Eric Jackson recently interviewed me for his column at Forbes. I’m cross-posting here my answers to the tech industry related questions. Check out the full interview to read more about me personally and the background of stratechery.
Q: Where is Apple at right now as a company in this post-Steve Jobs period?
A: I think, were Steve Jobs still here, Apple would be in the exact same position: wildly successful financially, with justifiable skepticism about their future growth prospects, and unjustifiable skepticism about their short-term opportunities.
The iPhone was in many ways a once-in-a-generation business opportunity: carriers are paying Apple handsomely to disrupt the personal computer business, just because Apple’s product happens to have an app that makes phone calls. Oh, and that product is one that is a necessity for almost every person on earth. It’s difficult to imagine a more lucrative opportunity, and fair to question how Apple can grow from such a large profit baseline (then again, it was hard to imagine a better business opportunity than levying a massive tax on every single computer just as computers became a necessity for every business and home, i.e. the Microsoft model, yet it turned out even better opportunities existed).
What’s not justified is the assumption that iPhone sales are going to suddenly collapse in the face of lower-cost, “good-enough” Android-based phones. This sort of thinking is primarily the provence of analysts with their roots in PCs who witnessed the race to the bottom among Windows OEM’s, and it ignores that the PC market was primarily driven by businesses, where the buyers were not the users, and thus highly focused on price. The iPhone, on the other hand, along with all of Apple’s products, competes for consumers, and every other consumer sector offers evidence that there is a sizable portion of consumers who make purchase decisions for more reasons than just price. Apple, with their focus on the user experience, has always been a consumer company, and in a lot of ways their success over the past decade is a result of consumers embracing technology just like businesses did in the 80s and 90s. The right company, in the right place, at the right time with the right product.
Steve Jobs certainly played a major role in that, and his most underrated quality in my opinion was his patience (on the flip side, one of Microsoft’s biggest failings is their timing). However, the values Jobs insisted Apple embody – quality, simplicity, the “feel” of something – are actually not that difficult to understand. There is no magic formula, just the incredibly difficult work of making choices and executing in a way that ensures those values come through in the products.
The problem, though, is that those qualities aren’t easily measured or put on a spreadsheet. A lot of analysts handled that uncertainty by simply ignoring them, and then, when Apple continued to surprise, Steve Jobs became the scapegoat for success. And, now that he’s gone, these analysts can’t imagine how Apple can be successful even though the reasons remain just as clear as ever. Apple even made a commercial about it (the Designed in California spot)!
In other words, I think Apple is fine. My long-term worry is about what happens when all of the old guard leave, and those in charge have only ever known success. But that’s still a ways off.
Q: Is Tim Cook the right CEO for the company at this time?
A: Absolutely, for the exact reasons I just articulated. Tim Cook’s speciality is making choices and driving execution, and from my observation both inside the company at Apple University and now, outside the company, he has long been the guardian of those values that make Apple, Apple.
The problem with following a visionary, which Jobs absolutely was, is ensuring the revolution doesn’t destroy itself from the inside out once the unifying figure is gone. Cook is obviously very aware of this, which is why you hear him speak so much about collaboration and working well together, and is almost certainly why he removed Scott Forstall.
Folks have said Forstall was the closest thing to Steve Jobs, and he’s more responsible for the iPhone than anyone, but Apple doesn’t need another Steve Jobs. Instead, Cook has worked to make the center of the company Apple itself, and the shared ideology design. It is a shared belief system that “No” is more important than “Yes,” that focus is essential to making great products, and that no one individual is essential. Not Steve Jobs, and certainly not Scott Forstall.
Q: What’s going to be the “next big thing” for Apple? Watches, TVs, something else?
A: Apple, despite their name change, has always been a personal computer company. They just keep reinventing what a personal computer is, and always in the direction of being more personal, and less computer. Look at the original Macintosh, saying “Hello,” to the candy-colored iMacs. Then came notebooks, which go with you, and now iPhones and iPads, more personal still.
And now, with technology like TouchID and the M7, the iPhone is becoming even more personal. Whatever comes after the iPhone, and Apple is certainly thinking about just that, will make computing even more invisible, yet even more omnipresent at the same time. Bicycle of the mind indeed! Moreover, as computing becomes even more personal, the door opens to many new opportunities, whether it be security, identity, payments, etc., lots of which are very lucrative.
Of course, Apple has always had a great accessory business as well; laser printers in the 80s and 90s, the iPod in the oughts, and the Apple TV today. I think, though, these types of products will always tend to enhance the primary, personal products, as opposed to being standalone moneymakers (the iPod was an obvious exception).
There are two certainties though: whatever comes next is having its foundations being laid now, just like iTunes and OS X laid the foundation for the iPhone; that’s why things like the M7 are so intriguing. The other certainty is that whatever is next will likely be dismissed initially for being too limited, although it will do a few things perfectly. And then, over the next several years, Apple will iterate and iterate, until we wondered how we ever lived without.
Q: What’s your take on how they’re handling their expansion into China, India, and other emerging markets?
A: As I noted earlier, Apple pursues customers for whom price is not the overriding concern. They’re not gouging people, but they’re also not chasing the low end. Moreover, while a lot of their value add is in their software and hardware, they also add value through services, including their retail stores, iTunes ecosystem, App Store, etc. This has some important implications for emerging markets: first, a much smaller segment of the population can likely straight up afford their products, and second, the benefit of Apple’s service offering are likely much more limited. I think India is very much the poster child for these challenges, and Apple’s share is commensurate with that.
China is interesting, though, because while some of the same issues apply, Apple’s brand is very highly valued as a status symbol. China is the fastest-growing market by far for all of the world’s luxury brands, and Apple is a part of that.
What Apple is clearly not going to do is offer an “emerging market” version of their products, and while I get the consternation about that, given the inherent weakness Apple has in emerging markets relative to developed markets, it’s not surprising that their first move to grow share beyond the flagship iPhone – the 5C – is much more attractive in developed markets with increased subsidies (which, in and of themselves, are a by-product of more developed economies).
Q: As you look at the rest of the mobile internet competitive landscape, do you expect any big surprises from other players (good or bad) in the next 5 years?
A: The bear case that I pilloried above, that the iPhone is going to somehow collapse in the face of “good enough” Android phones, is actually much more applicable to Samsung. Samsung has very little in the way of meaningful differentiation compared to cheaper Android, and they are going to increasingly struggle to keep up their average selling prices and margins. That said, the strength of their supply chain is extraordinary, and they are nothing if not adaptable.
Amazon is a big wildcard, but mostly in the US. Anything revolutionary they do in phone pricing, though, is likely going to be about the contract price, perhaps as an MVNO.
Microsoft is worth watching, as well, for the opposite reason. Their days of owning the OS layer are over, but they don’t seem willing to accept this. The problem is that the opportunity cost of not accepting that are massive: there has been a window for the last couple of years to effectively build a platform on top of Android and even iOS based on premium services, including Office, but that window (no pun intended) is closing quickly. Regardless, it’s difficult to see Microsoft having the sort of revenue opportunities going forward to support 130,000 employees, and the cuts, when they come, will be very painful. It makes me sad.
Q: Who will be the next CEO at Microsoft?
A: One person I don’t think it will be is Stephen Elop. While it’s hard to come up with a lot of good things to say about Microsoft’s Board of Directors, I simply can’t fathom how you could give the CEO job to someone who, the last time he was CEO, effectively accelerated a declining business into the ground. Then again, I feel the Nokia purchase has the chance to do just that, so who knows?
I’ve heard the name of Tony Bates thrown around; he’s already there, but still has enough outsider bonafides to seem like a fresh change, and he’s managed in a large organization at Cisco. I don’t know much about him, though, although I do think Skype has really dropped the ball in the shift to mobile; it has remained too focus on the voice experience, and not nearly enough on the messaging experience.
The person I would love to see be CEO is Kurt DelBene, the recently departed head of Office. Office has, over the last few years, transitioned its business model to a service offering in the form of Office365. It’s still small but one of the most exciting products at Microsoft (unfortunately, it’s paying a huge strategy tax to Windows by not being available on the iPad, and only on the iPhone/Android this past year). Moreover, it’s a model for where Microsoft needs to go as a company: up the stack into services. Unfortunately, I don’t think it’s going to happen, not least of all because his wife has moved to the other Washington as a Congresswoman.
Thanks to Eric for the interview. Check out the whole thing, including more about myself personally and the background of this site, here.