Apple = Sony

Apple will decline in the post Steve Jobs era. Here's why.

Sociologist Max Weber created a typology of organizations in his 1947 book The Theory of Social and Economic Organization. He described three categories: 1) Legal/bureaucratic (think IBM or the U.S. government), 2) Traditional (e.g., the Catholic Church) and 3) Charismatic (run by special, magical individuals).

Charismatic organizations are headed by people with the "gift of grace" (charisma from the Greek). "He is set apart from ordinary men and treated as endowed with supernatural, superhuman, or at least specifically exceptional powers or qualities." Followers and disciples have absolute trust in the leader, fed by that leader's access to nearly magical powers. "Charismatic authority repudiates the past, and is in this sense a specifically revolutionary force."

Sound familiar? Quoting from Adam Lashinky's book Inside Apple: "...Jobs made all the decisions." "He was the final arbiter on matters of taste." Lashinky points out that Apple was an entrepreneurial company, "...but its people generally are not entrepreneurs -- and they are not encouraged to be." In other words, there was one charismatic entrepreneur at the center (note Lashinsky's org chart from Fortune magazine, above) with followers connected via " emotional form of communal relationship" in the words of Weber, with the leader.

One of the primary challenges with charismatic organizations is succession. In bureaucratic organizations codified processes like elections yield new leaders. In traditional organizations, long-held rituals (smoke emitting from the Sistine Chapel) elevate the new head. 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. What about Apple University, Jobs' attempt to prepare the company for when he was gone? Back to Weber: "Charisma can only be awakened and tested, it cannot be learned or taught."

Without knowing them personally, I would look to Apple executives Jon Ive or Scott Forstall to be CEO. From on far they appear to have some of the charisma and outspoken design sense to legitimately lead the company.

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. Apple's momentum will carry it for 24-48 months. But without the arrival of a new charismatic leader it will move from being a great company to being a good company, with a commensurate step down in revenue growth and product innovation. Like Sony (post Morita), Polaroid (post Land), Apple circa 1985 (post Jobs), and Disney (in the 20 years post Walt Disney), Apple will coast, and then decelerate. 


Interesting take, however....

There is a big difference between Sony (and the other companies you mention in passing) and Apple; these companies didn't create the products AND own the store that everyone accesses to enhance the device. It is true that Sony created the Walkman and Trinitron TV and also made money off the music and movies on its labels. However, Sony didn't own all of the music stores or the other labels so it couldn't dominate the market. Moreover, Sony had to spend significant capital to produce the media that it was selling.

Apple doesn't have this problem all it has to do is maintain its app store/itunes and get 30% of whatever comes through it. The energy and capital Sony spent on making both the product and the media can be used by Apple to make great products that live off its ecosystem. I believe this ecosystem and the remaining products that got Steve Job's approval will Apple more than enough time to find another charismatic leader so that it will not turn into a Sony, HPQ, or Dell.

Pixar Redux - Why Apple Will Flourish Post Jobs

Unfortunately many who opine on this topic seem to forget that SJ built another brilliantly managed business besides Apple: Pixar, a company that is today as great as when he sold it six years ago.

Not only was Pixar as financially successful as Apple (in terms of the time return on initial investment) it continues to make vast amounts of money for Disney long after SJ sold it to them. Pixar dominates its field precisely because of the operational ethos that Jobs created: hire brilliant people, show them how to demand the best from themselves and their subordinates, then create a machine that functions flawlessly if you sell or leave the company. Apple today is modeled on Pixar.

(People who are serious about understanding Apple owe it to themselves to watch the documentary, "The Pixar Story", on Netflix:

Pixar set the stage for everything Jobs accomplished at Apple after his return because, in Hollywood, he learned how to sell great concepts to the entertainment business in order to get their licensing agreements. After returning to Apple he creates the iPod linked to the iTunes store... he'd learned to sell entertainment. And today Apple is primarily the largest vertically structured entertainment platform in the world. Yes, Apple is, and always has been, a software company.

Apple won't die with Jobs because it's a brilliantly managed business (see 5 year 39% gross margins, 5 year book value growing at 48%) with a very simple concept: hire the very best people and sell customers what they really want at a premium price. Tim Cook is more than up to the job. Let's face it, he's been running it for three years.

Spot on

Lets look at the history. Without Steve Jobs at the helm Apple failed, hard. With him again absent from the strategy they will fail again. I don't generally buy into the Jobs hype. I am firm believer his single greatest gift was connecting idiots with the obvious. But that was his gift, and he was amazing at it. He envisioned a phone, which did all the things a smartphone should obviously do, and sold it en mass. He reinvented his company on delivering just that. And then turning that into a cash machine. No one, and I mean no one else could pull that off, let alone sustain it. It was his gift of selling the obvious that brought apple to this point, and there is no conceivable heir who can continue it.

Job's Business Was Not Phones

Sorry, Apple doesn't sell "phones". It's a vertically integrated media distribution company. iPhones, iPads and Macs are the tools they use to deliver that media, and they do it better than anyone else.

I think people keep getting this backwards. Apple is, and always has been, about the software. The hardware is what get's the headlines but the total software agglomeration is what gets users buying. Case in point: What's the difference between the iPhone 4 and the 4S? Siri. That's software.

Apple 1.5 failed BECAUSE it tried to become a hardware company… too many products and a lousy OS. What makes Apple great now is IOS and the 25 billion software downloads from the online stores while providing the minimally necessary hardware to deliver that software. The new iPad is the old iPad 2 with 2x the resolution. Why? The software looks twice as good. It delivers a better user experience. It's not a revolutionary tool... it runs a better class of software. You can bet Tim Cook's brand is allover that one.

All smart phones, laptops and the (better) tablets are cerated equal. They all use the same chips, displays, etc. What makes iPhone, iPad and Macs great is what you can do with them. That's SOFTWARE. That's vertically integrated media distribution. And vertical integration is what allows a business to become a monopoly. So don't cry for Apple.

The software is worthless, in fact, Android is free

99.9% of Apple's profits comes from hardware sales. The only reason iPod was a success was because Apple decided to invest their $1 Billion of cash into mass manufacturing and mass selling the iPod while Samsung/Sony did nothing. The only reason the iPhone was a success was because Apple chose to put $10 Billion on the table to get an exclusive on the 3.5" screen hardware. Apple's success has NOTHING to do with the software, not even the ecosystem. It's a scientifically proven fact that Android is better software and is a better ecosystem. Android has been better than iOS constantly since 2009.

From 5 meters away, 99% of consumers cannot see the difference between iOS and Android, consumers don't care at all, all the consumers want is hardware, preferably now with a bigger screen than 3.5" which is also a reason why Android is so much more popular than the iPhone.

When Apple releases an iPhone with a bigger screen, that won't matter as much as Android prices for the same hardware is about 3x cheaper than Apple today. And that means Apple's only choice to keep a market share is to also lower their prices, and when that happens, Apple's profits go away, Apple's stock market valuation collapses.

no guarantees, but look at the Apple ecosystem

In short, i don't buy it. Apple's ecosystem expedites innovation. The company has institutionalized innovation and intelligent design.

Is success guaranteed? In The Age of the Platform, of course not. Mighty Google, Facebook, and Amazon may also fall. Yes, Cook wasn't Steve Jobs, but who is?

But I'll bet you a Coke that Apple is still dominant in five years.

Phil Simon

Prognostication without the Data --- Easy Research

George's post is another delightful attempt to draw attention to Forrester Research. Congrats, it brings out all the Apple Fan boys and Apple Haters. The post cloaked in ancient Greek history to portray a semi-factual attempt at prognostication fails to be a data driven supposition. For there to be a decline means inversely there must be a rise from others in the same market. Apple has a relatively low market share in the personal computer market, and the past 5 years of data show sustained growth rates exceeding market growth. While Apple has about 70% share of MP3 device market, I don't see any companies introducing new devices to compete with iPod music players. Factually the last competitor (that's a stretch) with the operational capacity to compete in that market - Microsoft - exited the market with it's fame Zune player. It would be wonderful to see Forrester embrace more data driven research models when attempting to prognosticate.....but alas that's requires more time and effort than a blog entry that is intended only to remind people of a company services....MacDailyNews recently highlighted a Venezulan Blogger, Daniel Tello who actually uses really data to prognosticate....George ---take a look at his data --- perhaps you could use some data driven analysis in the future. Cheers.

Apple makes more PC's than any other company

Frank, while your basic retort is fine, in fact the number one PC maker is Apple. They make more personal computers (Macs) than any other single PC maker. And they make a very healthy margin on their PC's. Something virtually no other major PC maker can claim.

Alan, Thanks for your


Thanks for your comment. Just so I understand Apple produces more PC than other competitors, yet its overall share of the PC market is small in comparison to Windows/PC market. This is potential opportunity for growth versus its demise. The higher margin on their Mac or other Apple equipments is no surprise and something George misses completely in his post, this is the result of Steve's hiring of Tim. Tim continues to deliver on operational efficiency and margins continue going does Apple's profit and cash on hand.

Higher margin products, greater market share to acquire, over 100 billion of cash on hand, a CEO with keen understanding of supply chain management, a creative design team...all signs that point to demise, sell the stock now.....(lol) To compare Job's absence from Apple with Sony/Stringer is gross exaggeration of Sony's legacy and Howard Stringer himself. I guess that's why the disclaimer at the bottom of the page is so accurate..."Forrester employees use the Web to engage the marketplace and share expertise". I am really seeing the expertise.....

PC share doesn't matter

It doesn't matter that Apple has a small slice compared to Windows/PC. Unlike hp, Dell, Lenovo and many others, Apple actually make cold hard cash with every Mac desltop and laptop sold. And lots of it. The others struggle from thin margin to loss on every shipment. The Mac base slowly grows over time in proportion (the halo effect: more people are buying Macs because of their experience with the iPhone and iPad). You never see blowout sales for Macs. Each model sells at its intro price until the end (maybe minor price reductions). Macs have about doubled their proportion of the "PC" market. Only about 8%, but growing.

The next decade will show an increasing share for Mac. Apple will come out with more and more products that are ubiquitous computers. The OS will not matter. More and more computers will depend on the web (aka the "cloud") for applications and content. Microsoft have marginalized themselves - nobody cares what they do anymore. They are the "Sony" with tremendous inertia but nothing new and groundbreaking coming out. (I run the same WinXP license as I've had for over a decade ... on my Mac under Fusion - when I need it). The only MS product I've bought in over 10 years is MS Office - for Mac.

Some say that at some point in the next few years the Mac OS will be identical to the iPad/iPhone. It will all be the same platform. (May even leave intel for ARM processors in the Mac - Apple are fearless where processor changes are concerned).

While many PC makers are showing feeble, stagnant or negative growth in sales, Mac sales grow year after year (especially laptops). Macs are a $20B+ / yr business for Apple.

Coupled to the other data points that you mention (cash, cashflow, product introductions) Apple can continue to dominate in the "iDevices", introduce a television and continue to increase Mac presence in the market place (as the OS' meld).

Sorry to sound like an Apple fan (I am, with reservations), but just more and more reasons to refute the Forester/Colony "Sony" comparison. It is not the same sort of company (Sony was always "far flung" - Apple is hyper concentrated at the top; Sony is a manufacturer (moreso in the past) - Apple is not; Sony made hundreds of products; Apple never will).

Cheers, nice discussing this with you in near, if not compete agreement.

PS: a little note for the Apple detractors. We have three Macs at home. Last year the new version of the OS came out: "Lion". The OS license was $30. (There is a single general v. unlike the confusing morass of Windows versions at $120 - $220 (for upgrades)).

And, that one purchase ($30) is valid for ALL the Macs in one household. For PC's I would have had to fork out 10X as much for the "home" edition upgrades.

So much for the "expensive Mac" notion.

Not quite right

It's very tempting to agree that w/o Jobs Apple just isn't Apple.

However Cook and Ives were not simply right hand men to the sole driving force of the company, Jobs. Cook's leadership on the operational side of the company is what makes Apple's execution so successful and profitable. Ive's design aesthetic is not going anywhere.

Jobs could do little of the former and was not at all proficient in the later role - he may have appreciated aesthetic, approved it - but he didn't make it. He could define what something "should be". But he couldn't make it happen without talented others. (That began with Woz and Ronald Wayne).

As a "duo" (and they are not alone) they make up for the loss of Jobs. "What would Jobs Do" is probably a common mantra whenever there is a key (or even trivial) decision point. And the transition plan at Apple over the past 6 years (or more) will have trained the next generation well in Jobs-think.

Apple will not be the Apple it would be if Jobs were around for another 10 years. I agree with that.

But it will continue to put out brilliant products and upset the fruit stand from time to time. (Look for a television later this year...)

The real worry is that once everyone in the world has a high quality Apple product (say a phone) that the majority of first time Apple users will stick with that phone for a long time. The "uptake" growth will wane at some point. But Apple will be a top three market leader for a decade or 2 more - unless another very innovative company grows from nothing.

The old dogs (hp, Microsoft) just can't do it - and Apple has no signs of turning into an old dog yet.

Everyone is missing the forrest for the steves

Has anyone contemplated that getting losing Steve Jobs may have been the best thing for apple? He most likely stifled as much innovation as he created. It isn't hard to find the huge array of negatives associated with the man. I think Apple will probably be more innovate and successful without him hold things back because they weren't his idea, or he thought they were dumb.

Steve was, well, Steve

The only upside of Jobs leaving Apple is that his mercurial temper will be gone. He was a true hardass leader. But a leader nonetheless.
You cannot in any way refute the tremendous growth under his leadership. The risks taken with, most notably, the iPhone (which then spawned the iPad) were tremendous. The "flop" potential was enormous and could have set back Apple. But, the execution of the product, driven by Jobs was near perfect. The iPhone will remain a major player even in the onslaught of excellent Android phones (notably Samsung).
As said, Steve-think has been well downloaded into the senior design and engineering at Apple. Hundreds if not thousands, of engineers and managers at Apple ponder "WWJD" (What would Jobs Do?) whenever at a cross roads. And they will usually get it right (just as Jobs usually, but not always, got it right).
Many have pointed out that Ives and Cook are the delivery talent. The "plan" left behind by Jobs and them will serve not only to launch products (evolved and new) over the next few years, but also be the training ground for Apple to break free from the notion that Jobs is the only way to make Apple work.

Apple's 70% of profit is only the iPhone, 10% the iPad

Apple's only successes in terms of "making them megabucks" has been the iPod 2002-2006, iPhone 2007-2012 and iPad 2009-2012. Other than for those ARM Powered devices, Apple would be a sub-$10 Billion company or bankrupt today.

iPod profits are dead.
iPhone profits are very heavily threatened as much better and cheaper Android devices are taking over the whole worldwide markets, especially in the only growth markets for Apple which are China and other developing countries.
iPad profits are much lower than on the iPhone (50% vs 300% profit margin per device sold) and just like the smartphone, the iPad's profits are very much under immediate threat by much better and cheaper Android tablets, that already have overtaken iPad daily activations since a day in December 2011.

Better-than-iPhone 4S is to be sold sub-$200 using Android during this year. Today you can get Better-than-iPhone4 for close to $100 unlocked using Android.

Better-than-iPad2 is to be sold also sub-$150 using Android during this year. Today you can get Better-than-iPad1 for close to $120 unlocked using Android.

It really does not matter who is the CEO, you cannot invent another cash cow like the iPhone. Today the iPhone generates 7x more profits for Apple than the iPad. And iPhone's profit margin is just about to collapse regardless who Apple has as the CEO.

Within a year, AAPL can loose 50% of its value. You simply cannot value a company at $568 Billion when nearly all of its profits comes from only a smartphone product and that the smartphone industry is the most disruptive and disrupted industry in the world.

Apple Mac alone is over $21B

In 2011, Mac sales amounted to nearly $22B. A huge business in its own right, shipping more personal computers than any other single PC maker. While making high margins and profit. That alone would be an enviable company. And the growth in that market was on the order of 25% (Growth that other companies would "buy" with slight or negative profit). Q2 sales growth from 2011 to Q2 2012 (Macs) was 19% for desktops and 7% overall. So your notion that "nearly all" of its profits come from a smartphone is false. Especially when the margin on a laptop or desktop is more that what the lower end iphones sell for.

But of course that's not the whole story. The story is innovation, "test products" and risks taken elsewhere. While 3rd or 4th to the MP3 player market, Apple "did it right" in both the product, the service and the marketing. The iPod spawned the iPhone, spawned "Apple TV" (a "hobby" product[1]) and of course the iPad. The iPod is now in seriously declining sales as people opt for the iPhone and/or the iPad. And all of Apple's products (Except the Apple TV and probably the iPod now) make very strong margins.

You can detract from Apple all you like, but success is success and there is no sign of decline in sight.

Android is not a good competing product. Android + Samsung is a great competing product. All to the good that there is competition. Keep everyone sharp and prices in control.

But where integrating the experience of the OS and the system is concerned, nothing comes close to Apple.

And as Apple continue their march to the cloud, and as the Mac OS takes on more "look and feel" of iOS, it is sure to say that the Apple integrated experience will continue to improve.

Time will tell. But Apple is not about to fall from grace in the near term.

Mac represents less than 10% of Apple profits.

You can talk revwnue all you want, its profits that matter.

iPhone costs $150 to make, sold for $650 in average, more than 300% profit margin
iPad costs over $300 to make (especially with retina), sold for $450 through retail in average, barely 50% profit margin
Mac costs $750 to make, sold for $1000 through retail, barely 33% profit margin.

It is ridiculous to even suggest that Apple has a backup plan once the iPhone is imminently out-competed by much better and cheaper Android alternatives.

Mac prices and profits

First off my naïve friend, if something costs $750 and sells for $1000 that is 25% GROSS MARGIN, not profit and not 33%.

(Sometimes called "gross profit" - but calling it profit is misleading as their are other costs against the GM).

[ GM = (Revenue - costs) / Revenue ] ($1000 - $750) / $1000 = 25%

(And that is NOT an Apple case. Apple's GM's are usually north of 30%).

Profit comes after other expenses (overhead, marketing, engineering, support, taxes and so on eat into the GM).

Apple's manufacturing model keeps costs way down - margin (and profit) are high. And as long as Mac sales are growing as fast as they are, the profit will remain high.

Most Macs sold sell well above $1000 - look at the mac store to find out.

Or, look at the Q2 results ($5.073B for 4.016M units. An average of $1260 per unit. That includes all the Mac Minis at $600 and up (no keyboard, no display, no mouse - things that gain other makers no profit at all - those Mac Minis are probably cash cows!).

I have three Macs (mine, wife, son) for an average before sales tax price of $1950 (iMac, MBPro, MBAir).

And Apple make strong margins on these. It's a $22B+ high margin business, that alone, would be the envy of any other PC maker.

Sure, it's not the largest slice of their business, but it is significant, high margin and growing. The next year will see if that slows (I think it will somewhat - but it will still be positive growth).

As to Android, that is all well and good. Samsung certainly are doing great with it by focusing on high end products and features. But they are followers (no matter how good a follower they are).

But none have the integration and the media distribution (iTunes store) that makes Apple's sauce sweeter.

Mac is 10% of AAPL profit

Mac may be around 20% of AAPL revenue, but it's about 10% of AAPL profit. The iPhone is 70% of AAPL profit.

Most Mac sales happens because of Apple's iPhone, iPod, iPad and the marketing around the Apple brand for that.

Without iPod, iPhone and iPad, Apple would be worthless today.

Apple may still be about Dell size, which means $28 Billion valuation, something like that. Not $564 Billion, that is quite simply absolutely ridiculous.

I'll say it again, today 70% of Apple profits is iPhone, 10% is iPad, 10% is Mac.

Facts not fiction

Nicolas, you have no basis for your claims. You don't know how to calculate GM. You don't know that profit is not GM. Retournez a l'école. Cheers.

... you're right

Nicolas, you're right of course that it's profits that matter.

And shareholders agree - pushing up the Apple stock price 3 fold in 2 years while the company as amassed over $100B in cash.

AAPL stock can be pushed back down 3 fold faster than 2 years

$185 Billion valuation is much more appropriate for Apple, $564 Billion is absolutely ridiculous when 70% of its profits comes exclusively from an overpriced iPhone.

Markets decide

Nicolas, you can't decide what a stock is worth individually better than the market can. The market includes institutional investors who can get it close to right (within 20% easily, and within 5% most of the time.

Further, $100 (more or less) of each share is cash. That $100B hoard of cash that Apple will begin spitting back as dividends and share buybacks. And by the time they complete the share buyback, they'll probably be back over $100B in cash lying around (much of it offshore to avoid US taxes).

And finally, put your money where your mouth is. If you believe they are worth a mere $185B, that means you think the share price is about $200 per share. So short sell as much as you possibly can and you'll make a lot of money.

agreeing with George,that's

agreeing with George,that's what came into my mind in the first place on hearing Jobs's gone, and still be impressed by the demonstration by Jonathan Ive in the Objectified directed by Gary Hustwit in 2009,who was,in that film,charming and professional,knocked me realizing that's how and why iPhone comes out.

Apple isn't Sony and Jobs' 2nd departure

First, by its very nature Sony expanded to become a conflicted entity. While their hardware and software divisions may have tried to innovate (the Walkman), Sony's content divisions (like all the other media giants) tried to stifle any new business models (such as online) in order to preserve their existing control over distribution and revenue flow -- ignorant to consumer demand (hence, Napster). It seems to me that Sony was doomed because of this before they even knew it.

Apple, on the other hand, owns no content. So, their objectives are far purer than Sony's. I think this is a big reason why Apple has the potential to continue innovating and actually SHAPING the market as they have done so far, and given the mture distribution model they formalized, the content owners now have little choice but to be a part of it.

As for Jobs final "departure" being a case of history repeating itself? PLEASE. In 1985 he was OUSTED from the company, his beliefs rejected. When he passed away last year the company revered him and his philosophies. I'll be surprised if some form of tribute to him (like a statue) isn't erected in the new "mothership" Apple is building. Plus, in 1985 his departure was a surprise. This time, it was long foreseen and prepared for. These two situations are as different as night and day.

The future is now

Ther are plenty of people ready to step in Jobs' shoes. Right now. Jobs wasn't the smartest, brightest man on the planet , but he was among the smartest and brightest. He had a dre'am. There are so many ideas to be developed into products that Apple could rule the world of hi-tech for a century. But this is not an option. There must be choice. It is the first rule of the marketing. People want to feel this.

If I choose, I feel I made the best option of the moment. If I have a sole choice, what can I do but embrace it. Apple will not invent things. They will dig into the graveyard of the dinosaurs and pull out productes dead before coming into age. I am pretty sure the first company to offer mass holographic-based image devices to the mankind will be Apple. Why do I believe that ? Because I do.

When Jobs put together 4 iphones he called them iPad. Many laughed and I remember the comments of the people on the web. Now, every major company but Apple craves to have thought earlier.

But the marketing has good rules: there can be only one : the best of its category. So yes, I think every candidate turned down by HRs at Microsoft, Sony, Google, Facebook might be a stroing asset at Apple.

The end of Matrix is conclusive: "I didn't know, but I believed."

Anything is possible and

Anything is possible and Apple after declining has been known to re-create itself but always with Steve Jobs. While most reading this might think it is insane to say that the number one technology company is going to decline; I would invite those skeptics to check out market and company life cycles, it is always a bell curve. However, I believe that the decline of Apple will be heralded by three horsemen so to speak, based on previous historical events.

1. The CEO will prove incompetence. While Tim Cook might be a great manager, he is not an innovator. He will say or do something ridiculous that will be confirmed by a decent but not insanely significant shift down in stock price.

2. The product flop. After Steve Jobs left the first time, Apple released products that failed miserably. The moment Apple ventures away from their current product line and creates something that fails, this will be the second indicator.

3. The business model shift. This will signal the end of Apple, if it happens. Steve Job's was always about control and perfection and it was this characteristic that let Microsoft succeed but would ultimately lead to apple's current success. The moment Apple starts to do things that completely contradict this philosophy of control, they will fail.

Not the same Apple

On point 1. Cook is not the incompetent that ousted Steve Jobs. Cook was hired for his smarts and has delivered. Cook has been groomed to guide Apple in the post Jobs era.

On point 2. See point 1/grooming. Apple will not make the mistake (again) of poorly differentiated products. At a given point in time the products of a "kind" are very limited in difference at Apple. As someone pointed out, ALL of Apple's products will fit on a small conference room table. Compare that to Samsung, Sony, Dell, hp. ...

On point 3. "Business model shift". Apple has been in continuous business model shift for over a decade while other companies stagnate (Dell, MS) or vibrate with ineffective change (hp, RIM, Yahoo, AOL). Apple has changed the music business and the phone business, are leading the change in the movie distro business and will likely tip over the fruit stand this year in the television business. Apple is the paragon of a lean structure in large part due to Cook's leadership on the supply chain. And Apple will not stop there.

Nobody can predict where Apple will be in 10 years. But they will definitely be a strong, rich, powerful leader for the next 5 and *probably* for the next 10 and more.

I am not sure cook has really

I am not sure cook has really been tested yet, he has been maintaining what has already been established for him. Competence has yet been proven. Where he leads the company in the next two years will determine his capability. I am not saying that he won't do a good job but I am saying there is no way to know yet.

In reference to point 3, I was referring to thinks like trying to license the mac OS, not creating new business models.

I agree that no one can predict the outcome, I think it is also a little early to predict the outcomes for apple.

Steve also released failed products

Remember the beautiful but doomed Cube? Or the Apple Puck Mouse? 20th Anniversary Mac? While not purely Apple, Steve still had a hand in the Motorla ROKR. While the eMac did its job, I'd arguably say that it also mostly failed.

Failure is not something to be afraid of and Steve Jobs certainly wasn't. I think that one of his key traits is that he ran with the projects that worked and quickly killed off projects that didn't

Another Example

The author should take a look at Harman, which has been turned into a giant b2b bureaucracy where the only "vision" is financial and where singular focus on cost cutting while preaching the value of "reverse innovation" (selling cheap stuff for low margin) has eliminated a great deal of expertise from the consumer organization that should be driving brand value. Employees are not "bought in" and every job is a factory job. There's essentially no difference between soldering wires together a thousand times a day, pivoting spreadsheet cells a thousand times a day and leaning on Chinese factories to reduce their prices by another 5% a thousand times a day.

Mr. George Coloney does not

Mr. George Coloney does not seem to know how to operate a company. You know why Sony is still so bad because they have internal competition themself. Different department fighting each other.
Recently I bought a 3D camcorder and a notebook with 3D displace function here in Hong Kong and want to buy their Vegas Pro 3D eiditing software. Sony Hong King said the department handling software only in USA, and they will not help me to purchase this software that they told me to place an order all by myself. How can this be if Sony still not changing their operation.
All Apple product either comes with their hardware or anyone else can purchase through their Internet website easily.
There is no company on earth that end user can obtain free basic training inside Apple shop for both hardware and software.
Steve Jobs layout the entire operation programs for employees and all departments inside the company should not fight each other, they should have all kinds of discussions between each others and join together to make final determination. Steve Jobs want their employees comes close together and that is why he use glass in all stores that each one can see each other, to avoid any miss understanding in between.
Chinses has an old word of saying 3 stubit guys join thinking is far better then one smart guy?
Can Mr. tell us which company on earth now can challenge Apple ? If his thinking he is right?

Who replaces Steve??

As I and others here have already mentioned the succession plan was designed and Cook was groomed to take over a long time before the inevitable happened. But there's more to this, and I suspect the operation at the top isn't as straightforward as Cook being made into the likeness of Steve Jobs. I believe that there's a composite of Steve that will carry his vision:

Jony Ive: the genius senior hardware designer. In Jobs' authorized biography it was revealed that Jobs had bestowed upon Ive the ultimate control over his work.

Scott Forstall: Currently the head of iOS and a Jobs protégé from his early days under him at NeXT, he is supposed to be about as exacting (he's said to inspect UI development with a jeweler's loupe) and apparently as ambitious as Jobs was, himself. In fact, he can well be Cook's successor (or conquerer, depending on how things go):

I think that these two, with Cook being the moderating factor that can observe their work dispassionately as well as exercise his own expertise in manufacturing execution, will be (or, as we speak and they work away somewhere deep inside Apple HQ, ARE) the font of creativity that Apple's future is entrusted to.

Not History.... But FUTURE

'Apple=Sony' this equation drags Apple in historical past.
But, the future of Apple will be decided by its competitor. Hugely backward integrated Samsung is the organization which will challenge Apple in 2-3 years time. Samsung will catch up Apple on Technology but Marketing will be an uphill task.

Samsung? Backward Compatible?!

You're confusing the cart and the horse.

So long as Samsung and all the others use Android they will have NO control over backwards compatibility. Google will control this as they specify the minimum system requirements for every Android OS update that comes out. This is the inherent problem with non-Apple (and even non-Blackberry) devices -- a problem shared by Windows-based computer manufacturers -- that any of their products could become "orphaned" without their say in it. As you so clearly demonstrated, users might end up barking up the wrong tree as they complain to their hardware manufacturer.

This negative impact on the Android installed base is already out there, as a percentage of Android devices sold cannot upgrade to the latest version of the Android OS. In fact, there are Android devices still being sold at this time out there that have older versions of Android OS pre-installed...and some of them cannot run the latest OS. Again, more murky waters as casual consumers may not know what they're getting when they buy such a device.

Both Apple and Blackberry alone have the power to orphan their own hardware as they see fit. At least there's some comfort in that -- although I admit it's cold comfort.

Scott Forstall and Jony Ive

Scott Forstall and Jony Ive are the 'Lennon and McCartney' of Apple.

Attention Seeker

Steve was like a SUN in "APPLE solar system".

There is no doubt his gravitational pull holds them together.
There are great planets people which revolves around him , And each one of them
has got great capability of 'CEOs"

APPLE's SVP ~= CEO of some Fortune 500 companies.

Timothy COOK - World's great authority in inventory and supply chain management
Jonthan Ive - World's one of greatest industrial designer and
great humble human being (Steve lacks this most desirable quality).
Hiroki Asai - One of the greatest graphic designers

Scott forstall who knew in and out of iOS and

Mr.George Colony failed to acknowledge the great people in APPLE except Mercurial Steve.
I dont think CEO of a can be ignorant of this fact.
A wonderful article on CNN/Fortune reported how a big startup works.

As long as they are around APPLE, Do you think APPLE will fall like SONY ?

Who is going to replace APPLE ?

Is it google (Search, OS centric), Samsung ( A copycat ), Chinese (huwei,ZTE -- Cheap copy cats) Sony ( Sleeping beauty) or Nokia ( Dying, directionless organisation),
Microsoft ( focus less on product, more on litigation and patents)...

This is fancy analysis and Mr.Forrester wanted to be "attention seeker".

My prediction: Colony will be wrong again

I ended up on CEO Colony's blog after being intrigued by curious article entitled "Apple's decline" which was mentioning that post.

Now I remember the same man who wrote in 2004 and 2005 that Google was doomed and could not resist the charge of Microsoft or Yahoo in the space of search and consumer applications.

I remember hearing the same man in a conference asserting that SalesForce, despite all its buzz, would be contained to be a minor player in the entreprise business or swearing that Motorola would be again the most inspiring and innovative company in the world(if it has ever been). Colony, again back in the early 2000s: Qwest was had the network and strategy to be the most successful network carrier in the world; The man has constantly predicted Apple's failure, had never considered Steve Jobs as an able CEO...
Actually if you read his blog and other of his writings, Colony's most common analysis is " I hate to be wrong but I will admit I was wrong about..... but not for the good reasons".
Ok, the success of a company or business leader is hard for him to assess. His product analysis must be good then, well when the iPad was launched Colony said he simply could not see it survive because of its format and place in the home, bag, etc.. that it would be the first Apple product in a while that would be terminated after one generation.

I am reading again. Colony dismissed the risk of a recession in Jan and again in June 2008. Besides a grasp on company's future, he also has an impressive command of macro economy.

Readers of this blog: one thing Mr Colony is good at is selling consulting services to businesses. I am curious to see what long-term impact his work and his company's work had on his customers' performance. I have no telling example to report.
The company he heads gets awards and seems successful... I would like to understand the magic now.

What I can just advice you: skip this blog, except maybe if you want to be amused and bet on the opposite of Colony's theories.

I have never worked for or contracted Forrester, I just safely assume based on data widely available that his predictions are wrong and his command of micro and macro economy is very poor.

There are very good reasons why this post is anonymous.

History repeats itself?

I haven't researched Apple but often wonder...

Back in the 80s the Macs were the coolest computer, 5 to 10 years ahead of the IBM PCs running DOS and later Windows. Yet, the IBM PC and Windows took over the market.

Back in the 90s the Netscape browser was the "internet" browser to use. IE was not even created. Now I would say IE is the dominant browser.

The key point is even though Apple is the in the lead currently, it is priced high and is a closed ecosystem as before. Will it have enough momentum to topple the mass computing devices running Windows or will we see history repeating itself?

Only time will tell...

Watch Out - Dark Horse is Samsung

Its Samsung which will shake the Apple Cart, proof is the current published figures where by it is No 1 player by Volume in Phones, focus on Bada and Brand will take them places.


What are your thoughts about corporate innovation and the need to create a small team (or teams), independent of the corporate budget, to generate new innovative solutions? Can a company like Apple, after the loss of its charismatic, develop a successful innovation center that bubbles ideas to the top? And if so, what are the leadership qualities required of that "skunkworks" leader? Can a new "Jobs" emerge in Apple's petri dish?
Apple will never replace Jobs and the company will indeed change, but perhaps they can create a successful culture where innovation is rewarded and implemented further from the throne.

Good questions

The most fascinating business story of the next four years will be how Apple re-invents itself in the post-Steve world -- how it reconstitutes governance, design authority, risk calculation, and other parts of its value engine. Skunkworks would be a place to start, but the toolbox contains many other approaches -- which I am sure they will consider.

More Importantly..

Would the leader of such a "skunkworks" team have the ego to go up against the bean-counters and the board to say "fund this project, at any cost, it is our future" and win?

Yes, in the end...

It's all about leadership. Someone with the power, legitimacy, and vision to say: "We are going this way."

I think this is a great

I think this is a great article. If you remember "Made in Japan" by Akio Morita and compare Sony's path to success and glory to that of Apple, you see a clear mirror image. Although I believe Morita was an inventor and Jobs was a thief (a visionary thief).

Apple makes more PC's - redux

To many,

I've received a lot of e-mails (over a dozen) stating that people have replied to my post regarding Apple making more PC's than any other company. For some reason these comments are not appearing on the site (that I can see). I only see the reply from Frank Meister. So I don't know what your comments are. But, to refresh:

. A "Mac" is a PC (Personal Computer). It is not an "IBM/PC" descendent, of course, though now in the "intel" era of Macs they are (as far as electronics go) almost equivalent (and run Windows solely or under parallel OS managers such as Fusion; indeed with some effort OS X will run on any recent PC(in violation of the Apple OS X user agreement)). I imagine people are saying "But Macs are a sliver overall" and themes of that sort.

. The point is that in a given year Apple make more Macs (minis, desktops, laptops) than any other "single" manufacturer (Dell, hp ...) . (This is true for 2011 - remains to be seen for 2012)

. It is also true that in the "premium laptop" arena (those costing over $1000), that Macs are a growing segment where other companies are seeing stagnation and shrinking markets.

. Depending on your source, you'll find that Macs are a mere 8% of the overall installed base of operating computers. Not much to be sure, but that is still a base of around 100M machines. Nothing to sneeze at. More to point it is growing, having doubled since the most troubled days of Apple in the late 90's.

. And finally, the Mac business at Apple is over $22B per year (2011) with very strong margins and profit. You never see a clearance sale of Macs marked down 30% or more as you will for others [1]. There may be a small reduction ($100) near the end of a products sales cycle. The Mac business is a serious going concern in its own right and will continue for a long time as an important Apple business segment. Apple's commitment to the Mac is reflected in the ongoing improvements to the OS (last year's "Lion" and the upcoming "Mountain Lion"). Both of these OS' show a merging of iOS display/interaction towards OS X. I believe, in time, that OS X will be more iOS like than OS X like. (Yes, iOS at its core is based on OS X - but the display and touch is quite different). To be sure, Macs are not the "biggest" segment at Apple, but it is a significant, solid, growing contributor. As to costs, engineers who work on OS X and the Mac also work on iPad and iPhone. There is a great cross breeding in talent across product lines. This is very different from other PC makers (and something that Meg Whitman has begun to chip at chez hp).

I hope the above replied to the comments you have made, and if not, well, it probably doesn't matter all that much in the great scheme of things.

[1] Part of the secret here is that Apple offer a very limited range of Macs at any given time, where Dell, hp and so on can have a dozen or so models with overlapping and confusing specs. It is also true of iPhones - the offering at a given time is simple and with few variations (memory size, network options). Apple hew to KIS.

George's prophecy

Since June 2008 when Bill Gates left, Microsoft releases Windows 7 and the upcoming Windows 8 and this time to tackle the ARM market.
Six years after Gates, Microsoft still shows no sign of decline and I suspect on the contrary that their business will even rise higher next year.
But George's prophecy has one positive effect : until today I didn't know who is the CEO of Forrester, now I know how he thinks and it's good for me to
be more careful with the Forrester's analysis.

Microsoft versus Apple

Microsoft, in the language of Weber, is a legal/bureaucratic organization -- governed primarily through a system of rules and structured governance -- rather than through the charisma of one individual. Of course, there are some charismatic elements within the Microsoft model, but it is quite different in its operating model as compared with Apple. That is why the departure of Bill Gates has had less impact on the company.

Self unfulfilling prophecy

Unlike Sony, these days it's not a great insight why apple works and how. Therefore if apple even hunts at straying, there's tons of press and upheaval. This alone will help keep them on track.

It's not about the CEO but the formula, which isn't exactly top secret. I'm not selling anytime soon.

Sorry this site did not like

Sorry this site did not like my iPad did it? I hope the admin can remove the dupes.

I'm certainly no George

I'm certainly no George Colony. But I saw it coming too. Altought I wouldn't exagerate on the 2 years mark (way too much cash, but also way too less competition).

Most analysts simply look at cycles and trends that they validate with what their hunch tells them about current elements and perspective there is, to determine what will likely happen. In this regard: there is no doubt this is the very beginning of the end for Apple as the first elements are here (altough for me they have been here for 2 years).

And I would simply explain this starting from the point of view of customers because after all they are the one who makes a brand or product successful or not. So like many trend or product adoption there is a pyramid of customer, at the top being the early/first adopters with sharp tastes and smart decision making and at the bottom, if you ever reach it, the mass market who simply follows like sheeps: (but this one is just an example, it doesn't exactly match the case)

Then there is the lifecycle scheme of a trend or product: