opponents can prevail against stronger ones by changing the rules of engagement. (So that you don't have to purchase the book, review paper "How the Weak Win Wars: A Theory of Asymmetric Conflict" as an alternative.)

Arreguín-Toft produces excellent historical data showing that, in wars, when smaller rivals apply David Thinking they are more likely to win, even against mightier opponents. The Biblical example of David vs. Goliath is good analogy. Rather than fight like Goliath -- and almost certainly lose by dawning armor and sword -- David relied on his own strengths. A slingshot and stone kept him out of Goliath's reach but still on the offensive.

Preserving Status Quo

But Apple has gone through dramatic transformation since my "always will succeed" post. The fruit-logo company is no longer David but Goliath. Apple's size and success makes it the status quo and encourages management decisions that seek to preserve what is rather than take forward-reaching risks.

Under Cook's leadership, rather than innovate, Apple iterates. Over more than a year of conference calls, I heard the chief executive promise new innovations that the company has yet to deliver. The only industry-transforming products are those put forth by scads of rumor-spreading Apple blogs. They promote vaporware.

That said, Cook the tactician brilliantly preserves status quo revenue streams through exceptional control of manufacturing and distribution logistics. I wouldn't want to play chess with the man. But Jobs the poker player -- master of bluff and misdirection -- made Apple a great innovator.

Cook chooses to preserve what is rather than reach for something more, and use daring tactics in process. From a different perspective, he acts responsibly. Every public company's first moral mandate is to shareholders, whose priority is profitable. Cook magnificently squeezes high-margins from Apple's supply chain, whether existing or new markets. That's how Apple succeeds today, but the "always will" I asserted in 2009 is gone.

Glory Days

Too many people obsess too much about Apple creating another new product category. On the other hand, Jobs' guerilla tactics produced many. Among the examples:

  • iMac (1998)
  • iTunes (2001)
  • Titanium PowerBook (2001)
  • iPod (2001)
  • iTunes Music Store (2003)
  • iLife (2003)
  • iPod mini (2004)
  • iPod nano (2005)
  • iPhone (2007)
  • App Store (2008)
  • MacBook Air 13.3-inch (2008)
  • iPad (2010)
  • MacBook Air 11.6-inch (2010)

Each of these products opened new categories for the company, and some for the broader tech industry. Like a sculptor, Apple refined each product line over the years. iPod and iTunes Store are among the best examples of successful iteration from initial innovation. iPad and iPhone are others.

Product refinement -- that is iteration -- reflects Cook's capabilities. But where is the innovative, risk-taking, David Thinking, category-changing product since 2010? Nowhere. Cook smartly preserves the status quo, but that's hallmark of Goliaths against which Apple acted as David.

For example, rather than make iPhone better -- or transcend it the way the handset did iPod in 2007 -- Apple improves marketing. I love the new "Powerful" ad campaign, but it's the wrong response to innovations that HTC, Motorola, and Samsung bring to market.

Beats Me

Then there is Beats, which for $3 billion is pocket change to Apple. Beats spotlights what's wrong. Apple isn't, or wasn't, known for buying big brands for loads of cash -- the kind of thing large Goliaths do to expand -- but to purchase smaller, innovative shops that fit the Apple Way and expand it.

Beats Music will give the fruit-logo company a streaming service rather than just straight sales. But the headphones are, well, brand conflict. They don't fit well. What would have been better: Apple releasing a risky product that transforms the art of listening. Instead, Beats is very status quo -- bass-booming cans that mask the imperfections of low-bit, compressed AAC.

Clear Pattern

The trend is both clear and frustrating to watch. Apple stands at the pinnacle of success, where down is the only direction to go. I've pulled a chronological selection of my analyses over the last 18 months that look specifically at Apple as a business. I encourage contrasting them against the company portrayed in the 2009 "always will succeed" analysis:

I want to specifically call out three others. The first two, from this month: "Apple should be very afraid" and "Apple isn't phabulous" look at the changing mobile device market that undermines iPad and iPhone, which during first calendar quarter accounted for 74 percent of revenues. Competitors playing to their strengths -- that is changing the rules of engagement -- undermine the Apple device status quo. The fruit-logo company has much to lose but risks little to keep it.

New Sidekick

The other post, "Apple needs a COO, not new CEO" responded to demands for Cook's ouster a year ago. The company needs him, but he's not, ah, cook enough in the kitchen. The Jobs-Cook team was a great matchup as top exec and chief operating officer.

Cook largely deserves credit for Apple's amazing success -- at the least during this decade, and really longer. As COO for most of the time, and CEO since August 2011, he managed day-to-day operations. But Cook has a problem: He is half of a whole, a man responsible for two jobs: Vision and management, and he does neither as well as he could just one.

A COO, and the right one -- to compliment Cook's weaknesses -- could make a crucial difference. He needs a sidekick with vision, someone willing to take real risks and think like David rather than Goliath.

Photo Credit: Joe Wilcox

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