What’s Wrong With Apple?

Apple held its huge product announcement event last week, and what once had people besides themselves with excitement has become a near pointless program of copied features and missed expectations.

It is a shame to watch — much like it was when Apple fired Steve Jobs. It appears that the firm has forgotten what Steve did to turn Apple into a unique company. As it drifts to becoming just another tech firm, I’d like to revisit what Apple was when people anticipated launches like this as potential life-changing events rather than the more typical PowerPoint-defined launch.

I’ll close with my product of the week: Keezel is a mobile virtual private network that can make international travel less risky and potentially more fun.

The Way Apple Was

When Steve Jobs returned to Apple in the 1990s, he had a unique skill set — one he developed in part while traveling across India to study religious leaders. He wanted to learn how those men were able to generate massive amounts of money from poverty-stricken populations.

One thing he discovered what that his inherent skill as a manipulator — someone who naturally could sense how to get others to do what he wanted — could be scaled to worldwide audiences. What he learned allowed him to acquire funding for NeXT based on a scripted video that fooled investors into thinking he had working code, although there wasn’t yet a functioning product.

In effect, he found that reality really didn’t matter — what people believed mattered. That concept carried over to the first iPhone, which basically was a pretty brick when first presented, and it provided a path to success that transformed a company that was all but bankrupt into the most highly valued company in the world.

Had Jobs not been able to deliver in either case, he likely would have gone to jail for fraud and Apple would have failed. Undoubtedly knowing that, in both cases he drove his people to a level of execution that resulted in products that just met expectations.

Then he wrapped the products with massive placement programs and astronomical advertising budgets, which convinced buyers that to be someone you had to have an iPhone, and he took out most of the then-dominant smartphone vendors at the knees.

Even though firms like Nokia, Motorola, Palm, Microsoft and Research In Motion arguably were entrenched and certainly more powerful in the smartphone space, they couldn’t compete. Most were not only knocked down — they were knocked out.

Apple’s process was unique, however. It wasn’t taught in schools. Like most CEOs of this age, Jobs didn’t ensure that his successor either understood his process or could execute it. To be fair, that was largely because Steve Jobs thought he could beat his cancer and eventually would return. In short, he wanted to make sure Apple’s board would take him back and once again put him in charge of the firm he had turned into a giant in the industry.

Tim Cook’s Failure

Much like Steve Ballmer, who followed Bill Gates at Microsoft, Tim Cook lacked the skill set that Jobs had. He had been selected by Jobs specifically to make sure he wouldn’t overshadow the Apple founder. Like Ballmer, he was operationally more than just competent, but he had neither the charisma nor the product focus that defined Jobs.

Also, what Cook initially learned at Compaq — although he was wasn’t even a major player there — led him to think that Jobs was wasting money and effort despite the success. That was despite the fact that Compaq failed, and none of the other firms using similar models were in Apple’s league in terms of profit or valuation.

The industry-standard model was vastly different from Apple’s. The industry’s strategy was to shotgun out products. Apple kept product lines simple, reducing both manufacturing and inventory costs significantly, and instead spent heavily on demand-generation efforts.

The industry approach generated lots of product diversity, but it didn’t allow for major demand-generation campaigns. Thus, even collectively, the products competing with Apple’s didn’t do as well.

Jobs’ practice was to hold up a single example of his idea of perfection and convince buyers that one size effectively fit all. Everyone else would shoot out lots of diverse products that might better meet individual needs, but the efforts lacked the budget to connect those products with the people they targeted.

Samsung actually took share from Apple years back through a similar effort. What that showcased was that any company could follow Steve Jobs’ example and even beat Apple if it had the right product and an effectively designed and resourced marketing plan. Samsung had way too many products, though, and it couldn’t sustain the budget.

Apple Is Becoming Compaq

There is a best practice for CEOs, which is that they need to change the company they are running into something they understand. Tim Cook neither has the skill set nor the understanding of what Jobs did to replicate Steve’s success.

As a result, he is changing Apple into Compaq by cutting demand generation and bringing out more and more diverse products, in the hope that one of these variants better matches what you and I want in a phone than Samsung and other competitors provide.

It’s not going well, because the need to increase Apple’s margins is resulting in overpriced phones that are so cost reduced, they can’t effectively compete in market.

The overpriced problem is tied directly to Apple’s need to sustain margins that are well above average, and the only way to accomplish it now is to cost reduce the phone dramatically while raising its price.

The increasing danger is the outcome that customers increasingly are paying more for less, and consequently many are deciding not to buy Apple. They aren’t yet switching to competitors en masse, but they are holding onto their phones much longer, realizing that their old iPhone still does everything they want it to do. If you are happy with what you have, why spend money for an overpriced device?

Apple did seem to apply patches to the older phones that slowed them down, in what appeared to be an effort to drive early upgrades, but people complained. That policy was withdrawn, making it harder to trick users into upgrading to the newest model.

That brings us to last week, when the announcements seemed consistently to convince people that they didn’t need a three-eyed phone and would be better off keeping their existing phone and saving the money.

Reporters who used to brag about their new iPhone instead seemed to be bragging they were still using an iPhone 6, saving around $5K as a result of not buying a new phone every year.

Wrapping Up

When Steve Jobs returned to Apple, he drove a process that favored manipulation and marketing over product breadth to create the most highly valued company in the world. Tim Cook, who likely was selected specifically because he didn’t understand Jobs’ model, stepped in and dismantled Jobs’ success mechanism.

While there are far more devices than when Jobs was there, the result has been slowing sales and fewer exciting me-too products. Even Apple’s lead designer has left the company, because he just wasn’t needed anymore.

It continues to surprise the hell out of me that after the success that Jobs had, rather than implement the process that he made so successful, Cook has fallen back on a process that killed his old company.

It is a shame but it isn’t unusual, because most CEOs do a bad job of succession planning. In this case, like several other CEOs I’ve covered, Jobs apparently wanted Cook to fail. As a result, it shouldn’t be a surprise that the excitement has left Apple products, and I expect that eventually that will do ugly things to Apple’s valuation.

So far, Cook hasn’t made a mistake like Steve Ballmer’s attempt to buy Yahoo, which revalued Microsoft’s stock, but eventually Apple’s investors will come to realize that it is now a very different company and no longer worthy of the huge valuation that once defined it.

Rob Enderle's Product of the Week

There are several risks to traveling overseas that you might not know about, as well as one annoying problem. One of the risks is that the WiFi networks you connect to aren’t secure, and you may have your identity or credit card information stolen as a result. The annoying thing is that if you want to watch your programing from Amazon or Netflix you can’t, because you are out of the country.

Keezel is a personal virtual private network. What a VPN does is link you to an address that is in your chosen country to fool services into thinking you are still in the country.

Keezel VPN, Internet Encryption Device

Keezel VPN

It also encrypts the data stream and makes sure some third party can’t read your email, inject a virus into your system, or steal your credit card information.

Sadly, Amazon, which sells Keezel for around US$170, has figured this out and now blocks VPNs, as I discovered on my trip to London last week. However, Netflix still allows you to stream and download as if you were still in the U.S.

As long as you live on Netflix, you can still stream and save content as if you were at home, and on a nine-hour plane trip (which is how long it takes me to fly back from London) you go through a lot of content.

Another feature of this product is a built-in power bank you can use to recharge your tablet or smartphone, so you don’t need to carry both Keezel and a battery bank when you travel.

While I’m not as excited about this product as I was when I first used it and Amazon didn’t block it, it still provides safety and access you generally can’t get abroad, and it does make traveling more convenient. As a result, the Keezel personal VPN is my product of the week.

Rob Enderle

Rob Enderle has been an ECT News Network columnist since 2003. His areas of interest include AI, autonomous driving, drones, personal technology, emerging technology, regulation, litigation, M&E, and technology in politics. He has an MBA in human resources, marketing and computer science. He is also a certified management accountant. Enderle currently is president and principal analyst of the Enderle Group, a consultancy that serves the technology industry. He formerly served as a senior research fellow at Giga Information Group and Forrester. Email Rob.

1 Comment

  • Apple used to be good, still over prices, but much better. I still have a Mac mini from 2011 which is now a media/file server (i have switched to linux for my main desktop). 2010 Macbook still going strong running Mojave. I have the mirrored door G4, still running 10.5.8. The point is the equipment was easier to upgrade, easier to open and change stuff. Now just like lots of other things, total corporate control and they dont want you fixing anything! To be honest, Apple was interesting, now its boring. I dont care about stupid apple watches, apple tv programs, silly games etc.. I want a real decent reliable computer that can be upgraded. Its one of the reasons of my switching to Linux Mint. There is no innovation anymore, its just lawyers and copying

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