How Apple Has Failed Steve Jobs

by Brad Moon | September 12, 2013 9:01 am

How Apple Has Failed Steve Jobs

Apple (AAPL[1]) did the entirely expected Tuesday and released a pair of new iPhones. But with the exception of Touch ID fingerprint scanning, we didn’t get anything remarkably new — mostly relentless, iterative improvement over last year’s model instead.

Actually, that’s not quite true — the iPhone 5C pretty much is last year’s model, but stuffed into a colorful polycarbonate shell with a hundred bucks knocked off the price tag.

There were no surprises, none of late CEO Steve Jobs’ famous “one more thing” announcements. The whole thing was done in just over an hour, and was followed by a two-day spanking of Apple stock that really accelerated Wednesday.

What gives?

That Was Then

Steve Jobs led the charge to turn Apple around at a time when the company was in deep trouble and he did so by innovating and taking risks.

Apple Computer dropped the “Computer” from its name, becoming a consumer electronics powerhouse that destroyed Sony’s (SNE[2]) Walkman with the iPod, made smartphone pioneer BlackBerry (BBRY[3]) virtually irrelevant with the iPhone, beat Google (GOOG[4]) to the living room with the Apple TV streaming box and topped it all off with the iPad, a game-changer that dominated the new tablet market while bruising PC sales. Jobs wouldn’t hesitate to kill his own successes to make way for the next big thing, whether it was the iPad eating into Mac sales or axing the iPod Mini, the top-seller in Apple’s lineup[5] to make way for the new, flash-based iPod Nano.

All risky, innovative decisions, but the new Apple was a leader other companies tried to follow.

This Is Now

Since Steve Jobs passed away and Tim Cook has taken the reins, the shine has come off Apple and its stock. While AAPL did reach its nadir at $700, one could strongly argue that much of the push still came on products Jobs had a hand in. However, Apple stock now sits 33% off that peak and was nearly 43% off earlier this year.

One of the most fundamental issues: Apple’s transformation from risk-taking innovator to a hawk of the bottom line.

The new Mac Pro[6] notwithstanding, Tim Cook’s Apple has been cautious, releasing iterative upgrades of existing products. And it’s falling behind.

The iPad Mini was a smaller iPad released in reaction to the success that Google (GOOG[4]), Amazon (AMZN[7]) and others had in selling cheap, 7-inch tablets. Earlier this year, Apple lost the tablet platform crown to Google’s Android[8] — it’s no longer dominating the tablet market, but is instead trying to keep up.

The new iOS 7 is the biggest upgrade to Apple’s mobile operating system since it was released, but it was needed just to level the playing field with Android and Microsoft’s (MSFT[9]) Windows.

Meanwhile, the iPhone has seen market share shrink to just more than 13% worldwide as consumers increasingly favor cheaper, bigger and more customizable Android smartphones. Apple’s response? Several years of higher-resolution displays, faster processors, and thinner and lighter phones. A fingerprint scanner. And now, with the iPhone 5C, different colors. The low-cost iPhone that Apple could have leveraged to dominate the low end? Nowhere to be seen (a $549 iPhone 5C is not it).

It’s no wonder investors are not impressed, and even Apple’s board is apparently getting restless[10] about lack of innovation.

The Difference

Of course … Steve Jobs used color to help drive sales of refreshed products (iMacs, iBooks and iPods all got the color treatment), so why can’t Tim Cook get away with it?

Because with Jobs, despite the fact he offered different colors and price points to lock down customers on Apple’s existing products, investors and consumers alike had confidence that the next big thing was around the corner. No one thought that Jobs had run out of ideas — that color was his attempt at innovation.

But that confidence is gone.

Tweaking a year-old iPhone to make it slightly more affordable isn’t innovating or creating a new market — it’s trying to wring as much as possible out of an existing smartphone market without taking the risk of releasing a true low-cost device.

That could be forgivable, except there’s no sense that Tim Cook has something else revolutionary up his sleeve.

There are rumors of an Apple smartwatch and an Apple television set[11], but even the faithful are starting to worry that these products will never materialize — or perhaps worse, that by the time they do, Apple will be the also-ran, not out front.

Tim Cook’s Apple needs to prove it can innovate the way Steve Jobs’ Apple did and take risks if it’s going to return to its glory days. Today’s Apple is madly profitable, relentlessly efficient and being run like a well-oiled machine. However, as Microsoft has so readily illustrated with Windows 8 and its Surface tablets, once you stop taking risks and settle in to being a predictable, profit-focused machine, it becomes a whole lot tougher to innovate your way back to relevance when your core business starts to slump.

Without innovation and the kind of risks that Steve Jobs was willing to take, the days of Apple creating and dominating new product categories — and the explosive growth that comes with this leadership — are being left behind.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.

Endnotes:
  1. AAPL: http://studio-5.financialcontent.com/investplace/quote?Symbol=AAPL
  2. SNE: http://studio-5.financialcontent.com/investplace/quote?Symbol=SNE
  3. BBRY: http://studio-5.financialcontent.com/investplace/quote?Symbol=BBRY
  4. GOOG: http://studio-5.financialcontent.com/investplace/quote?Symbol=GOOG
  5. the top-seller in Apple’s lineup: http://www.engadget.com/2005/05/05/4gb-ipod-mini-apples-best-selling-player-plus-a-mini-shuffle/
  6. new Mac Pro: http://www.apple.com/mac-pro/
  7. AMZN: http://studio-5.financialcontent.com/investplace/quote?Symbol=AMZN
  8. Apple lost the tablet platform crown to Google’s Android: http://gigaom.com/2013/05/01/ipad-is-top-selling-tablet-but-android-now-most-common-tablet-os-says-idc/
  9. MSFT: http://studio-5.financialcontent.com/investplace/quote?Symbol=MSFT
  10. Apple’s board is apparently getting restless: http://investorplace.com/2013/08/friday-apple-rumors-apple-board-pressures-ceo-over-innovation/
  11. Apple television set: http://investorplace.com/2012/12/will-apple-tv-be-steve-jobs-salmon-of-doubt/

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