Is Apple Really The Next Sony?

A recent piece on Forbes outlines 5 reasons why the author believes Apple could be the next Sony. The ideas are interesting, and conceptually reasonable, but the author makes some mistaken assumptions about a couple of things. He isn’t wrong on many facts, but there are some underlying assumptions that are incorrect.

 

First, Why Sony?

There was a time, in the 1980’s and into the 1990’s, where Sony was perceived as one of the top consumer electronics brands in the world. They were also seen as incredibly innovative, and their product designs were emulated (if not copied outright) by others. Their Trinitron TVs were premium priced, and for good reason. They were one of the sharpest and best tube TV’s you could buy at the time. The Walkman created an entirely new market segment, specifically portable personal audio, that took listeners in directions that portable radios couldn’t go. They built some of the best early “boom boxes”, portable stereo units with surprisingly good sound. The Playstation was the first rumble ahead of the massive juggernaut that would be the Playstation 2.

But Sony stumbled on MP3 players, had more misses than hits in PC’s, and their camera business has been “ok” but not outstanding. Their attempt to put mini-DAT up as a replacement for the compact cassette was completely shredded by the Compact Disc. They Playstation 3 was an amazing machine, but the most expensive of the 3 main consoles initially, and until Blu-ray gained a little bit of traction, didn’t have the early appeal of the Nintendo Wii and XBox 360. Now, they’ve sold their PC business, are slowing moving away from some proprietary storage formats (good-bye Memory Stick), and have switched gears on mobile phones.

They went from the top to the bottom in a couple of decades. The perception was that the creative spark, driven by company chairman Akio Morita, was lost when he stepped down in 1994. Sound familiar? Apple could be headed down a similar path. Maybe.

The Specific Points

So what are the 5 points that the author raises about Apple? In a nutshell, they are:

  • Regression to the mean
  • Tim Cook doesn’t think different
  • Apple is starting to make unforced errors
  • Apple is becoming reactive and defensive
  • Apple is bunting rather than swinging for the fences

While there are some very good points raised, the author fails to include some very important information that colours these items.

Regression to the mean

Given the prodigious output of new products, and the creation of a new product category, it isn’t surprising that Apple would “slow down”. Let’s be fair, Apple really only created one new product category, specifically tablets. The iPod was nowhere near the first MP3 player, and it was already a growing market before Apple came to dominate it. The iPhone entered a smartphone market that was ready 15 years old. What the iPod and iPhone did was ignite their respective markets. But they didn’t create them.

Now, the author isn’t wrong that this could be a concern. But the way they make the point belies a mistake they are making on the role of Tim Cook, which leads into the second point.

Time Cook doesn’t think different

In the introduction and the first 2 points, the author bemoans the fact that Tim Cook is no Steve Jobs. He accuses Cook of being a bit bland and unimaginative, and implies he isn’t the inventor Steve was.

Here’s the thing: he isn’t supposed to be. Steve was a founder and inventor. He was the rare combination of product creator and runner-of-the-company. Few people can pull it off successfully, even for a short period of time. Tim Cook was hired to shepherd the company along, not invent new product. It isn’t his background, it isn’t his forte and it isn’t his job. That job now falls to guys like Eddy Cue, Craig Federighi and Jony Ive. The probability of finding another Steve Jobs is so infinitesimally small as to be effectively zero. The same can be said for any great inventor or mind. Only rarely to we get to see a Henry Ford, Nikola Tesla, Jim Henson or Steven Spielberg. To expect one of the best supply-chain management people to suddenly become a product inventor is ludicrous at best.

No one complains that Meg Whitman isn’t inventing new product for HP, or that Larry Ellison isn’t designing the next great database product for Oracle. That isn’t their job. What is their job, and what Tim Cook is supposed to do, is to create an environment where other imaginations can thrive and grow. He needs to create a company where smart people can create great things. Just like any other CEO of any other product or service company.

Ultimately, I think it means the first 2 points are moot, simply because they aren’t unusual, and one comes from a bad assumption. But their third point merits a serious look.

Apple is starting to make unforced errors

This is most certainly a concern for the company. It isn’t just one problem, Maps, that is an indicator here. It is a series of problems. Two new operating systems, Mavericks and iOS 7, came out before they were fully baked. Both still have problems in terms of stability and usability. Anecdotally, I’d say that the quality of Apple software has slipped noticeably. There was a time where I could rely on OS X and iOS to just work. Wifi connected every time. Mail sent and received, without question. Apple systems and apps could be left running for days, weeks, months (even years) without issue.

That isn’t the case now. Mavericks, or important parts of it, will spontaneously crash from time to time. Apple still has issues with Mail and Google’s Gmail service. Safari has been noticeably unstable. I’ve had iPads reboot for now particular reason, and with no warning. Anecdotal? Possibly. But I’m not the only Mac and iOS user to complain about these things.

Apple has a QA problem, one that appears to be all the way back into the development labs themselves. They have tried to add too much, too fast, and it has lead to stability and usability problems. In this respect, I agree with the author. Apple has a problem, and it needs to fix it before they become another Microsoft. Apple has projected an image of quality, and that perception is slipping.

Apple is becoming reactive and defensive

I don’t buy this one. Why? Because the author implies that Apple started the patent wars. Sorry, but that is not factually true. Most of the patent nonsense was started simultaneously by a number of large companies. You could say that Qualcomm kicked it off in the 1990’s with some of the first patent fights around basic telco technologies. Apple and Samsung have been going at each other hammer and tongs, and each has initiated their fair share of the various lawsuits.

Do I think these fights are stupid? You bet. The only ones making money off of this are the lawyers. This is diverting money and time and effort away from making better product, and not just for Apple, but for everyone involved. Guys like Samsung, HTC, Motorola and others have been just as defensive. But because Apple has managed to get themselves under the microscope and in the centre of the conversation, they appear to be the one that is most defensive. Take away the glare of media attention, and Apple is just one of a number of companies engaged in these various follies, none of which have made things easier for anyone. If anything, they have made it harder, as everyone rushes to the patent office “just in case”, expending effort and treasure pursuing what amounts to an expensive insurance policy.

Apple is bunting rather than swinging for the fences

It is certainly true that almost all of what Apple has released has been incremental change (despite their usual over-the-top and overly-effusive descriptions to the contrary). But the problem for Apple is the curse or large numbers: it takes large numbers to move the needle. Releasing the equivalent of the iPod today wouldn’t budge the numbers for several years. What looks like a “good-sized market” for a startup can be statistical noise for someone as large as Apple (or IBM or Ford or Wal-mart).

Consider some new imaginary product segment that could generate $1 billion in annual revenue. That’s a lot of money. But for someone like Apple, it’s not statistically significant. Apple took in nearly $171 billion on gross revenue last year. That $1 billion in revenue doesn’t even amount to 1% of total revenue. To get the “hyper-growth” that people seem to expect, say around 20-25%, means Apple has to find new revenue sources amounting to around $40 billion dollars in a year. Only 69 companies in the Fortune 500 make more than that. It means finding revenue that is larger than that seen by more than 430 of the biggest companies in the United States.

Setting the numbers aside, the mantra in business has generally been, using baseball as the analogy, that you win seasons with single and doubles. Home runs are comparatively rare, both in the sport and in business. You can’t depend on them to reliably win each game. Having steady, sustainable growth and steady, sustainable products is the road to long-term prosperity. Yes, Apple went on an incredible run. From 1999 through to 2010, they had an amazing string of hits. But you can only keep that up for so long, and at some point, you are going to stumble. Slowing down now isn’t a surprise.

Apple Is Still Recovering

Apple is in caretaker mode for a very good reason: the creative genius and force behind the company died. You don’t just replace someone like that overnight, or even over a couple of years. It would be unreasonable to expect any company, or any organization, to lose their star player and manage to keep up the momentum. Will Apple find a different way forward? Probably. Will we see another Golden Age of new products and new product categories? Possibly, but it could go either way.

Consider Apple back in the mid-1990’s. Even bringing Steve back didn’t turn things around immediately. It took a couple of years before they found their footing again, made the changes they needed to make, and started to make some truly great product again. They aren’t the first. IBM took several years to overcome their near-death in 1992. HP is still finding a way out of the wilderness, and Microsoft has finally realized they are lost in the weeds. It took Ford several years under Alan Mullaly to get back on their feet. These are large, complex organizations. They can’t really just stop and turn on a dime.

Will Apple go the way of Sony? It is certainly possible, and getting back to the Forbes piece, conceptually the author is on a reasonable path. Some of his points are wrong (because they are based on flawed or incomplete assumptions), but the general message is certainly there. Apple went from great to near-death and back to great. It is certainly possible they will decline again, but that event is probably years away.

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