Why Apple Is In Trouble

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Why Apple Is In Trouble

by Terry Heick

While it will be years before the long-term effects to its elegant product and billion-dollar brand are known, it’s clear that with the death of Steve Jobs, Apple lost its muse.

In losing its muse, has Apple also lost its way?

Jobs died on October 5, 2011, and right now we’re a couple of weeks short of the one-year anniversary of his death. Understanding the impact of that loss on not only Apple, but the technology industry, and even education, isn’t simple.

Jobs’ rise wasn’t as meteoric as it might seem. Before his simultaneous engineering and business leadership power-plays, he had plodded along for almost two decades, tinkering, swapping, rethinking.

Everything.

Before seeing the success that made his black turtleneck as much of a cultural icon as the Ford logo or Nike swoosh, there was angst, slow growth, and uncertainty. Apple computers was founded in 1976, with hardware releases of the Apple I and Apple II in 1976 and 1977. It’d be 6 more years before the Apple III, and in 1984 the first Macintosh was produced.

Judged by today’s start-up age, this is the timeline of a terrapin.

Economics

After a dramatic exile and 11 year hiatus, Jobs rejoined the Cupertino-based company in 1997 as the company struggled for profitability, losing $816 million in 1996 alone. To restore order, Jobs slashed inventory, forged new retail models, and focused on what he did best–design.

Jobs created simple and elegant forms that evoked emotion–conjured real feeling to look at and hold. Made adults grin. That he took computer hardware from something cold and lifeless to something human and magical is both a miracle of marketing, and strong evidence that design is a universal language.

While new-product, new-thinking approach would take years to mature and bear real fruit, we all know how the story ended. Apple stock eventually rose more than 9,000%, and the world is now refracted through Apple products.

It’s no coincidence that after Jobs’ death in October 2011, Apple stock immediately fell more than 10%–almost $30 billion dollars. As of today, Apple is worth $350 billion, and many analysts predict growth could see Apple become the first company ever to reach a value of a half-trillion dollars. (For a sense of scale, the total GNP for the United States in 2010 was 14.64 trillion.)

So money isn’t an issue. iPads are flying off the shelves as quickly as Foxconn can screw them together, and they’ve got enough cash to pay off Greece’s crushing debt payments for the next two years.

But somehow, the future feels a bit less certain.

online-libraries

Weakening Industry Leadership
In the fall of 2011, Sprint spent $20 billion for 30 million iPhones. For a struggling company like Sprint, that’s what they call betting the farm. With orders like this pouring in, and cash on cash on cash, market saturation is more of a threat than profit margins or competition. Seems like a good place to be.

But in the tech world, innovation is everything.

Apple has been riding their current wave for over a decade now, bolstered by the prescient vision of one Steve Jobs who was either able to see the future, or create it himself. If new Apple CEO Steve Cook lacks that same vision for innovation and industry leadership, he’ll have to hire someone to conjure it for him.

In the tablet wars, Android, wisely choosing to not face Apple head-on, recruited Barnes and Noble, Amazon, and Samsung, finding at least some strength in numbers. 4Q 2011 sales of such devices were up 64.3% year-over-year, indicating at least some signs of life.

And now rather than Android Tablets versus iPads, it’s Nook, Kindle, and Samsung Galaxy versus iPad–still likely not a winning formula over the next three years–but further out? Perhaps. Industry analyst Tom Mainelli expects Android tablet marketshare to surpass that of the iPad by 2015, if for no other reason than sheer volume and affordability.

This is not a profit issue; Apple can essentially print its own money, and will continue to do so for the foreseeable future. But it is a question of leadership and momentum. Even if Jobs left behind a drawer full of genius ideas waiting to hatch, those ideas were based on a context that grows older by the day–and greys by the quarter.

Right now, Cook needs fresh thinking.

Think Different Jobs

Form Factor

In a 1998 New York Times article discussing Apple’s return to profitability, it was the iMac that was given the praise, with “Mr. Jobs” as an afterthought.

“The company’s renewed financial strength was driven during the quarter by the success of its new consumer product, the $1,299 iMac. Mr. Jobs oversaw development of the iMac and positioned it as a system designed to provide easy access to the Internet.”

Truth be told that for all of his efficacy, Jobs may have simply come along with the right idea at the right time. The internet was exploding, but it was also full of wires, hard plastic, and DOS. A bit of glass here, a dock full of icons there, and he had done the unthinkable. Jobs had made it sexy to access information.

While the late 1990s saw culture infatuated with “the internet,” Apple’s success had not only injected new words into our vernacular, but helped us lust, as consumers, for new thinking.

Simplicity.

Interdependence.

Form.

The iPad 3–err, new iPad–was delivered to market right on time, and sales are white-hot: 3 million units in the first 3 days, 17 million in 3 months. It features faster processing, and a beautiful retina display apparently–in a nod to irony–made by Samsung.

But it’s thicker (by .6 mm), and heavier (by 51 grams)–this for the wif-fi only version, with the 4G version the same thickness, but another 11 grams.

11 grams is about 4 and a half pennies of added mass–certainly not a jarring amount. And in all likelihood, the added weight was greenlighted by Jobs himself. But when judged against the iterative improvements from the original iPad through iPad 3, there may be some cause for concern.

Very little new thinking has emanated from Cupertino since, well–since the original iPad launched. While a company can’t be expected to reinvent the wheel every 24 months, the nature of such minor improvements, mixed with Apple’s recent entry into the textbook market may represent a problem.

Apple may be unsure where to go next.

A Digital Landscape Perpetually in Motion

The new iPad mini, a sub-10” version of the current iPad, would again suggest recognition of the desirable form factor of the Google Nexus 7 and Amazon Kindle Fire. But in 2013, the very nature of information is changing: what it looks like, why we need it, when we need it, and what we do with it.

Instagram, Pinterest, YouTube, and twitter all change the virtual landscape as they swell (and shrink) in popularity, not to mention facebook’s quest to literally replace the internet.

While any digital platform worth its salt has an “app” for iPads and iPhones, for Apple to continue its position of industry leadership, it will have to think beyond the “industry” itself–to understand not just sales projections, consumer demand, or core competencies, but the stunningly complex and diverse ways we, as a human race, continue to consume media, request information, and socially connect.

For Apple, such understanding will require not iteration, but perpetual reinvention, a daunting task they’ll have to manage without their muse.

This article was written by Terry Heick for Edudemic Magazine; image attribution Daily Beast, Albert Watson, foxcrawl.com, and flickr user johanlarson