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2013-09-05 05:12:24
With news leaking out that Apple will soon introduce a lower-priced iPhone,
many investors, managers, competitors and observers are focused on how this
will boost Apple s market share, especially in emerging markets.
Perhaps of even greater interest to me, however, is what this means for Apple
as a company, and more generally, whether corporate cultures are fluid enough
to accommodate abrupt shifts in strategy.
My conclusion: Leaders should be careful what they wish for.
Apple has been a modern marvel. Starting with the revolutionary iPod, the
company s former chief executive officer Steve Jobs spearheaded an attack on
the established order in consumer electronic devices. And this was an industry
ripe for disruption. When the state of the art is the Sony Walkman, you know
there s real opportunity to change the game.
Of course, Apple moved on from iPod to iPhone and iPad, using iTunes to shake
up the music, book, and software businesses in the process. The one commonality
among all these innovations is not just that they were new, but that they were
radically new.
Ironically, and unusually for a technology company, Apple was not really
competing on the basis of technology. The MP3 player that they called iPod was,
and is, considerably inferior to other MP3 players in terms of sound quality.
The iPod was a sub-standard technological product competing in a technological
arena, yet, it won.
Why? Because Apple differentiated on three key elements that resonated with
customers: design, access to content via iTunes and brand prestige. The real
innovation was embodied in these first two elements, which, when coupled with
the iconic leadership of Jobs, collectively captured cool.
Apple is on a path toward the mundane.
That strategy continued with the iPhone, whose brand cache was so strong that
customers lined up for hours to buy each new version the company introduced.
The early Samsung commercials mocking the herd behaviour of iPhone fans (yes, I
was one), waiting to buy a product for features the Galaxy also boasted (and
often with superior qualities), were so memorable precisely because they
revealed just what was behind Apple s kimono.
The iPad was also a revolutionary product. It even started a new product
category that customers didn t know existed. A company that breaks the rules,
changes the world, and does it all with panache and coolness is a tough act to
beat.
That is, until it starts cutting prices.
Companies that compete on the basis of price become commodity sellers. That the
company Jobs ran could be in a commodity business is almost unfathomable. The
next thing you know, they ll be offering coupons in newspaper supplements for
phones that are new and improved.
Now, there s nothing wrong, per se, with a strategy that is all about market
segmentation, using price as a competitive weapon and targeting promotions to
specific customer groups. After all, that s the bread and butter of the world s
best consumer packaged goods companies, from Proctor & Gamble to General Mills.
For companies like these, category management and brand management have been
elevated to an art form.
Culture shift
But that s not what Apple is, which means if the company wants to shift
strategy in this way, its leaders need to retool the culture in as radical a
manner as earlier product offerings changed how people worked and lived.
We should expect many employees to leave, unhappy to work in a company that is
no longer changing the world. We should also expect Apple to bring in new
talent with backgrounds from the P&G s and Unilever s of the world.
Apple stores will need to keep their true believer sales staff energised to
sell ten versions of the iPhone to customers who will no longer feel fortunate
to even be in the store. They ll be more demanding customers who will want to
know why the iPhone lite sells for $10 more than the latest Galaxy. Maybe Apple
will need to bring back its former guru Ron Johnson, who built out the stores,
to apply what he learned from his short and unsuccessful stint as CEO of
clothing discounter J.C. Penney.
It s not that a company cannot operate with two opposing modes radical
innovation and category management. Pharmaceutical companies like Novartis have
been excellent at developing new drugs while simultaneously managing a variety
of consumer brands. But it s not easy. Novartis, for example, has completely
separate divisions in pharma and consumer, with little interaction between
them. It s unlikely the mobile device industry can be similarly segregated into
independent camps.
One more thing: When we add in the latest effort from activist investor Carl
Icahn to tap Apple s vast cash on hand to enrich shareholders, the winds of
change become even more ominous at least for those who admire the company s
track record of radical innovation.
The stars are being aligned toward a vision that is the antithesis of what Jobs
dedicated his career towards. Rather than making great products that change how
people work and play, Apple is on a path toward the mundane, a virtual John
Sculley redux where consumer packaged goods are dressed up as high-tech and
nobody really cares anymore.
The last time this battle was fought, Jobs lost his job to the forces of
conformity and short-term profit maximisation. The spiral of ordinariness took
more than a decade to overcome and not until the prodigal son returned to the
helm of the company he co-founded.
That can t happen this time. If Apple does choose to embark on the new and
improved competitive train, many card-carrying acolytes employees and
customers alike will step off, some to start new ventures that promise
grandeur once again, and others to sit home waiting for the new new thing to
once again come calling.
And what a loss that would be.