I’ve been part of the PC industry since it began. Many of my friends remember me managing one of the first computer stores. I became a technology analyst and followed the industry for many years. I even wrote a college textbook on PCs as well as teaching computer science to college students. So, I do know something about PCs. I’ve not only been an Apple dealer, but I’ve owned virtually all its major computing products from the Apple II. That includes the first Macintosh, MacBooks, the iMac, iPads, etc.
So, it’s with a sad heart that I say what the financial press has already been reporting. The best years of Apple are behind it. Having said that, I have to also say that my wife and I are an Apple family. What I observed as a technology analyst was that companies that are led by visionaries and then turned over to bean counters lose their technology edge. Related closely to that truism is that once a company reaches a certain size, it struggles to maintain a decent rate of return because it continually needs new breakthrough products. To put it another way, Apple might make its products too good. They tend to last longer than PCs, and they require a lot less support. The result is that it has become harder and harder for Apple to convince its customers to upgrade. That’s true not just for its computers, but it’s also true for its iPhones.
Steve Jobs did fail on occasion, but he also had enough vision to create products people didn’t even know they’d want or need. Where is the next breakthrough Apple product coming from? Apple explored the TV marketplace, but there are technological constraints that prevent it from coming out with something that would revolutionize TV, especially since there is a movement toward decoupling cable channels and moving toward a wild west type free for all where people simply will decide on which Internet channels they want. How can you bring order to such a chaotic universe? I doubt Apple can.
Automobiles was another area Apple was exploring. Now we learn BMW is going its own way on electric cars and other major manufacturers are moving ahead in that area as is Google. Apple won’t be able to control this market because it is primarily a hardware company and it can’t mandate that everyone confirm to its standard and use its software.
I certainly lay part of the problem on Tim Cook. By all counts he’s a great guy—certainly much more human than Jobs and less likely to make his subordinates cry. He’s outspoken and apparently on the right side of all the current hot button issues from gay rights to computer privacy. But, his entire history has been as a supply chain guy, a person acknowledged as an expert in cutting costs and increasing efficiency. That’s wonderful, and every hardware company needs someone at the VP level with those skills, but it’s a forrest and not a tree CEO who is needed to give a company direction and keep it ahead of the curve.
What Jobs managed to do was to make Apple “cool.” Remember all the Apple fanboys who would line up whenever a new product was released. Now it tends to be people of my generation. The college age kids have moved on to Android products. Since Samsung has been in a long-standing battle with Apple over intellectual property rights, its no surprise that the Korean company’s products more and more resemble iPhones but cost less.
Now Apple is sitting on a lot of cash. What should it do and what is it likely to do? I suspect it will buy back some of its stock to maintain its price. I also suspect we’ll see Apple offer “new” products that offer a few new features, but that won’t be enough to maintain its leadership position. What it does need to do but probably won’t is to use some of its cash to buy new technology by acquiring some cutting edge startups. If it can’t come up with new visionary products from the CEO’s office, then it might have to do so from some of the young geniuses whose companies they buy.
The problem, of course, is that startups work quite differently from a company Apple’s size. They make decisions quickly and then create products rapidly. What happens, though, in a company Apple’s size when heads of different units compete for resources? Without someone like a Steve Jobs at the top who is capable of relying on some mysterious gut reaction to determine which product will be successful, Apple probably will rely on a bean counter who probably will create a very detailed spreadsheet that weighs the pluses and minuses of each potential new product. That might be an ideal way of narrowing a list of potential colleges to attend, but it’s no way to select the product that could make or break a giant corporation.
Apple will not disappear. It still makes solid products that its customers love. The problem is attracting new customers in sufficient numbers to meet its financial goals and satisfy the financial community. Its recent history has been to create products that cannibalize older products (Who needs an iPod now that there’s an iPhone and an iCloud?) When my generation finally rides off into the sunset, where will Apple be?