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As Apple Slowly Turns into HP

25/09/2016

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Someone I met recently received a call from an Apple recruiter. My friend is quite well known as a high performer in their field (to protect the innocent, I’ll leave things comfortably vague) and certainly no stranger to the calls of unsolicited recruitment. On this occasion, it was for a position that certainly would have high impact on the firm and as a matter of course, would require this person to work at the new mother ship. Relocation would be included. Compensation was discussed at the early stage as the costs of the San Francisco area were of concern for someone not quite sure of the city lifestyle. My friend also implied that any move won’t be a horizontal move – either in title or by wage. Apple said they would get back to my friend, although not without inferring Apple was a ‘Big Deal’. Nothing happened for a while and my friend had found that another, less experienced person got the same call they did, albeit about a week after my friend’s call.

Why am I doing my best to ‘turn a phrase’ on a story like this? Easy. It’s because it’s endemic of what we could expect from the new Apple going forward. That expectation isn’t steadfast resolve to keep the company head-and-shoulders above the competition in every aspect, it’s something else. Something inherently more average than what we’ve seen in the past.

Obviously there must be more than a certain, highly qualitative tale of missed employment opportunity. The point of the story is to call out the wholesale difference in how the firm is operating now versus when Steve was at the helm. In short, we’re now seeing Apple turning into a firm that’s no longer going to lead the markets, it’s striving to be merely cost-competitive. The difference between a manager with vision and one with a financial calculator.

So that’s a bold statement, to be sure, but let’s look at a few details that give the idea some credence – or at least a pause for consideration. To illustrate, I’ll compare activities now to the perceived methodology during the Steve era.

My first example is the iWatch… or Watch. There’s no doubt the company was working on this project well before Steve died. They didn’t release one even when an army of Android competitors started belching out versions. After Steve passed, Apple put out the Watch. They did it ham-fistedly, they released sketches, pictures of early concepts and slipped specifications. The company even seemed to have a false-start launch.

When the Watch did come out, Apple followed the Steve playbook and built all the presentations and materials in a manner that aped the Steve way – except for one thing: the company had no killer genius app, function or even emotion to attach to it. It was merely a me-too product that appeared as a plug to fill a product line gap. I’ll bet Steve knew that, and that’s why he never released it. The difference between Jobs and Cook may be that Steve knew when to not listen to analysts and say “no” to investors for the good of the company. The watch still has never reached the penetration it was expected to.

Steve Jobs

Another example is the firm’s seeming inability to further innovate on the iPhone platform. The user interface has not been updated by any noticeable degree, aside from styling the icons in forever. It took a near customer revolt to get a phablet-style iPhone out and perhaps the two most damning aspects come from the iPhone’s case. Number one was the bending debacle. While I initially thought it was hyperbole, I was recently witness to it actually happening to a series one phone in a wholly unchallenging circumstance. The second is the warning with the new black plastic case iPhone7 

Why are these damning things? Because they could easily be blatant attempts at cost-cutting at the cost of product quality. The bending could be an engineering overlook certainly, but it could also just as easily indicate the firm is not devoting enough resources to design or are actively looking to take cost out. Perhaps from reducing machining time or using cheaper materials.

Speaking of cheaper materials, the new phone comes with a plastic case version. Obviously, plastic is far cheaper to make than aluminum, especially when you’re using a materials that noticeably takes on wear marks. Ask yourself: would this move happen with Steve’s dedication to customer experience?

Speaking of innovation, one can’t overlook the buying spree the firm has been on since Steve has left. You can read a lot of business books and articles that point to acquisition as a large company’s best bet to stay relevant in a changing market. In fact, HP even has a venture capital arm, and so does Microsoft. Speaking of purchases, the scatter-shot buying pattern is also concerning as it could easily come off as straw grasping. If Apple is buying so many companies does that mean that the once great innovator is idea-dead on the inside?

While sales of the products are still ridiculously high, the year-over-year numbers have seen pronounced drops – double digit drops  Both drops are laid at the feet of two product lines that have seen the greatest market innovation in competitors instead of in Apple products. Those would be the iPhone and the Mac area.

Now the company is talking about repatriating a large sum of capital. On the surface, that may seem normal, but for a firm that put up so much stink about doing so previously, it seems okay with swallowing the huge tax penalty. Apple must really need that cash if they’re willing to part with over a third of the value.

So when you look back at the story that started this post off, you can see that perhaps the desire for margin, (out of the bottom end of the balance sheet) may manifest in selecting not the best person for the job at any cost (as Steve used to do) but to focus on cost before performance in the short term. Doesn’t sound like a company that throws the hammer anymore, but the one that’s receiving it.

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