Given this situation it was no surprise when Apple’s new and current CEO, Tim Cook, became the scapegoat for the company’s lower performance. Cook has been blamed for everything from lacking vision and exhibiting poor leadership to making faulty business decisions and selling out Apple’s values.
While these criticism may be true to some extent, it’s important to recognize that Jobs’ abilities and importance to the company tend to be overstated and Cook’s understated. Only by looking beyond the two CEO’s can we appreciate the new competitive environment Apple finds itself in as well as its impending institutional shift.
Ghost of CEOs past
One of the many things Jobs established during his time at Apple was a cult of personality around himself. It was Jobs’ ideas which inspired the company, Jobs’ personality which made the company work, and Jobs’ leadership that kept the company successful. Jobs was Apple; Apple was Jobs. A permanent spotlight thus became focused on Apple’s CEO.
When Cook became the new holder of that title in August 2011, the spotlight transferred onto him. Unfortunately the cult of personality didn’t – that remained centered around Jobs. Though Cook claims that Jobs told him “I never want you to ask what I would have done. Just do what’s right”, few have resisted the temptation to compare. Combined with Apple’s downtrend, it was only a matter of time before Cook became the disappointing younger sibling.
Of course, no Apple product has ever been the work of only a single man, even if that man is named Steve Jobs. Indeed, Jobs worked closely with Jonathan Ive, Apple’s Senior Vice President of Design and the man who Jobs called his “spiritual partner”. As the designer of the iPod, iPhone, iPad, and other Apple products, Ive can be described as Apple’s other creative genius. And while some may argue that it was Ives andJobs which made Apple products so unique and successful, it’s very unlikely that Jobs handpicked Cook to be his successor without considering Cook’s abilities as an innovator. At a minimum Ive and Cook are approximate to Ives and Jobs.
Furthermore, the impact that Jobs had has often been exaggerated. Jobs seems to have actively presented himself as playing a larger-than-life role at Apple. According to Walter Isaacson’s acclaimed biography of Jobs, Jobs regularly took personal credit for other people’s ideas. And because Jobs was the face of Apple, it was Jobs – not an anonymous Apple engineer – that consumers believed attended to the details of each device. The list of people from whom Jobs pocketed ideas include Ive and cofounder Steve Wozniak. As Jobs put it, “Good artists copy, great artists steal.”
With these items in mind, it becomes clear that the disparity between Cook and his predecessor isn’t as wide as critics make it out to be. Indeed, if we believe so much in Jobs, we should also believe in his choice of Cook as his successor. But if the identity of Apple’s CEO isn’t the cause of Apple’s slowdown, what is?
The “Cult of Mac”
To understand why Apple hasn’t been keeping up at its normal pace, one must first understand its customers. In a paper entitled “The Psychology of Intuitive Forecasts of New Product Utility”, authors Robert Meyers of the University of Pennsylvania’s Wharton School of Business and Shenghui Zhao of the University of Miami’s School of Business Administration explain that consumers make decisions about whether to buy a new product based on projections of its benefits. Since the reality of these guesses can only be observed after the product has been purchased, Meyers and Zhao argue that what consumers are really buying is “a speculative option: the ability to begin a stream of consumption that will reveal whether or not something is worth consuming in the future”.
This is the mechanism that formed Apple’s famously loyal customer base. By creating a line of innovative devices Apple has trained its clientele to expect a certain level of satisfaction from Apple products. Appropriately, the “Cult of Mac” believes so strongly that Apple is “worth consuming in the future” that they have gone to extremes to follow its products.
Few companies in the world enjoy such devoted customers, but as Apple is slowly coming to realize, this blessing is also a curse. Apple has reached a point where it appears to have exhausted all current directions of innovation and needs time to think of new ones. The problem is, its fans aren’t used to be patient. It is this pressure to produce something as groundbreaking as its past products which has put Cook – and all of Apple – under scrutiny. Forced to release a new product, Apple can only improve its existing devices in order to buy time. But even iterating old designs diverts resources that would have otherwise gone towards innovation, and so Apple finds itself in a difficult balancing act between the customers it must satisfy and the time it needs to research and create.
Rearranging the totem pole
Meanwhile, the tech industry is changing. Last year marked the first time digital track sales (think iTunes) suffered a decrease as streaming services became more popular. Apple’s response has not been convincing. Earlier this year the company acquired Beats Electronics for, according to many analysts, no apparent reason. Critics debunked the possibility of buying Beats for its streaming service, pointing out that Apple could have achieved the same purpose by expanding iTunes or directly buying already well-established services such as Spotify. And as John Gruber of Business Insider notes, “If Apple wanted to sell expensive high-end headphones, they [didn’t] need to spend $3 billion.”
Apple’s competitors, however, definitely have been noticed. Heading the charge against Apple is Samsung, whose Galaxy S5 became popular enough earlier this year to take an (albeit small) share of the smartphone market from Apple’s iPhone. In September, Apple answered with the iPhone 6 and iPhone 6 Plus, phones that are surprisingly reminiscent of the S5 with their larger-than-traditional 4.7” and 5.5” display, respectively, and similarly-rounded edges. This apparent imitation was on top of already comparable technical specs between the two brands’ devices. Not to be outdone, Samsung released the Galaxy Alpha later that month and the Note 4 the month after, both of which have been widely praised for their increased power and improved design.
Apple’s declining share of the tablet market is even more dramatic. According to the market research company International Data Corporation, the iPad now has only 26.9% of the market as of the second quarter of this year, down from 60% two years ago. Samsung once again made ground against Apple, gaining almost 10 percentage points to clinch 17.2% of the market.
Apple is also shockingly late in entering the immerging smartwatch market. While Apple plans to release the Apple Watch early next year, it has been more than a year since Samsung introduced the Galaxy Gear, and this past spring Motorola Mobility came out with the Moto 360. Furthermore, the current leader of the smartwatch trend, from the up-and-coming company Pebble, supports both iOS and Android, making the already generously praised device even more uncomfortably competitive to both Apple and Android bids alike. And while the Apple Watch is taking its sweet time coming into market, the Pebble Steel, Pebble’s next generation of smartwatches, has already arrived.
So what does all this mean for Apple? One interpretation of Apple’s recent slacking is that it is maturing as a company and in the process and is in the transitioning from creating to perfecting. “Cook and Apple are facing the harsh reality that no company can expect to continue innovating at a consistently high rate… retain control of large market shares and provide high profit margins in the face of increasing competition,” notes Wharton’s online business journal, Knowledge@Wharton. And it may be that Cook is just the right person to organize this transition with his efficient and methodical style. Apple’s purpose is no longer to get to the top but rather to stay at the top, and to do that it’s going to need to become more competitive.
Another possibility is that Apple could be on the brink of starting a whole new venture. The personal device industry has long become saturated and it’s hard to imagine many more revolutionary advances, even from Apple. If Apple wishes to continue to be “the innovator”, it has to start considering innovating in an entirely new branch of technology. In fact, Apple may already be stepping into the wearable tech with Apple Watch, and it’s easy to picture a cooler Apple counterpart to Google Glass in the near future. Alternatively, it could explore smart home appliances, as did former Apple engineers Tony Fadell and Matt Rogers with Nest.
Apple is at a crossroad, and judging from its recent change in behavior, Apple knows it. The Apple of yesterday can’t hold up for much longer. Now is the time to figure out what it will do next. It’s a daunting task, to be sure. But with the renewed leadership of CEO Tim Cook, nearly limitless resources, and the privilege of reputation and loyal fans, Apple will succeed as it always has.