Apple Computer company (see chart here) has been rather remarkable. After eschewing the Newton and other products it Locked-in on the Macintosh – and almost failed. After years of declining PC market share and no new products Steve Jobs returned – and with a lot of Disruption and White Space he turned the company around. For the last 4 years Apple has been a model Phoenix Principle company.
Today Apple announced earnings (read article here), and again they were up. But analysts were concerned because the company indicated margins could decline in the next quarter to account for costs of launching new products. This is exactly the kind of feedback that ended up driving Motorola (see chart here) into its bad situation. After Ed Zander Disrupted Motorola, installed White Space and had the company acting like a high-tech power again he fell victim to the lure of margin maintenance. Instead of following up the Razr with a new product every quarter – some hitting well and some maybe not – he let disappointing sales of Rokr and other new products push him toward D&E behavior. He started focusing on Razr sales for market domination – and in the end he pushed the Motorola cellular handset division over the brink when competitors eclipsed him. Short-term margins looked great, longer-term Motorola is fighting to survive in cellular handsets (it’s biggest business).
Apple is showing all indications of continuing to do the right things. After entering new markets, it shows the ability to bring out a series of sustaining product technologies to grow revenues. Each Disruptive product opens the door for these new products which help grow revenues with new customers. Now the CFO is telling investors that new products are planned, and since sales are never assured he has to be conservative about the margin estimate! Good!! No one introducing new products can be sure of their early sales and margin. But to be like a Phoenix, and continually keep rejuvenating, you must continue to launch new products in search of new opportunities. And that is exactly what Apple indicates it is going to keep doing. For investors, employees, customers and suppliers this is good!
The worry is Apple’s reliance on the CEO. Marketwatch quotes an analyst who said investors are worried about Steve Jobs’ health after a recent pulbic appearance "Question’s about Steve’s health will weigh on the stock until he, at some point, looks better in a public forum" (read quote here.)
There’s no doubt Jobs is a good manager. His willingness to Disrupt and instill White Space has allowed him to do well for all the constituencies benefitting from Apple’s turnaround and ongoing success. But for Apple to be a truly great, evergreen, Phoenix company it must build into its architecture the ability to renew itself. Rather than rely on its leader, it needs the systems to seek out the low-return businesses to exit, and to create Disruptions that self-develop White Space which can be monitored and guide growth. Otherwise, the company will stumble when Jobs inevitably leaves. And that would be unfortunate. Businesses can become evergreen, but not if their longevity relies on the leader – the hero CEO.
At Cisco Systems (see chart here) the company mission includes obsoleting its own products. This credo promotes Disruption as it keeps managers from becoming too Locked-in and staying with a product too long in an effort to avoid "cannibalization." As a result, Cisco is not too dependent upon its CEO to keep moving it into new markets, using new technologies and launching all new products. Until Apple develops a system for Disrupting itself its reliance on Jobs will be too high – just as was true at Microsoft – and investors have reason to be wary of the long-term results.
