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.
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
~ Joe Wilcox
