It’s time for a new Apple CEO

9

December

2016

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Over the last couple of years, Apple was so fortunate to set one record after another in terms of revenue, profit, profit margins etc. Just this year for the first time in 15 years, Apple reported an annual decline in sales, revenue, and profit compared to last year. And to be honest, the signs were pretty clear that this had to come.

Under the leadership of Tim Cook, Apple lost its place as a Digital Master and innovator and is now slowly transforming to a Fashionista according to the framework of Westermann (2014). Let me explain why this is happening.

In the recent years, Apple completely shifted its focus from a variety of products to the cash cows of the company, namely the iPhone. While the iPhone receives updates every year to be equipped with state of the art chips, camera, and display, Apple decided to leave other products behind that were not contributing so much to the company’s revenues and profits. There are dozens of example: The iPad Air 2 hasn’t been updated since 2014, neither has been the iPad mini. The MacBook Air hasn’t received a major update since 2010, and the Mac Mini and the Mac Pro didn’t even get a new chipset since more than two years.
Just last week, Apple introduced new MacBook Pros (finally, after keeping the older models for more than one year on the shelf), where they got rid of all ports but the headphone port, replacing them with four identical USB C ports. They also included a smaller battery than in previous models and not the latest Intel chipset. The only innovation is the Touch Bar, a contextual toolbar at the top of the keyboard that automatically changes to surface app-specific commands.

With the development of Apple in the recent years, one might also get the feeling that products get developed more and more in silos with little communication and coordination between departments. Let’s look at some examples here:

  • If you buy a brand new flagship iPhone 7 and a brand new MacBook Pro, there is no way you can connect them without an adapter. You can also not use the headphones that ship with your iPhone 7 on your new MacBook without an adapter.
  • Let’s have a look at software. Siri was introduced in 2011 for iOS and it took more than 5 years for it to arrive on MacOS. Two years ago, MacOS received a major update for its search function Spotlight, that in a way tries to behave like Siri, just with text input. These two parallel developments raise the question why they didn’t coordinate the work on both of these frameworks and instead developed two different features that have the same functionality just with different inputs.

The results are pretty clear:

  • In terms of software, Apple has fallen behind its competitors. For example, Google Docs and Microsoft Office support collaboration since a couple of years and Apple took until this year to finally launch a collaboration feature for their Office suite. This list is almost infinite. Apple’s iCloud is not as good as Dropbox or Google Drive, Siri doesn’t have the capabilities of a Google Assistant, Google Photos is superior to iCloud photos and so on…
  • In terms of hardware, the competition gets better and better, raising the bar for Apple to be the leader in innovation. The new Surface Studio by Microsoft is way more innovative than everything that Apple has introduced for desktop computers in the last couple of years. Okay, desktop computers and innovation don’t really sound like a natural fit anymore, but let’s look at cell phones. The Samsung Galaxy Note 7 had a superior camera than the iPhone 7 does (I wrote this in past tense and not present tense for obvious reasons), almost all Android phones have a fast-charging capability and when we look at the quality of a Google Pixel it’s on par with the quality of an iPhone.

So, with all these negative developments happening, Tim Cook was fortunately foreseen enough to already have chosen his potential successor. Be aware that this is just my personal hypothesis here, but I will lay out some reasoning why I believe that way. When Tim Cook personally convinced Angela Ahrendts to step down from her CEO position at Burberry to join Apple as a VP, I am pretty sure that not only the $80 million paycheck in her first year convinced her to move jobs but also the prospect to eventually to move up on the career ladder at Apple. I am pretty sure that Tim chose her to be his successor and he really wanted her to join Apple, why else would he as a CEO pay her more in her first year than he pays himself?

Apple right now is just at the start of facing a crisis. There is no sign that a new iPhone could catch up with the success of the iPhone 6 and 6S and new products like the Apple Watch do not live up to the expectations. Most of the new ventures that Cook tried so far, failed before they even saw the light of day. Examples here are the rumored Apple TV (an actual television) or the Apple Car, where rumor has it that no clear leadership and internal conflicts led Apple to shelve the project.

For Ahrendts, this would be the perfect time to step up to provide Apple with a better digital leadership and bring the company back on track. Her excellent track record at Burberry’s of providing excellent leadership and a clear vision, thereby transforming the company is the perfect requisite for Apple in its current situation. It’s easy, Ahrendts once said, to run a company while the economy is expanding, and easy to get lazy. A sharp downturn tends to focus the mind. Ahrendts would also help Apple to correct its focus and to see new chances of growth in products that are already forgotten by Apple’s leadership. “The idea is balance,” she once said in an interview, “knowing the market, the customer, and perfectly anticipating demand.” She seems like a natural fit for the position of the CEO of Apple, even if she doesn’t have a background in the tech industry.

Don’t get me wrong here, I am not an Apple hater, I like Apple products and I am writing this on a MacBook but with the recent update of the MacBook, I become truly worried about the direction Tim Cook is leading this company. I think Tim has contributed his fair share to the development of the company but should now have the courage to step down and leave place for improvement.

Please feel free to share your own opinion on this topic. I am really interested to see what you think about the recent developments of Apple and the consequences in the future.

 

Sources:
George Westerman, 2014. Leading Digital: Turning Technology into Business Transformation. Edition. Harvard Business Review Press.

https://www.theguardian.com/technology/2016/oct/25/apple-profits-sales-decline-2016-iphone-7

http://www.dailytech.com/Meet+Apples+New+CEO+Tim+Cook/article22538.htm

https://web.archive.org/web/20100914002455/http://magazine.wsj.com/features/the-big-interview/earning-her-strips/5/

http://www.macrumors.com/2016/10/31/ipad-sales-3q16-idc/

http://www.macrumors.com/roundup/apple-car/

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17 thoughts on “It’s time for a new Apple CEO”

  1. Great article, it’s an interesting topic and has been on the new during the last days. I agree with many of your thoughts. Especially the missing alignment between products is problematic, as there is not one aligned platform anymore. If your newest phone can not connect to your newest notebook that certainly can be seen as failure.

    However I would not say that this makes Apple a Fashionista. Given the secrecy of the company I can imagine that instead of investing into existing product lines they are focusing on new products that will drive digitalization forward.

    So far you have taken a perspective that looks at Apple from a product perspective. I would argue that it is rather important to look at processes inside of the company when determining the digital mastery level.

    Let me know what you think!

    1. Julius, thank you for your comment! I think you are right, one should definitely look at the processes when determining the digital mastery level. But I think the missing coordination behind the scenes is e.g. a process that is happening inside the company. And the consequence out of this is that products get developed in silos.

      I agree with you that Apple is a very secretive company, but due to its size, almost every information is leaked, even information about projects that never see the daylight. So I think as soon as Apple starts to working on something new you can read rumours about it. And when we look at the rumours in the recent past we can see that products like the expected Web TV service never launched (http://www.wsj.com/articles/apple-in-talks-to-launch-online-tv-service-1426555611) and that the project to develop a car are not going as planned (https://www.bloomberg.com/news/articles/2016-10-17/how-apple-scaled-back-its-titanic-plan-to-take-on-detroit). I would be very happy if Apple would once again launches something revolutionary like the iPod or the iPhone, but I doubt we will see that happening in the near future.

  2. Dear Hendrik, great article and thank you for sharing your thoughts! I agree with Julius: I do not think Apple is a Fashionista, right now. But, if it keeps going in this direction, it might become one. However, Apple is still innovating. While many people may not initially like the wireless headphones, they are a true technological advancement: the main problem with headphones is them falling out because of the cord, and the cord is often in a knot. By removing the cord, Apple fixed two problems! Unfortunately, however, people did not seem to be ready.

    In order to see what investors currently think of Apple, I looked up the stock prices and their movements. I noticed that today, Apple’s stock went down. Looking over the course of a year, Apple stock’s went up and down, and it indeed seems to be going down right now (if you’d like to see the curve, just google Apple Stock Price), but it is still going upward compared to for example May 2016. So maybe you are right, and it is indeed time for a new Apple CEO.

    1. Ananda, thank you for your comment. I fully agree with you that Apple is still innovating, just on a different, not very visible level. For example the real innovation of the Airpods that you described is that they are paired via the new Apple W1 chip and once they are paired with your iPhone they will automatically connect to your ipad and Macbook as well. So there is no hassle with connecting and disconnecting like it is the case with other bluetooth headphones. Or take the iPhone 7 CPU as a example. The design of the chip is really revolutionary and it is by far superior to the competition. The chipset might be even equal or better than the CPU in your computer if you have a MacBook Air or a MacBook Pro 2013 and older, which in my opinion is very impressive (http://www.macrumors.com/2016/09/15/iphone-7-faster-than-macbook-air/).

  3. Thanks for your article, Hendrik! Cook is great at managing the company and is truly dedicated to Apple’s brand. However, as you indicate, something is lacking. There is not the same buzz around the company as there was when Jobs was around. Business Insider came with an interesting solution this weekend: buy Snap and make Spiegel CEO.

    Apple has a was chest of over $230 billion and Snap has recently filed for an IPO, with an estimated value of $25 billion. The company does not even generate more than $1 billion in annual revenue, but Cook has indicated that Apple is not looking for cash cows; innovation is key. Evan Spiegel, Snap’s founder and CEO, knows how to create excitement around a new product, as was shown when Snap launched the Spectacles (Snap’s first hardware product) in California and Oklahoma. Besides, Apple is also working on smart glasses and could actually use Snap’s expertise to gain a head start. At the same time, Snap also appears to have intellectual property that could be of interest to Apple: its Snapchat ‘Lens’ filter is currently the most commonly used augmented reality features and its engineers are widely praised for their AI skills.

    Furthermore, Spiegel is know as a ‘product Picasso’, just like Steve Jobs. They are both known to be extremely dedicated to building great products, have the charisma to inspire the public and know how to innovate a company.
    Although your suggestion could definitely result in improvement compared to the status quo, the idea described in this comment might also bring the company back to its former glory – and help remain a Digital Master.

    https://www.businessinsider.nl/apple-should-buy-snap-2016-11/

    1. Dave, that’s indeed a very interesting thought! Especially seeing that for example with iOS10, Apple emphasized the importance of messaging by adding tons of new features to the internal message app. So I would guess they have an interest in Snap. However, don’t you think that this increases their digital capabilities even more but once again shows no clear direction of a strategy that Apple pursues. I mean even if they have a lot of money it would make more sense to buy real innovation in form of small startups like they did in the past. I would argue that, in fact, the only “big name” they bought in the past was Beats, which I still think does not make a lot of sense to me.

  4. Good article! Due to my last personal experiences with the iPhone I would totally agree to the fact that the hardware is not as good as it used to be.

    On the other hand side, I still think that apple is one of the most innovative companies.
    As a designer I was happy about apple bringing out the apple pencil, which was a huge innovation in comparison to all the wacom pads used by designers and illustrators.

    1. Michelle, thank you for your comment. I agree with you the iPad pro is a pretty nice tool for designers. On the other hand I don’t get why they are launching a tablet dedicated to professional consumers and in the same time they are launching a new MacBook Pro that doesn’t fulfill the expectations of professionals in no way.

  5. Hi Hendrik,
    I totally agree with you on that subject. In fact, I think Microsoft is currently launching more innovative products than Apple, which is already pretty awkward by itself. This can be demonstrated best by one of their recent hardware product launches: Both companies tried to show off with a new and innovative input device. Apple presented its Touch Bar for the MacBook Pro while Microsoft presented the Surface Dial for a number of its devices. While the Touch Bar seems to be more useful and straightforward for most users, the Surface Dial is a much more radical and innovative tool in my opinion. And it is rather targeting the creative industry – a core customer segment of Apple. I think it’s weird that the roles seem to have switched in the past years as in my opinion the Surface Dial would actually fit much better to Apple’s product portfolio and vice versa.
    I think Apple definitely needs to have a completely new product launch soon, because updating the iPhone every year just won’t be enough to stay competitive. What are thoughts on Microsoft’s latest product launches like the Surface Dial or the HoloLens?
    https://www.businessinsider.nl/microsoft-is-now-more-innovative-than-apple-2016-10/?international=true&r=US
    http://www.t3.com/news/microsoft-surface-dial-vs-apple-touch-bar-whos-leading-the-way-in-innovation

    1. I, for one am welcoming this shift. The unique selling proposition of Apple is great build quality, seamless integration of software and hardware and excellent customer support. Now, I’m not saying they abandoned these values, but the fact that other competitors are catching up reveals that his isn’t a source of lasting competitive advantage. Just renewing the iPhone isn’t going to be enough, and like many people pointed out, Apple needs to go back to the drawing board and create something revolutionary. As for the car project, which I covered during the IS course here: http://digitalsocialstrategy.org/informationstrategy/2016/09/23/apples-car-effort/
      I think that Apple has no business in the automotive industry, and this possibly stillborn idea serves as another warning that the company seems to have lost focus on what made it great in the first place.

    2. Lukas, thank you for your comment! I agree with you that I am very impressed with what Microsoft has put out there in the past. Especially the Surface and the Surface Book are a real threat to MacBooks and iPad Pros I would say. But I don’t know if creatives are really going to switch, as a huge advantage of MacBooks is their operating system and the specialized software on the mac.

  6. Hi Hendrik, Thanks for your post. You raise many good points! Just last week a friend of mine expressed their reservations towards ordering the new MacBook Pro due to its lack of “improvements” that would merit the upgrade… And I think this is an opinion shared by many – Apple has, since the beginning, pursued a differentiation strategy, allowing them to impose enormously high prices with the justification that other brands simply aren’t as innovative. This strategy becomes a huge problem when the ideas run out and people are scrambling for reasons to pay the price. I myself am an Apple user, and have in the past fallen victim to their “lock-in” strategy – even customers like myself are now less likely to remain loyal due to the disconnect between products you mentioned! Looks like Apple has some catching up to do…

    1. Hi Antje, thank you for your comment! I think Apple is under a lot of pressure to deliver innovation. Another example are the airpods, which despite Apple’s promise have not been going into the delivery phase. They are having quality issues as the sound is not delivered to every airpod in the same time, which is usually a problem that should be addressed before launching the earpods.

  7. Hey Hendrik, thank you for your interesting post. In some ways I agree, but there is certainly something to say against it. You’re absolutely right that Apple used to be way better in innovating and surprising the market time after time, but this started in a time in which the market of digital products was just making its entrance. I think that there used to be way more space for innovation back in the days when internet was having an amazing growth, intelligent phones and devices were completely new and no-one had every heard about a ‘tablet’. During this time, Apple took great initiatives in serving these new consumer markets, but if they didn’t, someone else would have done it.

    Nowadays, the market of tech products is overly saturated and it is incredibly hard to make a product stand out from the crowd. Competition is fierce, and technology standards have increased a lot. Of course Steve Jobs had a different vision than Tim Cook, but the different pace of company growth and innovation cannot just fully be blamed on the CEO in my opinion. We will see what the future brings Apple.

    1. Jorn, thank you for your comment. In part, I agree with you that of course you cannot blame everything on the CEO what is going wrong. But I still think that Apple could actually do more regarding the huge amount of resources they have. It seems to me that in terms of software they are lacking behind and they have become slower with their release cycle, which I honestly don’t understand.

  8. Hi Hendrix, Thanks for posting this interesting bog about Apple, I agree with your arguments on the problems that Apple is facing recently. I think the main problem lies on the fact that Apple has always believed and still believes that it is always able to come up with highly innovative products through its highly paid experts in aesthetics and design. But I strongly believe that it is time for Apple do the real work. It should listen to its customers and put some genius algorithms and analytics to its customer data to come up with products that surprises its current and potential customer. Have a Look at this article, Paul Papas, Global leader for the IBM’s Interface Experience, wrote an interesting article on “how big data is revolutionizing design”.https://www.wired.com/insights/2014/11/how-big-data-is-revolutionizing-design/

    1. Hi Mahdi, thank you for the comment. I agree with you that Apple needs to stack up their game to deliver added value to their customer. That’s why I am pretty curious for the new iPhone 8. As innovation has been slow for the last two models I really hope they are having a true innovation for the new iPhone ready.

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