Apple: The Splendid Failure

John Kirk / September 25th, 2013

“All of us have failed to match our dream of perfection. I rate us on the basis of our splendid failure to do the impossible.” ~ William Faulkner

The Innovator’s Dilemma

If you’ve heard this story before, don’t stop me, because I’d like to hear it again. ~ Groucho Marx

The Innovator’s Dilemma made the point that successful companies can lose their way when they pay too much attention to legacy products and not enough attention to new stuff. They are making so much money they either don’t see a competitor rising up or are too complacent to feel threatened. In either case the incumbent generally loses and the upstart generally wins.

Standing still is the fastest way of moving backwards in a rapidly changing world.” ~ Lauren Bacall

The paradox is that choosing “shareholder value” or profit as your North Star will eventually lead to the demise of your business. Disruption, short-term greediness, whatever you want to call it—you will die. To paraphrase Clayton Christensen, you fail by getting too good at pleasing your best customers, while companies that were once beneath contempt eat you from below.

Although gold dust is precious, when it gets in your eyes it obstructs your vision. ~ Hsi-tang

This is exactly what happened to Steve Ballmer and Microsoft. They did everything that the stock market wanted them to do — make money, make more money, make even more money — but they failed to create any new businesses that would generate a new stream of income to sustain them in the future.

(A) strategy that seeks to maximize revenue and profits – i.e. the sort of strategy at which Ballmer excelled – necessarily precludes the creation of significant new products. ~ Ben Thompson

People are now (foolishly) contending that Apple doesn’t innovate, but Microsoft’s two big cash cows – Windows and Office – were both created in the 1980’s! Now THAT’s a lack of timely innovation.

It is necessary for us to learn from others’ mistakes. You will not live long enough to make them all yourself. ~ Hyman George Rickover

Ben Thompson further contends that the same thing will happen to Apple if they have a Steve Ballmer-like CEO at the helm or if they follow the advice of the stock market.

“…everyone at Apple would be working so hard, and be making so much money, both for themselves and for Apple’s shareholders, that they would ensure that Apple never again reinvents consumer computing.” ~ Ben Thompson

The Innovator’s Impossible Solution

There is always an easy solution to every human problem—-neat, plausible, and wrong. ~ H. L. Mencken

The innovator’s solution is unbelievably simple…and simply unbelievable:

    1) Invent the future…before your existing competitor’s — and the competitor’s that don’t yet exist — do; and
    2) Prioritize future profits over current profits.

Simple, no?

No.

Inventing The Future

Every once in a while a revolutionary product comes along that changes everything… One is very fortunate if you get to work on just one of these in your career. Apple’s been very fortunate its been able to introduce a few of these into the world. ~ Steve Jobs

Do we know what company is going to create the next revolutionary product and invent the future? Of course we don’t. That company may not even exist yet or be too small for us to take note of. How is one supposed to prepare for that?

Prioritize future profits over current profits

Ignore profit, risk financial ruin, ignore financial incentives for your employees, ignore your creditors, ignore your investors, ignore your stockholders, ignore Wall Street…

…in other words, ignore reality.

It’s A Dilemma

That’s why it’s called a dilemma and not a problem. A problem can be solved. A dilemma is a choice between two equally undesirable alternatives. A company can make money when it’s young and risk stagnating when it’s old or risk starving when it’s young but theoretically innovate forev…well, innovate longer and more often, anyway.

I want to die young at a ripe old age. ~ Ashley Montagu

Hundreds of thousands of companies go out of business every year because they chose the latter course. Makes choosing the former look a little more palatable, eh?

I know I’m (working) myself to a slow death, but then I’m in no hurry. ~ Robert Benchley

Steve Jobs Hoped To Resolve The Innovator’s Dilemma

From the errors of others a wise man corrects his own. ~ Publilius Syrus

Steve Jobs clearly hoped to resolve the Innovator’s Dilemma:

Apple has the opportunity to set a new example of how great an American corporation can be, sort of an intersection between science and aesthetics. Something happens to companies when they get to be a few million dollars — their souls go away. And that’s the biggest thing I’ll be measured on: Were we able to grow a $10 billion company that didn’t lose its soul? ~ Steve Jobs

In order to overcome the Innovator’s dilemma, Steve Jobs created a radically new way to run a company, structuring his company entirely differently than any large company of 20th Century.

Kobayashi Maru1

Do not go where the path may lead, go instead where there is no path and leave a trail. ~ Ralph Waldo Emerson

What does Kobayashi Maru mean? It means that when you’re faced with a no-win scenario, you redefine the problem.2

If the only tool you have is a hammer, every problem looks like a nail. ~ Abraham Maslow

There’s great wisdom contained in the above aphorism. On the other hand, if the only tool you have is a Hammer…

…then you really should get more tools.

Steve Jobs went out and forged some more tools.

Effective people don’t just do things differently… they do different things.” ~ Slogan for Covey Leadership Center

Prioritize The User Experience Over Profits

Apple puts the customer at the center of their business. Profit is viewed as necessary, but not sufficient.

We believe that we’re on the face of the Earth to make great products, and that’s not changing. ~ Tim Cook

Apple’s primary objective is to make a great product, to build the best, to to delight the customer and provide a great experience.

Any activity becomes creative when the doer cares about doing it right, or better. ~ John Updike

Apple reinvents existing markets by making the user experience easier, richer, and more pleasant.

The visionary starts with a clean sheet of paper, and re-imagines the world. ~ Malcolm Gladwell

Each time, they begin at the beginning, and start with the user’s experience first and drive back through their infrastructure to make that a reality.

You know, we want to really enrich people’s lives ~ Tim Cook

They absorb the complexity and present the simplicity. They’re obsessed with details and sweat the small stuff so that the customer doesn’t have to.

We try to make tools for people that enable them to do things that they couldn’t without the tool. But we want them to not have to be preoccupied with the tool. – Jony Ive

If it disappears, we know we’ve done it. ~ Federighi

The Expected Result: Innovation and Fanatical Customer Loyalty

The proof of the pudding is in the eating. ~ Miguel de Cervantes

If you make innovation your number one priority, you’d expect innovative products and fanatical customer loyalty. And, unsurprisingly, Apple has them both.

Innovation

Design is where Apple products start,” writes Lashinsky. “Competitors marvel at the point of prominence Apple’s industrial designers have. ‘Most companies make all their plans, all their marketing, all their positioning, and then they kind of hand it down to a designer,’ said Yves Behar, CEO of the design consultancy Fuseproject. The process is reversed at Apple, where everyone else in the organization needs to conform to the designer’s vision. ‘If the designers say the material has to have integrity, the whole organization says okay,’ said Behar. In other words, a designer typically would be told what to do and say by the folks in manufacturing. At Apple it works the other way around.”

Fanatical Customer Loyalty

A satisfied customer is the best business strategy of all. ~ Michael LeBoeuf

ap709556740620Apple’s customer’s love Apple. For some reason that surprises people.

People who don’t love Apple or Apple’s products (and there’s absolutely nothing wrong with that — as we’ll see later, Apple is not for everyone) claim that they don’t understand why Apple’s customers are so loyal. It must be that Apple’s customers are stupid or that they’re part of a cult or because Apple’s marketing has cast a spell upon them.

Are you kidding me?

Source

If Apple’s first priority is the user experience, then OF COURSE Apple’s customers are going to be loyal to them. It’s not an enigma or some great mystery, just the opposite. Apple’s high customer loyalty is an obvious result of Apple’s policies and priorities. Since Apple puts the customer experience first, what would be surprising would be if Apple’s customer’s were NOT loyal.

Appreciation is a wonderful thing: It makes what is excellent in others belong to us as well. ~ Voltaire

The Unexpected Result: Devoted Employees And Massive Profits

If a company prioritizes product over employees and profits, then employee loyalty and profitability are supposed to suffer. But that hasn’t happened at Apple.

Devoted Employees

The problem with prioritizing product over profits is that it demotivates employees by reducing career advancement and removing economic incentives. Or, at least, that’s how it’s supposed to work.

Money doesn’t make you happy. I now have 50 million but I was just as happy when I had 48 million. ~ Arnold Schwarzenegger

I don’t think that working at Apple is a picnic, but it’s very clear that they attract and keep good employees. The reason for this is that they substitute intrinsic rewards for financial rewards. That’s not going to cut it for everyone but it’s highly motivating to the type of employees that Apple finds desirable.

“People come (to Apple) for the values that are evident in every product we build,” Ive says. “When we make decisions, it’s not a battle of people trying to break us out of our value system. We all want to double down on these values, whose aim is to make things simpler, more focused. Those are spoken and unspoken mantras in all the discussions we have. You can call that Steve’s legacy, but it’s Apple now.”

Working on fascinating projects, pursuing excellence, having a sense of purpose, feeling like you’re making a contribution to the world — these things are highly motivating to many people.

And frankly, we don’t settle for anything less than excellence in every group in the company ~ Tim Cook

Perfection is our goal, excellence will be tolerated. ~ J. Yahl

Turns out that for many, the products, not the profits, are motivation enough.

You can tell a lot about a company by the people they keep.” ~ Advertising slogan for Microsoft Corporation

“He who has a ‘why’ to live can bear almost any ‘how.'” ~ Friedrich Nietzsche

Profits

Take a long, hard look at these quotes regarding de-emphasizing profits at Apple:

“Manage the top line, and the bottom line will follow.” ~ Steve Jobs

If you keep your eye on the profit, you’re going to skimp on the product. But if you focus on making really great products, then the profits will follow. ~ Steve Jobs

“The goal of Apple is not to make money but to make really nice products, really great products. That is our goal and as a consequence if they are good, people will buy them and we’ll make money.” ~ Jonathan Ive

Sounds like a lot of pie-in-the-sky hooey, right? If you prioritize product over profits then profits are going to suffer, right?

Wrong.

Apple currently has 55% phone profits. I think the 5c designed to bring them back up to 65%. ~ eric perlberg (@eric_perlberg)

But how could this be?

So many companies wish they were as doomed as Apple. ~ ßen ßajarin (@BenBajarin)

Apple’s Secret, Hidden In Plain Site

“A paradox is truth standing on its head to attract our attention.”

So how does this work? If Apple is prioritizing product over profits, then why do they have so much profit?

Simple. They only go after the profitable part of the market (duh).

It Is No Bed Of Roses

It’s not all sunshine and flowers for Apple. Their contrarian strategy riles the analysts. Their elitist pricing maddens the critics. And for some reason, Apple, makes people go out of their gourd.

Pundits, Analysts, and Investors. Oh my!

Industry observers don’t understand Apple. (To be fair, I think Apple may reciprocate, in kind.)

I know that you believe that you understood what you think I said, but I am not sure you realize that what you heard is not what I meant. ~ Robert McCloskey

Lots and lots of analysts would prefer that Steve Ballmer ran Apple. The way Steve Ballmer is running Microsoft into the ground is the kind of failure that analysts can understand and appreciate.

Apple, on the other hand, doesn’t play by the known rules:

— Apple doesn’t do low prices;
— Apple chooses quality over quantity;
— Apple doesn’t go after market share;
— Apple emphasizes touchy, feely, emotional things that can’t be measured;

Unless analysts learn to appreciate the unmeasurable value consumers place on the experience of a product, they will be forever surprised. ~ Ben Thompson (@monkbent)

— Apple doesn’t play well with Wall Street.

Giving your company over to the whims of Wall Street is like turning your daughter over to a pimp.

The reason Apple isn’t playing by the known rules is because Apple is playing an entirely different game – a game that the Analysts are unfamiliar with.

No product has been more disrupted by the shift from enterprise to consumer than analyst forecasts. ~ Ben Thompson (@monkbent)

Apple taking advice from Wall Street would be like a baseball player taking advice from a football coach.

There is nothing so stupid as the educated man if you get him off the thing he was educated in. ~ Will Rogers

To be fair, even if Apple were playing the game, short-term, myopic, panic-stricken Wall Street is hardly who’d they turn to for advice.

Just out of curiosity, why the hell do analysts think that lowering the price of something is innovative?

Basically, Wall Street is trying to teach a fish how to swim. And Apple’s having none of it.

Apparently, Wall Street feels everyone — except Apple, who has done it time and time again – has expertise in disruption theory.

Critics

Apple is not for everybody:

— They sell a premium product at a premium price.

— They also think that they know technology better than their customers do. Go figure.

The downside to being better than everyone is that people seem to think you are pretentious. ~ Despair.com

— Also, Apple has a very loyal fan base.

Everybody hates me because I’m so universally liked.

Apparently, Apple’s whole attitude and the attitude of Apple’s customers just really ticks people off. The sad truth is that excellence makes people nervous.

If you haven’t got anything good to say…you can always blog about Apple.

I don’t get it. All Apple is asking you to do is not buy their stuff and shut up. Is that really so hard?

Descartes walks into a bar, and the bartender asks “Would you like a beer?” Descartes replies, “I think not” and poof! he vanishes.”

If only Apple’s thoughtless critics were so easily disposed of.

Reality Distortion Field

You think APPLE has a reality distortion field? When it comes to delusional thinking, Apple can’t hold a candle to their critics.

There are an incredible number of people who honestly believe that Apple can hoodwink 9 million people into buying an iPhone. ~ James Kendrick (@jkendrick)

Judging from the lines around the block and the cheering in Palo Alto, Apple screwed up again and built something nobody wants. ~ John Lilly (@johnolilly)

Most people need a reason to criticize others. Apple’s critics just need a keyboard.

Judging from the comments, Apple seems to have two major problems: not enough demand AND not enough supply ~ Horace Dediu (@asymco)

After using the iPhone 5S for a few days I can say it hasn’t fixed that awful sense of emptiness inside me. Worst iPhone release ever. ~ Jonathan Wight (@schwa)

I offer Apple’s critics a bargain: if they will stop telling falsehoods about Apple, I will stop telling the truth about them.

Conclusion

Is Apple an Illusion or a paradox waiting to be resolved?

We are confronted by insurmountable opportunities. ~ Walt Kelly, from Pogo

Apple is like a good sermon. They comfort the afflicted and afflict the comfortable.

“It’s easy to make a buck. It’s a lot tougher to make a difference.” ~ Tom Brokaw

“The reasonable man adapts himself to the world. The unreasonable man persists in trying to adapt the world to himself. Therefore, all progress depends on the unreasonable man.”-George Bernard Shaw

I am now convinced that Apple will always be viewed as a failure by their critics and by their investors, no matter what they make or how much they make…

We are all failures–at least, the best of us are. ~ James M. Barrie

…ah, but what a splendid failure they are.

Next Time: “Apple’s Dilemma: The Bear Case Against Apple”

Author’s Note: I’ve been twittering a lot of late. Come join the discussion @johnkirk

  1. The Kobayashi Maru is a test in the fictional Star Trek universe. It is a Starfleet training exercise designed to test the character of cadets in the command track at Starfleet Academy. The Kobayashi Maru test was first depicted in the opening scene of the film Star Trek II: The Wrath of Khan and also appears in the 2009 film Star Trek. In Star Trek VI: The Undiscovered Country, Dr. McCoy referenced the test as an example of the no-win scenario that he and Captain Kirk were facing. The test’s name is occasionally used among Star Trek fans or those familiar with the series to describe a no-win scenario, or a solution that involves redefining the problem. ~ Wikipedia []
  2. It also means that you haven’t seen enough Star Trek. []

John Kirk

John R. Kirk is a recovering attorney. He has also worked as a financial advisor and a business coach. His love affair with computing started with his purchase of the original Mac in 1985. His primary interest is the field of personal computing (which includes phones, tablets, notebooks and desktops) and his primary focus is on long-term business strategies: What makes a company unique; How do those unique qualities aid or inhibit the success of the company; and why don’t (or can’t) other companies adopt the successful attributes of their competitors?
  • rattyuk

    The Bens in this week’s cubed podcast brought up a major point of Apple’s doing. The iPhone 5 contained hardware that enabled AirDrop, which wasn’t activated until the iOS7 update. Apple is thinking that far ahead. When people complain that the 64-bit processor in the iPhone is useless because it doesn’t have over 4 gigs of memory, they just aren’t stepping back to see the big picture.

    • FalKirk

      “Apple is thinking that far ahead.” – rattyuk

      Agreed. They own the whole widget so they can lay down the foundation for the future, building block by building block.

    • klahanas

      I agree with you, but it’s not fair to the buyer. If I buy a pair of shoes, I expect both at the same time. Not one this year, and the other next year. Both at full price.

      In the same vein, a 64 bit chip should have 4 GB RAM this year. (And SD slot too please).

      • Bill Smith

        Hopefully that was said tongue-in-cheek. The SIM card will go away, and you still won’t have an SD slot.

        You’re not getting one shoe at a time. Each iPhone is fully capable at the time of release, and Apple also builds in some degree of future-proofing; mostly so that their developers can get the next batch of technologies into the hands of the public, as well as do some extensions so that purchasers get more value from their old phones.

        • klahanas

          “Each iPhone is fully capable at time of release”
          So’s the microwave I bought last year. I hold a computer to a higher standard.
          Not having an SD slot is no longer an issue for me…

          • Bill Smith

            Apple is already pursuing virtual SIM’s. This buys them a significant amount of space inside the phone (for the SIM card, mounting bracket, internal connector, etc. It will also allow them to have fewer SKU with better interchangeability. My understanding is that they’re waiting for VoLTE, and for the major carriers to agree to the virtual SIM.

            Apple would rather use that space for an additional radio chipset, possibly allowing a single iPhone SKU to support all carriers worldwide. Consider that, for US-based 5c devices, Apple must have (5 colors x 4 carriers x 3 memory sizes = ) 60 SKU, and another 36 SKU for the US-based 5s, and another 24 SKU of iPad, and yet another 24 SKU of iPad Mini. That’s 144 SKU for iOS devices alone, and the count for iPad-device SKU is likely to go up.

            Reducing SKU count helps consumers too. With a virtual SIM, you can swap carriers with a software download that changes the radios/bands to be used.

          • klahanas

            Or you could build a slightly larger, or thicker device…

          • Bill Smith

            Changing the virtual SIM would only take slightly longer than changing a physical one, and there’s nothing to misplace.

            Also, most customers never change SIMs; most don’t even know what one is.

            Apple doesn’t do larger or thicker or heavier. That only happened with the iPad 3, but is unlikely to recur.

            You forget that slightly larger/thicker also affects shipping and packaging costs. It may be small per unit, but when you ship 100 million of something, small amounts add up.

          • klahanas

            You make very lucid and compelling arguments, on behalf of Apple’s interests. At premium pricing, I just don’t care. I’m a user, and on the opposite end of that relationship.

            As for the “most user” arguments, if these are to truly be “Post PC”, rather if the term is to have any meaning, the freedom to tailor to your needs matters. Otherwise, they are “individual PC’s” and not truly personal. Who’s the “average user”?

          • TheEternalEmperor

            Users who don’t change sims apparently. Most just change phones. As for “freedom to tailor”, you get that. Apps and content.

            My content is different than your content.

            My Apps are different than your apps.

            Apps and content make each device intimate and personal to each user and is fully controlled by the individual.

            The issue may be that what you considering “tailoring” and what most do is not the same thing. I agree with Bill, most people don’t want thicker devices with each generation and clearly with respect to whatever trade-offs Apple has made, the market has spoken with their wallets.

            Trying to be all things to all people is a fool’s game.

          • klahanas

            Do you feel the same about your Mac?

          • TheEternalEmperor

            The App store has over 900k apps. They obviously get approved. And nope, it isn’t vulgar at all.

            First, it’s voluntary. Don’t like it. Go the Android, Windows Phone or BB.

            Second, the curation is the one of the appeals of the App store. Though it is amusing how Apple gets dinged for its curation in one story, then you’ll see about how Apple dropped the ball because some app made it through that offends people.

            Finally, I don’t have a Mac. I use PCs. What’s your point?

          • klahanas

            Easy stuff first. Between myself and my kids, we’ve had every iPhone through the 4S. I left first, then my kids did. Android is now quite viable as a choice. It really wasn’t before (we want it all). So, yes, I have both an S4 (SD slot) and HTC One (like it). So we agree there.

            Curation is an abomination IMNSHO. And it doesn’t stop with Apps, it extends to content. Jobs single handedly banned all Wiley publications from the book store. That’s his right, but it’s censorship. There was a line in Demolition Man, where Sandra Bullock’s character is thrilled at going to Taco Bell. When asked why Taco Bell, she said “Taco Bell won the restaurant wars, and now all restaurants are Taco Bell”. The App store is like that. No alternative shopping. And we seem to be okay with that.

            Finally, you use a PC. Great! I will restate my previous question. Would you be okay with that on your PC?

          • TheEternalEmperor

            I’m not sure what the first paragraph has to do with anything.

            No. It isn’t even close to censorship. Not even in the same universe. And you must be in a different universe because I have plenty of software that I didn’t get from the App store. And since you use Android, you must, by definition, have software that didn’t come from the App store so what exactly are you talking about? Unless the App store sells Android apps, you must have gotten software from one of those “no alternative shopping” stores.

            “Finally, you use a PC. Great! I will restate my previous question. Would you be okay with that on your PC?”

            With what? What are you talking about?

          • Bill Smith

            I think he’s trolling, but he has expressed a few commonly held opinions. Anybody who liked Demolition Man can’t be all bad.

          • TheEternalEmperor

            Maybe. But I wouldn’t pick that particular scene of that movie to back up my case with respect to technology. I mean, there is a zero percent chance that Taco Bell would beat out anyone. Even the Olive Garden is better!

          • steve_wildstrom

            The Wiley episode serves mainly to remind us that Jobs was capable at times of great pettiness, as when he (temporarily) banned Wiley products because he didn’t like a book they had published. But it wasn’t meaningful censorship because you could get all the Wiley books you wanted from Amazon or Barnes & Noble in the Kindle or Nook apps.

          • TheEternalEmperor

            How could he be petty? He was an infallible visionary who did not preside over the Mac Cube, MobileMe, Ping, Antennagate, Schmidt on the Board, not decoupling iOS from Google services (Maps) soon enough and beta Siri, all while designing all the hardware and writing all the code.

          • klahanas

            I’m just as concerned that it was even possible to happen.

          • klahanas

            Your comment made me think of a hilarious irony. Jobs said that “Android is for porn”. It’s also known that he wanted his 30% cut from in-app purchases. That means porn as well. No?

          • TheEternalEmperor

            Nope. No porn.

          • Bill Smith

            There are always alternatives…like rat burgers…and web apps…and Android/Tizen/Windows Phone/Firefox Mobile OS/ChromeOS and others. The thing about capitalism is that, if there are enough who want something and are willing to pay for it (e.g. guns), it will always be obtainable.

            I don’t mind you having a porn bookstore, but don’t deny me the right of having a porn-free one

          • TheEternalEmperor

            Exactly. If not having access to smut(and I have no problem with porn at all), mal-ware, pirated apps, odd repackaged legit apps laced with SMS trojans and an actual need for anti-virus on your mobile device is important to you, do what klahanas did and load up the truck and move to Beverly,Android that is, swimming pools, movie stars.

            I get enough of that on my PC.

          • klahanas

            “I don’t mind you having a porn bookstore, but don’t deny me the right of having a porn-free one”
            You had to go there didn’t you. That’s right Android is for porn. Jobs said it, so it must be true. When Wiley publishes porn, I’ll be the first to tell you.
            Meanwhile the exact opposite of what you stated is what happened. If other stores were available, you could still choose to shop at the Apple store exclusively, no one would be forcing you to the porn shop.

          • Bill Smith

            I own Mac’s, and I’m an independent developer for multiple platforms, including OS X (Mac), iOS, Android, Windows, Linux, UNIX, Windows Phone and Blackberry QNX, as well as a number of embedded and specialized platforms you’ve never heard of.

            Sandboxing and the app approval process are painful, but I’m all for it.

            I ONLY buy apps from the Mac App Store, and I only make non-MAS apps when I do contract work that can’t be completed otherwise.

            I’m much more of a power user than most of the people who claim Android/Windows/Linux over OS X/iOS. I love the nearly-malware free existence and reliability. It’s imperfect, but it’s good to know that some minimum level of quality is imposed.

            Ever heard the expression “Jack of all trades, master of none”? That’s precisely what Android has become, as the result of catering to the fringe elements. I’m glad Android exists because one day, I may want a phone that has a floppy disk drive, Blu-ray player and a refrigerator built in, but for most people, all that stuff gets in the way. Vive le non-conformists! I’m with you, brother.

            Similarly, I’m found of cars with manual transmissions, but I don’t drive a stick unless I have to (and with the advent of DSG, there’s absolutely no reason for them). The market has proven that there are a few people who, for aesthetic reasons, prefer manual transmissions, but it’s generally people who wanted to save the cost of an automatic transmission. Most auto manufacturers have found it better to only sell automatic’s, and save the overhead cost associated with having slow-selling manual transmission SKU.

            The same thing will, ultimately, happen with phones. A few people will insist on phones with floppy drives, err…, SD cards and physical SIM cards for aesthetic reasons. Manufacturers, not just Apple, will decide that it really doesn’t sway the purchase decision for the vast majority of customers and drop it. A better alternative will show up for those who have legitimate need of such things. The truly insistent will be recognized as a tiny, fringe, niche market that can afford to pay extra for their non-conformist platform.

          • TheEternalEmperor

            I’m one of those manual drivers. I just like driving sticks. But what I don’t do is go around hassling people who how awful it is that more vehicles don’t come with sticks. I don’t try to move my entire family to sticks and I don’t frequent articles about automatic transmissions telling people how great the stick shift is and how vulgar it is that the automakers are making power grabs by limiting my stick options.

            I’m also a professional dev on Windows, Unix/Linux mostly in Java, but with secondary on C# and C/C++. Mostly server side stuff talking to a variety of RDBMS and using a ton of open source tools. Love open source. Love it. Spring is still my top favorite. I don’t use mainstream Eclipse. I use IntelliJ Idea for my IDE.

            What I’ve found is that everyone,all the people who talk about Android’s openness really just mean themes, 3rd party keyboards and widgets. I’ve yet to see,hear or read about anyone actually doing anything interesting with the Android source despite it being available. They really tend to be techno-dilettantes, IMO. And they tend to want to drag everyone around them into their open. I’ll bet money that you won’t find a kid in the US who would pick anything Android over an iPod or iPad unless you’ve got a parent blowharding(no offense) constantly about the subject, ala Bill Gates.

          • Bill Smith

            @klahanas That’s why there are companies, other than Apple, who make phones. Apple doesn’t, and shouldn’t, cater to fringe cases.

            The “average” user, much as The Eternal Emperor said, doesn’t even know how to change a SIM and can’t imagine why they would ever want to. If there are 100 million who don’t care, and 70-80 thousand who want a SIM slot, I’d rather send those who need a SIM slot to Android.

          • klahanas

            Computers, which these things are, should be liberating, not intentionally limiting. Even so, I can live with the concept of an “appliance computer” as distinct from a PC, which is general purpose.

          • Bill Smith

            But that’s precisely where you’ve missed it. For most people, the Apple model ***IS*** liberating. Yes, I could drive while managing the clutch and shifting, and if you drive a lot, it becomes a “background” task for your brain, but maybe I don’t want to do that all the time. Yes, I could have a phone with an SD card and manage which data is on the phone, and on which SD card, but most of the time that simply isn’t key to what I’m trying to accomplish. Yes, I know EMACS and LATEX, and PostScript, for that matter, but maybe I just want to use Pages. I assure you that I know more about file systems and storage media than most anybody on the planet, and I ***COULD*** manually defragment my hard disk every day for best performance.

            I know enough to design my own PCB, processor and other ASIC to make a pretty decent computer, then write an OS to put on top, in addition to my own shell, where I can choose to manage the data on a sector by sector basis, but I WANT the freedom to let someone else make those decisions so that I can accomplish the task at hand.

            Most days, having to manage an SD card for my phone would be an encumbrance, NOT liberating. Having a physical SIM just means one more thing could go wrong, or be misplaced. My car has a SIM card for its built-in WiFi/LTE router (Audi), and I’ve spent needless hours trying to find it.

            I get so much work done with iCloud, because I don’t NEED to think about a file system, and wish more apps didn’t require me to name my files (says the guy who has a contract to write a file system). Bonjour has saved me countless hours, although I could bore you to death yammering about the virtues of IPv6 and the intricacies of SNMP.

            Although my job often requires that I delve into the bowels of my computing devices, for most people, that is NOT the job to be completed, and it’s liberating NOT to have to think about areas that are NOT directly related to the task at hand. And even though I CAN do all these things quite well, I don’t want to waste time thinking about i-nodes when I just need to print a document.

            Do you go around complaining about guard rails that keep people from accidentally driving off the sides of bridges? They, also, are intentionally limiting.

            Your argument has merit in saying that it’s good to have that option on SOME product, but it’s absurd to say that a product that doesn’t allow every conceivable fringe option is somehow faulty or inferior.

            I do everything from hard core development to multi-camera video and audio editing on my iOS devices. If that’s not general purpose, it’s surely useful.

          • klahanas

            “Your argument has merit in saying that it’s good to have that option on SOME product, but it’s absurd to say that a product that doesn’t allow every conceivable fringe option is somehow faulty or inferior. ”
            We can agree then. If that were the case, trolls like me would be appeased (troll in this case being anyone who is not enamored by Apple). At these prices, I still don’t like the value proposition, but at least it would EXIST.
            Please take this whole thread as dialogue, and not personal affront.

          • Bill Smith

            klahanas: I don’t take it as an affront at all. I more than agree with you that choice is a wonderful thing. The government shouldn’t have to subsidize your desire to have a phone with a 5 MB Winchester drive attached, but if you want it, regardless of how absurd, and are willing to pay for it, you should be able to get it.

            What I disagree with is that Apple is somehow doing something evil or wrong by making design decisions that selectively reduce functionality that they see as irrelevant.

            I disagreed when you said that “curation is an abomination.” To me, it’s a feature.

            You went on to say that the App Store is like only having Taco Bell (quoting my much-loved Demolition Man, which greatly enamored me toward you). If there were NO way to run an unapproved app on any device, I would be the first to sign a petition against such a monopoly. Because Apple doesn’t own the entire market, it’s okay that you have to get their approval to sell an app that runs on their device.

            In essence, BECAUSE Android exists, Apple should be free to make as restrictive an environment as they want, since I can always buy an Android-based tablet and do my own thing. If, for some reason, Apple were to dominate and cause Android and other alternatives to cease to exist, THEN I would be standing right beside you, whining about their practices.

            Yes, I am fond of Apple, but I’m not stupid. I don’t trust ANY organization that much.

          • klahanas

            I’m sure that we will be discussing this again in the future, we both have very much to say on the topic. But I’m afraid we’ve gone long in the tooth for this thread.
            Let’s just say that talking about Apple is how I get my toilet paper, regardless of how much Jobs & Co. want me to use the three seashells. 🙂

          • the Ugly Truth

            what may be “intentionally limiting” to you may not be for others.

          • klahanas

            True. You are free to limit yourself. Why impose that limitation upon others?

          • airmanchairman

            Dead right you are, although Apple has been stopped dead in their tracks by a consortium of European carriers who, seeing the grim writing on the wall, bloodcurdlingly threatened to back out of the subsidy model that props up Apple’s revenues against the marauding Android horde, if they did not back down from this venture.

            So it’s stalemate for now on the virtual SIM front…

          • Bill Smith

            As John Kirk might say…

            Haters gotta hate.

            I have reason to believe that Apple will break the stalemate in just around 3 years. The carriers won’t always have the final say.

    • Bill Smith

      It’s even more than that. They’ve been plumbing LLVM (the compiler for OS X and iOS) for their own brand of 64-bit ARM, and 64-bit Objective C support for at least 4 years, based on the comments in the LLVM check-ins. That means all of this pre-dates Steve Jobs’ death.

  • stefnagel

    The Minnesota explorer Will Steger was once asked what was the key to crossing the Antarctic with just skis. Don’t panic, he remarked. He once said, “Panic will kill you quicker than starvation.” Quicker than shareholders.

    That’s what Apple and Jobs learned in the wilderness of the nineties: Pick your direction. Pursue it. Don’t panic. Panic is failure; everything else is an opportunity to look deep inside and to take new trails. It is a measure of integrity. Another quote, from Outward Bound: “If you can’t get out of it, get into it.” Don’t panic. Breathe.

    On the other side of the trail, Wall Street routinely panics; it has no center, no soul. It’s populated with Reavers and Wraiths.

    Thanks for the Walt Kelly quote. Pogo still makes me smile.

    • FalKirk

      “Wall Street … is populated with Reavers and Wraiths.

      A Firefly reference! :0

      • airmanchairman

        … and Stargate Atlantis (Wraiths).

        Of Wraiths, it was said: The Wraith view themselves as vastly superior to humans and treat them similarly to how a human might treat cattle or livestock, although in a much more sadistic and brutal way.

        Of Reavers, it was said: “If they take the ship, they’ll rape us to death, eat our flesh, and sew our skins into their clothing – and if we’re very, very lucky, they’ll do it in that order.”

        Very descriptive of the main Wall Street types, I would say…

  • James King

    Do we know what company is going to create the next revolutionary product and invent the future? Of course we don’t. That company may not even exist yet or be too small for us to take note of. How is one supposed to prepare for that? – John Kirk

    You answered your own question in the article. You don’t.

    It’s a false dilemma.

    The original purpose of a company is to fulfill a need that the market demands. Profit is the RESULT of that. So any company that places maximizing profit ahead of fulfilling a need isn’t following its original mandate.

    In the end, it is demand that creates and destroys companies. When that demand is not met or met more effectively by another company, a company fails.

    What is irrational is the notion that a company would place any priority above identifying and meeting that demand. That suggests a continuous process of discovery, such as R&D, to identify new and better ways of meeting that demand. What kills companies is stagnation in their thinking, the counter-intuitive belief that nothing will change.

    Apple is built on a simple premise: change. It is doing what every company in the world SHOULD be doing: embarking on a continuous process of discovery. It isn’t a get-rich-quick scheme for traders and shareholders, it is a true business in every sense of the word.

    More importantly, Apple has identified the one area in which it is impossible to over-serve: the user experience. But what people seem to not understand is that real science goes into that. Those “happy” colors on the iPhone 5C aren’t a happy accident… neither is its choice of Helvetica Neue or the parallax effect on iOS7. These aren’t just cool things cooked up in a lab to create excitement. Every element of Apple’s products are thoroughly researched to operate in a way in which our minds find the most conducive. Or to create a competitive advantage that can only be equaled but not surpassed.

    Like Apple has done with its products, it has simplified business. Build essential products that delight people. And keep discovering new ways to do that. Simple.

    Is this not the way ALL business should be done?

    • rationalchrist

      Good points, both from James and John. Customer experience first, profit would follow. Problem is that company starts thinking business is bigger than customer after the initial success. Exhibit 1: Microsoft thinks Windows ought to be everywhere regardless what customer want. Exhibit 2: Blackberry thinks keyboard and email is more important than internet thing. Exhibit 3: Nokia thinks brand difference is greater than customer don’t another OS.

      • James King

        Thanks. John’s article, as always, is excellently written and informative.

    • FalKirk

      What is “rational” is constantly fighting against our human nature. Being “myopic” or “failing to see the forest for the trees” are buzzwords precisely because we have tendencies that are self-defeating. First we need to be educated. Then we need to take action. Both are hard. Easy is usually done until hard is absolutely necessary.

  • Space Gorilla

    Most anti-Apple arguments boil down to “No matter how much Apple succeeds, Apple is not succeeding!” And I think that is rooted in the perception within the industry (and press coverage) that Apple is ‘doing it wrong’ (the nerds are quite angry about Apple’s abstraction of the computer, “it’s a toy” they shout). I also think Apple avoids any dilemma by simply doing what works best. As you note, Apple typically reinvents a market by offering a great user experience. There’s so much opportunity to improve user experience, I don’t see Apple running out of work to do on that front, there are just so many products/markets with mediocre user experiences. Doing what works best is Apple’s disruption. Very few companies truly follow that model, so I don’t think there’s much danger of Apple being disrupted, unless they stop doing what works best.

  • Below$550AShareIsPathetic!}:-D

    I’m afraid Apple is in a no-win situation with Wall Street. The news media and smartphone industry is constantly discrediting Apple of any type of advancements and I wonder if it’s keeping the institutional investors away in droves. I can’t say if Apple is making cutting-edge smartphones and I don’t think they necessarily need to. Most consumers just need well-built, reliable smartphones that are easy to use. Most consumers aren’t spec-junkies.

    The problem is that the people who control the smartphone industry are spec-junkies, basing how good smartphones are by the highest specs and the most number of features you can cram into one. Most consumers just don’t require all that stuff. I think it merely confuses them or they don’t bother to use all those features. Apple is always said to be behind all Android smartphones in terms of hardware and it’s said iPhones are certainly no better than the average Android smartphone. I wonder if this is what scares investors away from Apple.

    I think Apple is just trying to make the iPhone easy to use while offering good customer support to make it worthwhile for consumers to pay more for the iPhone. Apple should just pack in more software services for free for consumers to offset that extra cost. I still find it really strange for the smartphone industry to constantly belittle the iPhone just because it doesn’t have a larger display. That’s Apple’s choice and the customer’s choice to make that decision. I’m just surprised that the iPhone 5s is considered an underwhelming product. Most high-end smartphones can’t be considered underwhelming products. They’re really powerful devices that fit in the hand. To me, they’re marvels of current technology. These phone-nerds are getting really jaded and I can’t imagine what they’re expecting a smartphone to do.

    It’s tough for Apple to be forced to innovate because it’s expected of them. Major advances just don’t come about every year in any industry. The Boeing 747 has been flying since 1970 and yet it still doesn’t exceed Mach 1. Would the airline industry say Boeing is just screwing around and hasn’t innovated at all and has little value because of that? I really don’t understand why Apple’s expectations are so set so much higher than the rest of the tech companies. Practically the same components and materials are available to everyone else and Apple has to make money like any other business. I just get the feeling that someone is deliberately trying to ruin Apple.

    • Anders CT

      “Apple is in a no-win situation with Wall Street?” How can you say that? Aren’t thay the most highly valued company on Wall Street?

      But really, if you think that company X is unfairly undervalued, there is only one proper response: Buy stock in company X and get richer.

      • TheEternalEmperor

        Come on. What other company in tech gets hammered for not having enough low priced products in one story, but for shrinking margins in a different story on the same site?

        The iPhone business is larger than most companies, yet each announcement is met with a stock drop because the device is seen as poor by analyst, only to find massive success with the only people who’s opinion on the subject matters: The customers.

        Apple makes guidance. Analyst come up with their own numbers, then punish Apple for Apple not making the made up analyst numbers.

        Heck, you see stories suggesting it is bad that customers were lining up to buy Apple’s newest phone, stories that Apple was lying about the numbers or channel stuffing despite the fact that almost no mobile company release numbers(Amazon has never released kindle sales) and stories berating Apple because the iPhone 5S, the higher priced model was selling better than the lower priced one.

        As Horace Deidu surmised, Apple is seen as being in a state of constant freefall no matter its success. “It is a wonder the stock has any value at all.”

        • Anders CT

          But still, Apple is valued higher than any other company by Wall Street. That is not “being seen as in a state of constant freefall”

          Do you think that Apple stock is being valued too low?

          • Bill Smith

            Until Blackberry went negative recently, its P/E ratio was higher than Apple’s.

            Do YOU think its valuation is too low?

          • Anders CT

            I have no clue. I just don’t see all the Apple doom and gloom.

            And in general, if people think that Wall Streets valuation is way off, go get rich.

          • TheEternalEmperor

            If only it were that easy.

          • Space Gorilla

            Well, our family business bought a bunch of stock when it went below $100. We’re quite happy with the stock’s performance. Most people don’t understand Apple, so it will never be properly valued by Wall Street. But I think there’s a limit to how much analysts can deny reality, so the stock will slowly keep going up. You just can’t look at the price too often, it’ll drive you nuts. Up. Down. Down. Up. Up. Record sales. Down. Down. What the hell?

          • isitjustme

            I believe you are wrong, Apple is not highly rated if they did their P/E wouldn’t be in that low.

    • SIJ_xx

      Your comparison of Boeing’s progress to Apple’s is a poor one.
      Other than the Concorde, no commercial aircraft exceeds a Mach .85 cruise speed for economic and other reasons.
      Check chapter 7 of “The Simple Science of Flight by Tennekes.

      As for Kxxx complaining about the lack of a SD slot, that will never happen given Apple’s walled garden approach and hidden file system that can only be viewed by Jail-breaking the phone and adding an application like iFile.

      As to the decreasing thickness of the iPhones, it is annoying, I would go forca millimeter or 2 more in thickness and a biger battery.

  • skeese

    Splendid blog. You are now on my always read list.

  • Steiner on Failure

    John, great analysis.

    However – Apple has followed up on tremendous success with agonizing failure before – it is definitely a much longer, much better run this time but the odds are stacked against the company for two primary reasons:

    1) Loss of the visionary and his vision – people are not understanding the depth of the loss of Jobs (btw looks like Bezos is shaping up to be the new Jobs…)

    2) The proprietary culture, reluctance to embrace a more open solution – even the app market suffers from tremendous bureaucracy, and that has been the linchpin of Apple’s inability to stay successful historically.

    Jobs knew how to learn and leverage his past failures.

    I’m not sure Cook has enough to learn from…

    Erik Steiner

    Steiner on Failure

    The blog http://failure2point0.blogspot.co.il/
    The Linkedin group http://linkd.in/16O8SK2
    The twitter feed https://twitter.com/stnr_on_failure @stnr_on_failure
    The Pinterest board http://www.pinterest.com/ragingacademic/the-anatomy-of-failure/

    • TheEternalEmperor

      Don’t agree

      1) I think you are overstating the case with Jobs and underestimating everyone else. Ironically, you are doing what people are doing instead of “people not understanding…”.

      Jobs wasn’t infalliable and Bezos has yet to do anything that I’ve seen that compares with Jobs. Job’s touch, under Apple was world wide and game changing. Amazon is a great store, but it isn’t worldwide.

      2) Apple set the tone for standards. They didn’t follow Flash. They adopted H.264 and HTML5. Almost all mobile browsers use or derive from Webkit. They embrace bluetooth and wifi.

      What you appear to be talking about is that they don’t embrace EVERY conceivable open standard and they shouldn’t. Being open doesn’t automatically mean being better.

      Also, your history theory, no offense, is woeful and antiquated. Apple has been dominating for over a decade. They make money in PCs while almost everyone else falters. Their iPhone business alone is larger than most companies. They took control of the tablet business.

      I’m not even sure what you are comparing the App store too. PC software is hard to install and hard to maintain for most users. Android is a complete mess. Rampant piracy. Malware. Full of ads And doesn’t even make devs as much money. Google’s model is “Let the buyer beware. If enough noise is made, we’ll act (see Android iMessage), otherwise, you’re on your own.” Good luck if you’re one of the first 50k who got scammed or robbed.

      The App store, while not perfect, made installing software easy and affordable to millions. Grandmothers install software and that was something you rarely saw in the pre-App store days and totally risky on Android.

    • FalKirk

      “the odds are stacked against the company” – Steiner

      I’ll respond, in detail, in next weeks article.

      Thank you for the kind words and thank you for your comment. Both are much appreciated.

  • Dan_Kurt

    re: “btw looks like Bezos is shaping up to be the new Jobs…”Steiner on Failure

    No way. Bezos appears to be a kid in a candy store with his wealth. He is pissing away his fortune as demonstrated by his buying the Washington Post and admitting that he has no business plan for running it. Bezos will have to keep infusing it with money, sell it again at a lower price, or ride it down in value until he sells it for scrap. http://www.zdnet.com/jeff-bezos-has-no-plan-for-saving-journalism-tells-editors-focus-on-customer-7000021247/

    Dan Kurt

  • Ian Waring

    My wife considers her iPhone to be her prize possession. If I ever suggested anything else, I ‘d get little more than a death stare.

    She ‘s just waiting for Apple to ship her 32GB Gold 5s, due 7-10th October 🙂

  • Starman_Andromeda

    Fantastic!

    One of my favorite tropes is that Apple is all hat and no cattle–that they’ve marketed themselves into market share–that they’ve hoodwinked the masses–that they’ve case a reality distortion field around buyers.

    Yet, Samsung, which is considered Apple’s “big” competitor (not that I did not write, “copier”), spends billions on advertising and scores of times more than Apple does. Who’s really trying to market themselves and fool the proles?

  • aardman

    Aardman’s (perhaps inelegant) restatement of Steve Jobs’ solution to the Innovator’s Dilemma:

    Don’t fall in love with your product, fall in love with product development.

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