That's essentially George Colony's contention. "Apple will decline in the post-Steve Jobs era", the Forrester Research analyst opines. The sentiment is stunning in context of Apple's first two quarterly results following Tim Cook's ascension to chief executive. The company generated more revenue ($85.83 billion) than all fiscal 2010 ($65.23 billion). Net income ($24.12 billion) exceeds that of fiscal 2009 and 2010 combined ($22.25 billion). That's hella good performance.
Yesterday, I argued that "Apple is better off without Steve Jobs", in part based on recent performance that derives from Cook's running logistics for the better part of three years. But I also believe that no one knows the future, and that good reporting is about looking from different viewpoints. So today I offer counterpoint to yesterday's prognostication. Yeah, I'll rebut myself, something I frequently do. You just don't see the process, and Colony's argument is good foundation.
Disruptive Risks
The question to start with: What is Apple? For many long-time Mac fans, Jobs is Apple. The two can't be separated. But for the hundreds of millions of people buying iPads, iPhones and iPods over the last decade, Apple is something else. According to a new report released today by NPD, one in three Americans owns an Apple product. The majority of newbies own iPhone or iPad, but increasingly the tablet.
Referring to iPad, NPD analyst Ben Arnold says that "one-in-five Apple owner households has one -- nearly equivalent to the number that own an Apple computer". These aren't Steve Jobs' people -- the so-called Mac faithful that worshipped him and his sense of style. Most of them probably didn't know who Jobs was until his tragic, well-publicized death.
But Jobs' influence over these Apple product owners is undeniable. His leadership led these products to market and define a style that Cook so far fails to exhibit: Disruptive risk-taking. Last year I wrote about decade-past Apple launches that are foundational. Three were huge risks, and Apple took them at a difficult time -- during a recession: OS X, Apple Store and iPod, in order of 2001 release. But the big pay-off risks came later: iPhone and iPad, particularly, and culminated others.
Apple launched iPhone on one carrier in 2007, moving into a market where it had no expertise, no experience. Then came iPad, which moved into a market where many other computer and consumer electronics giants had failed. Yet these risks paid big rewards. During fiscal 2012 second quarter, for example, iOS devices generated 76 percent of Apple revenue. iPad and iPhone generated $29.3 billion revenue, or 74.8 percent of revenue. These disruptive risks define Jobs' return as Apple CEO.
But who will take such risks now? Who will lead disruptive changes like these? Ponder those questions while reading the next section.
David Thinking
In December 2009, I posted here at BetaNews something taken from my personal blog months earlier: "Why Apple succeeds, and always will". I wrote:
Apple doesn't play by the rules. It reinvents them. Apple applies what I call 'David Thinking' to its broader business, product development and marketing. Apple is David to Microsoft Goliath -- and other ones, too. Goliath plays by one set of rules. David choses to change the rules, which favor his strengths rather than those of Goliath.
David thinking derives from research political scientist Ivan Arreguín-Toft conducted. In 2005 book, How the Weak Win Wars: A Theory of Asymmetric Tactics, he explains how seemingly weaker opponents can prevail against stronger ones by changing the rules of engagement. He produces excellent historical data showing that, in wars, when smaller rivals use such tactic they are more likely to win, even against mightier opponents. The Biblical example of David vs. Goliath is good analogy. Rather than fight like Goliath -- and almost certainly lose by dawning armor and sword -- David relied on his own strengths. A slingshot and stone kept him out of Goliath's reach but still on the offensive. I call this approach David Thinking.
But Apple has gone through dramatic transformation since I wrote that analysis. Apple is no longer David but Goliath. Apple's size and success makes it the status quo and encourages management decisions that seek to preserve what is rather than take forward-reaching risks. The higher Apple's stock price rises or the more customers it acquires, the less attractive risk-taking looks to management. Today's Apple, under Cook's leadership, is in jeopardy of losing the risk-taking, David Thinking that defined Steve Jobs' leadership. It's answer to the question I started with: What is Apple? A disruptive, risk-taking, rule-changing innovator.
Charisma vs. Competence
Apple is not a cult of Mac enthusiasts; they're a minority now. As stated earlier, most people buying the products today have never been influenced by the so-called "reality distortion field" -- the spell of Steve Jobs. Apple's cofounder spent little time on the keynote stage starting in 2008, because of his health.
Colony sees Apple for what it was, not what it is -- a business led by a charismatic leader:
In charismatic organizations, the magical leader must be succeeded by another charismatic -- the emotional connection of employees and (in the case of Apple) customers demands it. Apple has chosen a proven and competent executive to succeed Jobs. But his legal/bureaucratic approach will prove to be a mismatch for an organization that feeds off the gift of grace.
That's not Apple 2012, nor was it before Cook's ascension to CEO about eight months ago. There's a well-known management maxim that charismatic leaders often can't grow companies far enough because they micromanage too much. Many of the most successful startups required the charismatic leader to step back and put someone else in charge. Given Jobs' health situation and Cook largely running day-to-day operations, at least from January 2009, this leadership change effectively occurred at Apple years ago. Jobs continued to provide vision -- and good taste -- while Cook expanded the core business. As I asserted yesterday, Jobs' ego held back Apple. His declining health let Cook make competent decisions about manufacturing and distribution logistics that generated huge sales. Apple can design pretty products, but it means nothing if there is no place for people to buy them.
Meanwhile, the faithful decreased in numbers, particularly outside the company. That Apple shares soared, rather than collapsing, after Jobs stepped down as chief executive and then tragically died, says much about the myth and the man -- that the charismatic leader and company are one. They aren't.
Colony and I agree about something that is important to Apple's future: "When Steve Jobs departed, he took three things with him: 1) singular charismatic leadership that bound the company together and elicited extraordinary performance from its people; 2) the ability to take big risks, and 3) an unparalleled ability to envision and design products". I absolutely agree on the second, but question the other two -- how much is myth versus the man. Colony says that "Apple's momentum will carry it for 24-48 months", and without a charismatic replacement will decline like the company did after Jobs left in 1985 or following the departure of Polaroid and Walt Disney founders.
No Risks, No Gain
Apple doesn't need charismatic leadership. The company requires someone with vision to think like David, to constantly change the rules of the game and in process take risks in innovation. That was Apple under Steve Jobs.
What's risky about iPhone 4S or new iPad? Sure, Apple developed these products while Jobs was CEO, but he also was ailing and Cook ran day-to-day operations. Cook has yet to demonstrate David Thinking, not that he's had much time. Still, there's time enough.
My favorite example of Jobs' disruptive approach is iPod nano, and I watched to see if there might be something similar with third-generation iPad. Apple introduced the diminutive music player in September 2005 to replace the iPod mini, which was the standard copied by competitors. Just as their larger devices arrived for the holidays, Apple transformed the category with the tiny nano.
Something else: Apple killed off iPod mini at the height of popularity. No one does that! But Apple did. iPod sales dramatically rose with launch of the mini in early 2004 and simply skyrocketed after the nano. iPad's high-resolution display adopts similar philosophy but is nothing near as radical. In more ways, it preserves the status quo rather than defies it. Cook must do better.
For Apple to remain Apple, disruption and risk should be defining characteristics. If not, then there is no Apple without Steve Jobs. The company has become something else.