Is Apple Cursed? An Intriguing Conversation…

Hola Todos!

I was reading an interesting article the other day on CNNmoney.com.  What originally caught my attention was the article’s title “Is Apple Cursed” questioning if Apple’s market dominance was soon to be in the rear view mirror.  Then, what really caught my attention was the author; a brilliant marketing academic, Gerry Tellis, from the University of Southern California.  I love to see examples when academics cross over into the mainstream as thought leaders and I wish I’d see more articles from academics in the popular press.

As I read the article, Professor Tellis describes a familiar story in the study of innovation; is rare, very rare for a company to maintain their market dominance for an extended period of time.  Competition is fierce, consumer behavior changes, the marketplace changes, the technology landscape changes and nothing lasts forever.

Professor Tellis details;

“Success, and especially market dominance, breeds complacency, arrogance, and reduced innovation. Companies such as Sony in mobile music, Hewlett Packard in personal computers, Blackberry in smartphones, General Motors in automobiles, and Kodak in analog photography were at the top of their respective markets, when their decline began. What caused the fall?

Critics often fault the rise of external technologies when discussing a company’s demise. But that is a superficial cause. In all the above-mentioned cases and many others, the revolutionary innovations that catapulted upstart firms were also available deep within the bowels of these dominant companies. But those innovations were put on hold, ignored, or belittled. What caused firms to overlook such radical innovations? A risk-averse culture, that’s what. Such a culture stems from a firm’s dominance and its success with its current stable of products. My coauthors and I have called this the “incumbent’s curse.”

So the question is, has Apple peaked?  Apple’s stock price performance over the last five months seems to indicate that the market believes Apple has peaked.  Moreover, the scenario described above by Professor Tellis happened to Apple as well.  From 1980 to mid to late 80’s, Apple was dominant in the personal computing market – first with the Apple II and then the Macintosh.  By the early 90’s, “WinTel” (Microsoft Windows and Intel chips) were the dominant player.  Apple almost went Chapter 11 by 1997.

To summarize, history tells us that very few firms can maintain its market leadership. While I would agree the data is clear, I would like to add a few thoughts to this conversation concerning Apple.

(1) Contrary to popular believe, Apple is not as top-down – either in a management sense nor with regards to innovation – as most observers would believe.  While Apple is very hierarchical as a whole, Apple’s top management particularly the Top 100 as they call it, is very flat given a company that size.  All of the key leaders meet every Monday and Apple believes everyone should work at headquarters and meet face-to-face.  Perhaps in Steve Jobs’ time, innovation was more top-down at Apple but not any more.  I’d bet the Apple faithful would be very shocked if Jony Ive was not part of the equation at 1 Infinite Loop.

(2) I believe there a number of misconceptions about Apple’s innovation cycle.  First, I’d agree that Apple has had a number of major duds during Steve Jobs’ 2nd tenure (USB “puck” mouse, G4 Cube, MobileMe, “AntennaeGgte” on the iPhone 4 just to name a few).  Second, the innovation cycle at Apple is much longer that most tend to believe.  The original iPod was released in 2001, while the first iPhone was 2007 and iPad was 2010.  The shortest of these cycles was three years while the longest was six.  If these innovation cycles remain consistent, we should expect at least one major new product line from Apple in the next 12 to 24 months (e.g., iWatch or Apple TV anyone?).

(3) If one were to take a careful look back at the launch of each of those major Apple innovations, the business press was not universally applauding.  When iPod came out, most pendants were perplexed to what was Apple doing.  Journalists were very curious about the iPhone but questioned whether Apple could break into a market with so many established players, especially at that $499 price point.  In 2010, the iPad was not nearly as well received as the iPhone (what do we need a giant iPod for?).  Even in 2012, many pundits criticized Apple for developing the iPad Mini.  Even I was critical that Apple missed the price point.  The Mini sold out during the holiday shopping season and Apple never has more than 1 to 2 weeks of inventory for the Mini.

(4) Perhaps the most telling indicator of whether Apple will be able to maintain market leadership or become “cursed” is their internal culture. I would wholeheartedly agree with Professor Tellis that previous market leaders were risk-adverse, complacent and arrogant – incredulous that some other firm could knock them off their perch.  One has to look no further back than to 2008 to 2010 while iPhone and Android destroyed Nokia and Blackberry’s worldwide market leadership.

(5) What makes Apple’s culture different?  That’s an easy question: Creative Destruction. Economist Joseph Schumpeter coined this term and perhaps the easiest way to define it is cannibalization.  My hypothesis is that for every firm that lost its market leadership, I suspect a culture that was too afraid of cannibalization if its own products.  For the record, Apple is NOT afraid of cannibalization.  In multiple examples turning Steve Jobs’ 2nd tenure, particularly with the iPod and iPhone lines, the new product made the previous product obsolete.  Reporters asked Steve Jobs if he was afraid that the iPad would cut into Mac sales – we was not.  Luckily for Apple, CEO Tim Cook also preaches the discipline of creative destruction (iPad Mini radically cut into iPad grande sales).  In multiple earnings calls and interviews since becoming the CEO, Tim Cook has repeated the same mantra (paraphrased), “I’d rather we cannibalize ourselves than have someone else do it for us.”

In closing, I’m curious as everyone else to see what will happen to Apple.  Will history repeat itself?  Is Apple cursed like all those other firms who were once market leaders?  Only time will tell but I believe Apple has the deepest leadership bench in tech and their culture is stronger than most.  In my eyes, I still see Apple just as dominant over the next 3 to 5 years given what they have in the pipeline.  Any time frame longer than that is too far out to project.

Something to think about today…

 

Best regards,

Dr. Dan-o

 

Daniel M. Ladik, Ph.D.,

Associate Professor of Marketing

Stillman School of Business

Seton Hall University

 

 

 

The Information Tsunami on This Week in Social Media

Hola Todos!

I have a really, REALLY good video for you to watch that is FULL of nuggets.  Robert Tercek, host of one of my recommended video blogs “This Week in Social Media” (click here) did the keynote at Social Media Week titled “The Information Tsunami” (click here).

There is a strong build up to the 27 minute mark when the “Tsunami” metaphor kicks in, however, his version of Dr. Dan-o’s value creation/creative destruction begins at the 37 minute mark.  Mr. Tercek does an excellent job describing the four pillars of Social Media – Create, Discover, Consume, & Monetize – through the market leaders Apple, Google, Amazon, and Facebook.   Although I have heard most of the content Mr. Tercek presents, I have never seen it so elegantly organized in this way.

To be direct, this is a MUST WATCH and I will make it a requirement for both of my upcoming social media classes in the spring semester.

Enjoy!

Dr. Dan-o

 

 

 

 

 

 

Leadership – Creative Destruction

Hola Todos!

I know this could have an easily been a Friday keyword term but Mr. Mike’s leadership nugget brought it out.  Creative Destruction is one of my favorite terms and I learned it WAY back as a young undergraduate economics student.

In numerous works, Austrian economist Joseph Schumpeter emphasized what he called creative destruction whereas “that capitalism can only be understood as an evolutionary process of continuous innovation and creative destruction.” For more detail on Schumpeter, click here.

There are times that the only way to make a giant leap forward is to destroy what you are doing now (e.g., because you current product or service WILL never get THAT much better).  Kill the old and bring in the new.  The funny thing is, very few firms have the “guts” to kill their existing value offering.  Microsoft never did it but Gillette does it almost every time they create a new blade.  Fusion creatively destructed Mach3. Apple is creatively destructing the PC market because the gains in tablets could be three or four times what PC could have been.

Let’s hear it Mike!

 

To:  The Great Leaders Who Have a Passion for Continuous Learning

“And when we achieve the outer edge of any of our abilities, we do what comes naturally: we keep moving into the next” writes Tracy Saville in her article, Blow It Up: Begin Again.   This is one of the great challenges all great leaders face throughout their professional and personal life: hitting their “proverbial glass ceiling of creativity.”  Their continuous innovation – new ideas, new solutions, new possibilities – all of a sudden come to a point of apparent exhaustion.  So what do they do?  Saville’s response is: “Blow it up and start over.” There is a secret.

“And this is the simplest secret of all: we can rest, we can lay down our efforts for a time, we can do over, start over – again and again it seems – and we can re-charge our batteries using a different fuel source than before.  We can because we must.  This how we find the courage and inspiration to move forward.  The discipline it takes to be comfortable with a life spent in constant change and evolution is the discipline hallmark of every great leader and great achiever.”

John Gardner, author and former Secretary of Health Education and Welfare, wrote:  “Self-renewal is possible if we don’t lose our capacity to learn and grow. But renewal…depends in some measure on motivation, commitment, conviction, the values men live by, the things that give meaning to their lives”.  When you feel you are getting to the outer edge or your abilities, pause and rest.  Blow it up, and begin again. Look beyond the outer edge and find your life’s endless possibilities and beauty.  And have fun doing it.

Have a beautiful day and an incredible week!!!

Mike

 

Contact Information:

Michael M. Reuter

Director, Center for Leadership Development

Stillman School of Business

Seton Hall University

Tel: (Office) 973.275.2528;

Email: Michael.Reuter@shu.edu