Apple the Business vs Apple the Product

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One of the things that I do is that I ask why.

People (and especially companies) are rational, for the most part. Customers are rational. Investors are rational. Employees are rational. Developers are rational.

When you end up in a situation which you can’t understand, generally either your logic is incorrect (leading to the wrong conclusion, and thus, why you don’t understand why events are unfolding as they are) or your inputs are incorrect (your assumptions, your facts)… But sometimes, more important than facts or assumptions, is your perspective.

Facts are tricky. Facts can lie. If you don’t have the proper perspective, your “facts” may fit a certain narrative, but that narrative may be incorrect.

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Take the recent activity around Marco. Arment wrote a post on why “Apple has lost the functional high ground“. Now, I listen to Marco’s podcast, and I understand where he is coming from. But what his attempt at answering – why – simply did not go far enough. There are three parts to this analysis:

Part 1:

Marco’s attempt at answering the why question, has to do with his perspective of being a developer. He starts with an initial assertion, that Apple’s software quality has been getting worse, and is more unreliable than in the past. He then offers a reason why – it’s because Apple is tying software development to aggressive, 1 year, hardware development cycles. And he then offers a solution – slow down on the software side. Fix bugs. People want a reliable product.

Marco is being rational. He is a developer. Software quality, to him, is a big deal. He is also a mac nerd. One of the reasons why he likes Apple products (and why many other Apple nerds like Apple products) is that they work BETTER than the competition, both hardware and software.

However, Marco is wrong. Or at least, he isn’t analyzing the entire picture.

Part 2:

To analyze the entire picture correctly, you have to understand one simple fact.

Marco Arment – and other Apple nerds, who used to be the core Apple customer base 10 years ago – is no longer Apple’s main customer. Apple is now a large company. The majority of their business is the iPhone business, which is sold to mainstream people (with higher than average incomes) around the world. These are NOT Apple nerds. These are NOT Apple developers. These are normal people, buying iPhones.

From a business perspective (which is what Apple is) this is simple logic. How many of Apple’s mainstream (ie. majority) customers have noticed any real issues with the mac? With iOS? Even though the iOS 8.0.1 update was critical for a small number of people (disabling phone calls) it was exactly that – a SMALL number of people.

To answer the question about what Apple OUGHT to do our what it OUGHT not to do, you must answer the question, what impact do these “issues” that Marco raises, impact Apple’s mainstream customers, and their actual business. To which, the answer really is, likely not a whole lot of impact.

 The issue, is that Marco THINKS that he is Apple’s customer. But he isn’t. Not in terms of how Apple (the business) makes decisions about Apple (the product).

This is extremely obvious if you analyze the situation from a holistic perspective. Marco is looking at it from a developer and Mac Nerd’s perspective, and this is enough to articulate a legitimate concern, but it isn’t enough to fully understand and appreciate the decisions that Apple must make as a publicly traded company.

Part 3:

Now, this is extremely normal. Apple (the company) has grown extremely quickly in the last few years, both in market cap, mindshare, revenue, profits – pretty much by any metric you care to measure Apple by.

Now we get to what is REALLY going on…

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One thing has not grown in the same proportion – it’s leadership team. There are still a small number of functionally placed people at Apple.

Although Apple’s stock price has risen from $100 (give or take) to (an effective) $770 in the last 10 years, it’s leadership team has NOT increased by 7x. It has expanded from the Mac and iPod lines, into also offering the iPhone, Apple Watch and cloud services. And in fact, these businesses have VASTLY superseded the original Mac and iPod lines in terms of relevance and importance.

Again, Apple has NOT increased leadership positions by 2-3x as much, to account for the additional scope of work that must be required to maintain a more complex product portfolio.

So this is one of the issues, and one of Apple’s fundamental weaknesses as a company in terms of how they are structured.

a) Apple – as a functional organization – cannot scale Management, Leadership and Design talent the same way that other companies – organized around divisions – can scale their personnel.

More projects, more responsibilities, fixed number of top level positions, means that you MUST ruthlessly prioritize. And this means that some things (lower priority) fall by the wayside. Marco is simply the outcome, of a management team which is likely far smaller than ANY other company with this sort of market cap.

———-

Second, Apple’s customer base has shifted to mainstream consumers. Issues which impact only a small number of Apple’s total customer base – while vocal – do not generate the majority of Apple’s revenue. Apple’s decisions, need to take into account the entire customer base. And while, to a developer, getting a NEW feature (but at the cost of some instability or bugs) is likely NOT the preference… to normal, regular people, getting a NEW feature (at the cost of some instability or bugs) might be a perfectly rational trade off to make.

b) Normal, mainstream customers, are NOT developers. They have different priorities. And more importantly, as a publicly traded company, Apple has business objectives and milestones it must meet. Launching new software with hardware is a huge part of Apple’s marketing story. It also is the most efficient way to spend ad dollars to market both hardware and software together.

— The real solution to this problem really is likely NOT slowing down, but either increasing resources/management to bring the AVERAGE level of quality up (ie. increase resources), or to change/improve processes and protocols to prevent similar issues from occurring in the future, or it’s to reduce the scope of projects to a more manageable level.

However, this last point, has MAJOR caveats.

———-

Finally, what Marco is not considering, is the opportunity costs of what he is suggesting.

As one of the largest companies in the world (and one of the most profitable), Apple can very easily rest on it’s laurels. It’s management team can milk it’s existing products as cash cows for years to come. With additional advertising, what pundits will just be waiting for, is where Apple STOPS innovating, and simply releases products with incremental hardware and software updates, but where Apple is still charging a price premium.

This is how companies – in Apple’s position – fail. What Marco is suggesting, could very quickly lead to Apple’s downfall in a number of years. Not by any specific action or decision, but by the gradual cultural changes which would emerge, by a shift in priorities from innovating and looking forward, even though there may be minor issues, to looking backwards.

This shift from a forward looking culture (new customers) to a backwards focused (existing customers) culture is death.

c) Apple MUST continue forging ahead. It MUST continue to push the envelope in terms of hardware development, and software development, or risk death. However, Apple MUST solve it’s cloud service issues, and gain series competencies in this area. Notably, NO ONE in its senior management team, is actually a GOOD cloud services engineer… Most of this stuff falls under Eddie Cue, who I believe is NOT a cloud services engineer.

If there is ONE suggestion I would like to see Apple do to move it in the right direction, would be to hire a TOP leadership person who is extremely good, at cloud services engineering, and to see this become one of Apple’s top priorities, next to Design, Software and Hardware. You shift priorities by shifting leadership. Either existing leadership develops new competencies, or you bring in someone new.

———-

Lastly, Techopinions actually breaks up Marco’s argument into two areas – software bugs and iOS vs OS X standardization.

This IS creating a strategy tax on Apple.

I don’t know a SINGLE person who uses or thinks iCloud drive is useful or a good idea. We all already use Dropbox, Box.net or any of the other useful services that already exist. Who seriously uses the Launcher application on their Mac, to launch programs??

There simply are resources at Apple, that are being diverted away from important features, to develop useless features that normal people simply don’t care about, but is being developed in the name of consistency between iOS and OS X .

d) Apple is slowly giving in to diverting resources and attention away from REAL problems for REAL customers, into solving non-existent problems. This is wasteful, distracting, and adds overall complexity to Apple and it’s products. Even I cannot keep up with all of the things Apple adds to it’s products which I do not use. The most important Apple trademark, the “it just works”, is quickly going away. This is an extremely seductive, and obvious response. Add things which a small number of people want or that competitor’s offer, by increasing complexity by a small amount. Well, do that over a long enough time span, and what you end up with, is another Microsoft.

I think this is one of the greatest threats to Apple… Simple universal laws of business – entropy. And I don’t see Apple doing enough to combat it.

———-

I believe this gives a more balanced view of Apple’s decisions. As as something in between a normal Apple “mainstream” customer and an Apple “nerd”, I can see both sides. The issues which Marco is talking about simply do not impact me.

At heart, Marco simply does not realize, that he is not Apple’s main customer anymore. And that his priorities, desires and wants, simply matter LESS than what the mainstream iPhone customer prioritizes, desires and wants. While it hurts to be the “middle” child, which gets less attention than the others, you have to call a spade for what it is, a spade, to get to the heart of the matter.

 

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