When I unboxed my new iPhone 5 a few weeks ago, it was scratched right out of the box. There are forums aplenty with other customers documenting this same problem. I walked over to the Apple Store near Vodori HQ for a Genius Bar appointment. Apple agreed to replace it – no problem. But then I watched in amazement as the Genius unboxed not one, not two, but three replacement phones, all of which were unfit for replacement due to similar scratches. Having depleted the store's entire inventory of replacements, I walked out empty-handed.
I had read about #scuffgate as I typically follow technology news. But now I was personally embroiled in the controversy, causing me to pay closer attention to Apple as a business and not just the manufacturer of some of my favorite products.
This post is not about predictions or complaints. I won’t tell you where I think Apple is headed, whether the company has peaked, or guess about what Steve Jobs would do. Apple products have served and delighted me over the years, and while I’m not a “fanboy,” I'll openly admit that there's the joy of a six-year-old child opening gifts on Christmas day that accompanies the unboxing of the latest Apple gadget. And let’s face it –Apple isn’t exactly a corporate ship that’s adrift. I would argue, however, that its sails seem to be luffing and there are lessons to be learned.
Apple’s Value Proposition & Slippages
For me, Apple’s value proposition is born out of three important and closely intertwined components: product innovation with products that "just work" (strategy), customer experience (strategy & operations), and flawless execution (operations). As I’ve parenthetically noted, these three areas directly relate to the company’s core strategy and operations. And as strategy expert and Harvard professor Michael Porter will tell you,1 strategic positioning and operational effectiveness are the two critical components to a company’s success. Apple is slipping across these areas in both painfully obvious and also less noticeable ways.
Apple’s Most Recent Product Launches
On the product hardware front, while Apple’s just-released iPad Mini is already sold out, it's not the most exciting or interesting product. Most of its important components are identical to those of the iPad 2, a product that is now a year and a half old. At best, it’s on parity with other tablets and eReaders. Apple isn’t accustomed to playing defense with its products, yet this product seems to be defensive. Some may even argue that the Mini is reminiscent of the product dispersion that plagued Apple before Steve Jobs' triumphant second act.
On the software front, Apple has also made a misstep in a core strategic principle of closely-knit hardware and software integration. Setting aside any opinion of the quality of Apple’s Maps application, it was at least bad enough for current CEO Tim Cook to apologize to Apple customers. Not only that, his recommendation to customers is that they look outside the Apple ecosystem for a solution. And close on the heels of some major management shakeups that took place this week, new reports suggests that a recent cultural shift in the way Apple creates products may have been at play. With respect to company longevity, the cultural shift is far more concerning than the fallout from the Maps App itself.
The Apple Customer Experience
Apple hasn’t yet had a catastrophic failure on the customer experience front, but a few recent stories point to at least some erosion here as well. For example, over the summer Apple uncharacteristically apologized for staffing changes that were impacting the in-store experience. And there is a small but growing contingent of Apple's most loyal fans that are pretty mad at Apple for wiping the iPad “3” off the map. Apple is in business to make money, so I realize the complaints are misplaced. But from a revenue perspective, Apple’s customer base seems to be comprised of an uncharacteristically high proportion of early adopters/upgraders. With a shorter release cycle, these people may now wait longer to upgrade in anticipation of the next version. Only time will tell, though.
Apple’s Operations
Perhaps the most disconcerting of all the things I’ve personally observed is a falling off in Apple's historically flawless execution, which is an unheralded component of the company's success to date. The average consumer would never know it, but Apple's supply chain is something to marvel at and is key to tremendous profitability. With my n=1 #scuffgate experience (which accounted for four phones, mind you), I’d say company operations are slipping. And never mind the striking and rioting employees that are responsible for assembling Apple's flagship product.
What does this all point to? A Saturday Night Live skit with a traditional sarcastic dance, of course.
What We Can Learn From Apple
In all seriousness, we can learn from Apple's current situation. When evaluated through Porter’s glasses, the lesson seems straightforward and simple. Apple needs to stay true to its core strategy and refocus its operational efficacy.
On the strategic front, up until now Apple had clearly established a difference between itself and its competitors with its products and overall experience. The old Apple didn’t release “me too” products like the iPad Mini, and instead delighted customers with products that they didn’t even know they “needed.” I’ll admit that Apple’s product direction for the Mini is murky for me. But in general, the company needs to remember that there are tradeoffs and difficult decisions it must make in order to maintain its strategic position. Being all things to all people is impossible for any company, let alone Apple.
The missteps and issues on the operations front are much clearer to me and easier to fix. In Porter’s view of the world, strategy and operations are clearly separable. But in Apple’s case, one could argue that extreme operational effectiveness is actually core to the company’s strategic positioning. Tim Cook built Apple’s operational masterpiece, and since he’s not a “product guy” (as Steve Jobs admitted in his biography), he needs to be playing to his strengths in operations. Flawless execution has made Apple successful. Simply put, the company needs to stay focused on this core competency that led it to success in the first place.
The Apple is Not Falling from the Sky
Realistically Apple is going to be here for a long time to come. And as I already mentioned, the company made some drastic management changes that will empower design icon Jony Ive to refocus the organization on its core strategy of hardware and software integration.
As for me, I’ll still buy Apple products – and I did eventually wind up with an iPhone (although it was white instead of my original black). I just hope the company can turn me back into the delighted six-year-old kid as opposed to the disgruntled teenager that I’ve become.
Do you have thoughts on this? Send them to rob.demento@vodori.com and we’ll share the best points in a follow-up post.
1. Michael Porter, “What is Strategy,” Harvard Business Review, November 1, 1996.
