Apple is a very large company. It's so big that it's impossible to quantify the company overall. Only specific elements of the company can be characterized. As such, it makes no sense to label Apple as a whole because some elements are failing and some are flourishing. This leads to my rule #1 for a large company.
We tend to like simple metrics. This company is brilliant. That company is a loser. We like to treat companies like people. And then we let the CEO of the company assume the brunt of our simplification, treating the entire company as we treat the CEO.
This is not to say that the CEO isn't responsible for the conduct of the company. When the CEO is obviously failing and flailing, it's time for the board of directors to look for a replacement.
But the nuance here is that any large company is really a superposition of multiple states. It can be doing well in one area and failing in others. To put it more generally, I present my first law of large businesses:
Any sufficiently large and thriving company is both failing and succeeding simultaneously.
Here's an example. In the April 25-May 8 issue of Aviation Week & Space Technology, (p.11), the CEO of American Airlines, Douglas Parker, says:
I think it's highly unlikely you'll ever see losses in this business again. We're in a whole new world."
Mr. Parker is referring, according to AWST, "...systematic long-term losses suffered by U.S. Airlines. He says consolidation has put the industry on a much sounder footing." Lower fuel prices have, no doubt, assisted.
And yet. And yet, if you ask any airline passenger, they'll tell you that flying is the most inconvenient, frustrating and uncomfortable thing they've ever done. Seats get smaller and closer together every year. The food, if even offered for a price, is awful. Washing hands in the lavatory is like using toxic waste.
The company is thriving and customers are complaining. Sound familiar?
And so, it only makes sense to evaluate Apple in specific areas. Any analysis of Apple has to include a discussion of a wide spectrum: health of the developer community, customer satisfaction, the communication and leadership skills of the executive team, the overall financial success, the quality of various products—to name a few.
For example, I would rate Apple A+ for its iPhones but F for its efforts with the Mac Pro and its partner Thunderbolt display (now three and five years old respectively). iTunes gets an F, but OS X El Capitan gets an A.
Of course, a detailed checklist of a company's spectrum is a lot of work when it comes to sizing up Apple and its prospects. It's far, far easier to treat Apple like a homeless person who shoplifts a box of crackers. The person must be some kind of deranged criminal, yet most know the poor soul has a heart of gold.
In the last few weeks, after Apple's simultaneously good and bad earnings report, I've seen Apple analysis all over the map. Not much of it was put in light of other high tech companies. When Apple does one thing poorly, the whole company comes under greater scrutiny. When Apple pulls off something brilliant, like the iPhone 6 in the fall of 2014, the whole company is given the benefit of the doubt.
Hope springs eternal that brilliance in one area will percolate into all areas. It seldom does.
That's why when Apple screws up, we call them on it. But the overall faith in what the company is trying to achieve remains steadfast. Like a photon, travelling at the speed of light, a particle and a wave simultaneously, Apple is both succeeding brilliantly and failing in many areas. To understand that is genuine wisdom, not brainless bashing.
My question is: Who''s in charge of the Adjustment Bureau to fix the crappy stuff while Tim Cook focuses on China and the Apple Car?
And when the spirit of Steve Jobs begins to walk the circular arcs of Campus 2, like the saucer section of the Enterprise, let his memory cast a long shadow of passion and brilliance.
Next page: The Tech News Debris for the Week of May 2nd. Apple's biggest challenge yet.
Page 2 - The Tech News Debris for the Week of May 2nd
The Apple Car is A Bigger Challenge Than We Thought
Your fingerprint can be used as evidence against you. For example, your fingerprints are found on a murder weapon. But can your fingerprint be used as a gateway, on a smartphone, to access information that's self- incriminating? So far, law enforcement likes the blurred distinction between these two separate notions. Some would like the two concepts to be separated. Here's further discussion. "The government wants your fingerprint to unlock your phone. Should that be allowed?"
The Apple Car
Which would you rather sell? 10 million watches at $400 ($4 billion) or 100,000 cars at $40,000 ($4 billion)? That's what Apple is facing as it, apparently, moves towards challenging every other car company on the planet that makes (or plans to make) electric cars. So far, those car companies have only been able to muster gross margin of 8 to 15 percent. But we know that historically, Apple operates at a gross margin of near 40 percent.
Perhaps Apple has figured out how to use its robotic manufacturing expertise, which we've only seen a glimpse of, to change the rules. As with other products, the Apple car doesn't have to be the very best. It just has to be the only electric car that's making a boatload of money.
This is all in light of the huge challenge faced by Tesla. Tesla will win big for fail spectacularly trying to deliver, in 2017, all the Model 3's that customers want. From The Verge: "Tesla wants to make up to 200,000 Model 3s in the second half of 2017." Quoting....
Again, all of this comes down to Tesla figuring out how to scale manufacturing in a way that it's never had to do before. "I have a sleeping bag" in an office in the factory, Musk said. "My desk is at the end of the production line."
Apple will learn a lot from this. And that's one reason not to buy into or acquire Tesla right now. On the other hand, if Tesla succeeds brilliantly, Apple may not have the growth it would like to see as it enters the market. The timing could be too late—or it could be perfect. How Tesla does with its Model 3 deliveries in 2017 will tell us a lot.
Tesla Model 3. Image credit: Tesla
Related to the above car discussion is a superb article by Neil Cybart. (The connection will be clear in a minute.) "iPhone warning signs: Apple management is losing control." Mr. Cybart asserts that Apple executives did not fully comprehend the factors that would contribute to a slow in iPhone sales growth.
It's a deep and nuanced article, yet I highly recommend it. One of the intriguing facets of his discussion, which I'll just mention briefly, is the unintended consequence of the iPhone SE. The other is the urgency of the Apple car, amidst a saturated smartphone market, to spur new Apple growth.
This is the Particle Debris article of the week. It's fascinating and informative.
Teaser image via Shutterstock.
Particle Debris is a generally a mix of John Martellaro's observations and opinions about a standout event or article of the week (preamble on page one) followed on page two by a discussion of articles that didn't make the TMO headlines, the technical news debris. The column is published most every Friday except for holidays.