Apple doomsayers

It happened on August 24, 2011. It was a brief and simple meeting, but with historical implications. At two o'clock San Francisco local time, Apple informed the world in three lines of its board's decision to accept the resignation of Steve Jobs as CEO, and to name Tim Cook as his successor.

During the meeting, which lasted for about 40 minutes, Steve Jobs said goodbye in trademark fashion: he played a demo of Siri — the iPhone voice assistant — to the six members of the company's Board of Directors. All made efforts to hold back their tears: the physical appearance of Jobs foreshadowed the worst possible outcome, and his resignation was a gesture of responsibility necessary for the good management of day to day operations at Apple.

It's been two years. Today, Apple is no longer the object of almost reverential admiration by investors, business schools and the media. There was a time, not long ago, in which not a single conversation about business, technology, leadership or management took place without Apple being brought up as the example to emulate. Now, after the first two years with Tim Cook at the helm, everything concerning the Apple brand is as though cloaked by the shadow of a doubt: Does Apple have a future without Steve Jobs?

According to Larry Ellison, founder of Oracle, another emerging tech giant in Silicon Valley, "Apple without Steve Jobs is doomed to fail We conducted the experiment and we know the outcome: it does not work." Ellison refers to the twelve years (1985-1997) during which Steve Jobs remained away from Apple's headquarters in Cupertino. When he returned, the firm was three months away from bankruptcy. And, as the saying goes, the rest is history: after the second coming of Steve, Apple became the most valuable company in the world and turned four industries on their head: music, telephones, computers and animation.

Now, following the very appropriate religious metaphor for the Apple fan phenomenon, some Steve Jobs's admirers resemble the disciples of Emmaus who returned home sadly after learning of the disaster of Jesus of Nazareth. It is said that the Cupertino firm has not released any breakthrough products in recent years; that some Samsung phones are better than the iPhone; that the Apple aesthetic has become outdated; that sales have stopped growing in the latest quarter; that product presentation conferences are not surprising any more, and so forth.

The story that seems to be prevalent in the media, markets, and little by little, in the street, is that the magic has disappeared with Steve Jobs. Without his imprint, Apple is one company more, doomed to the heartbreaking competition raised by Samsung on the Hardware front, and by Google's Software.

Is this position supported by the facts? Could it be, perhaps, that we are again falling victim to what strategy professor at IMD business school Phil Rosenzweig called the Halo Effect? In his book of the same name, Rosenzweig argues that company management gurus often attribute the financial success of a company to factors that actually have little or nothing to do with the truth. Thus, for instance, the tendency is to extol the personality of some leaders as the key to success when things are going well. And when a company deteriorates, the failure is attributed to the personal failing of these same leaders whose charisma was undeniable.

The Halo Effect may, therefore, have a positive or negative sense. Take, for instance, what some top experts said about Steve Jobs before he was canonized as the CEO of the Century by Fortune magazine.

Following the introduction of the iPod in October 2001, a prestigious analyst wrote: "Apple is obviously imitating Sony in its strategy to integrate consumer electronics devices into their portfolio. But Apple does not have Sony's supply richness, which is clearly superior. Introducing new consumer products at this point is very risky, especially if the price is as excessive as that of the iPod."

What's this I hear about the introduction of Apple Stores being an utter nonstarter? BusinessWeek magazine said that in an article published in May 2001 whose headline read "Sorry, Steve. Here's why Apple Stores won't work". The report closes with a comment that, in retrospect, gives a good laugh: "Apple's problem is that it still believes its growth model is to serve caviar at a time when all the consumer wants is cheese and crackers." Hence, merely qualifying as an expert does not a psychic make.

How has Tim Cook fared in his two years?

Apple's numbers reveal spectacular growth in the company in 2011 and 2012, due mainly to sales of the iPhone and the growth of the tablet segment Apple created (iPads). In the second quarter of 2013, there has been stagnation compared to the previous year (which was the best ever), owed to the surprising decline in iPad sales.

Apple faces two immediate challenges: to sell far more phones in the Asian market, which accounts for 80 percent of new mobile customers in the world, and stem the iPad's loss of market share in the tablet segment.

LOW COST IPHONES?

As for tablets, the Apple market share has fallen in the last two years, but the company continues to be the leader far and away, with over 30 percent of the units sold worldwide between April and June 2013. Moreover, Apple enjoys margins well above those of its competitors in this niche. Just ask, for instance, Microsoft, which has invested $900 million in the launch campaign for the Surface, and faced with the poor demand, has had to reduce the price by $150 per unit. In this area, I think the main threat to Apple may be the competition in price by the manufacturers of Android. That may force the Cupertino contingent to launch a low-priced model in the coming months. I do not rule out, furthermore, that Apple in October will come out with a new version of the iPad to help stop the decline of his leadership.

Where both analysts and consumers can agree is in the assessment that Apple has not released any breakthrough products since the death of Steve Jobs. So far, we have seen only evolutionary improvements, with the exception of iPad Mini, designed specifically for the female market segment. But with each presentation that passes, it is expected that Tim Cook and company will launch an innovation that makes the world tremble.

At this point, I think we are all underestimating the cost of innovation and overestimating the individual power of Steve Jobs. Steve Jobs himself spoke in an interview about the need for perseverance over time to generate ideas of value: "You have to love what you do. The work we do is very hard, and time consuming: years of work on the same idea. If you do not love this job, you will not last."

How long did the revolutionary launches that Steve Jobs accomplished with Apple take? Pulling from Wikipedia, the data is very interesting:

1997-2001: The iPod was released four years after Jobs returned to Apple.

2001-2007 It took six years before the next revolutionary launch: the iPhone, introduced by Jobs in January 2007.

2007-2010 With a high level of anticipation, the iPad appears in April 2010.

The time to maturity of Apple's greatest contributions in the age of Steve Jobs is, therefore, in the space of three to six years. And sometimes things do not happen in the expected order. Steve Jobs said that he worked on the tablet since 2003 and, after making some prototypes of a touch screen, they decided to apply it to a phone in what would become the iPhone.

Therefore, if we had demanded that Jobs present a revolutionary product every year, we would have been rushing his genius. Isn't that what the market is doing with Tim Cook? Cook has between one and four years to deliver to market a new idea of the scope of the iPod, iPhone or iPad. I think if given time, he will.

It is true that circumstances are not the same: the market for phones, tablets and digital content is more competitive than the first decade of the century, and the rate of innovation has increased. But so far, the resources of Samsung, HTC, Google, Amazon and company have been invested into following the footsteps of Apple, the champion of innovation. Since Steve Jobs died, has there been any revolutionary device of massive reach to emerge? The reality is no. While Glass is impressive as a concept, Google is far from offering the market a technology of mass use.

There are also complaints that Apple is not listening to consumers: voices are heard, for instance, calling for phones with larger screens; some believe that Cupertino should design a tablet with a physical keyboard (as some of its competitors are doing). In short, we have the impression that Cook is doing little, and slowly at that.

But friends, those of us who are a bit older remember a time when Apple was definitely listening: it launched new products constantly, almost compulsively. This strategy led to an endless catalog of Macintosh models that were not differentiated much at all. In order of inventiveness, Apple made during those years a television that nobody bought; and launched a PDA -the Newton- before anyone else and, as attested by the sales, before its time. The urge to emulate Sega and Nintendo led them to create a console — Pippin — which was never sold; they had their own AOL with eWorld... Finally, in an attempt to heed the great gurus of the moment, it licensed the Macintosh operating system to oriental manufacturers. Is that the right path for Apple? Really?

The second problem we have when discussing the future of Apple is overestimating the figure of Steve Jobs. Is the credit for Apple's success in the early twenty first century deserved by one person alone?

Clearly, Jobs is to go down in history among the likes of Thomas Alva Edison and Henry Ford. True also is it that the talent of Jobs is unrepeatable. But it is interesting to note that both Edison and Ford were unrepeatable geniuses who were able to build institutions that endure successfully today (General Electric and Ford). And in the case of the fashion industry, the best years of firms usually arrive after the withdrawal of the founders.

Another argument that may serve to enrich the conversation about the future of Apple is Jobs' personal failure during the years when he was in exile (1985-1997), away from the Apple culture and team. While it is true that some of the ideas from Apple were incubated at NeXT, this company never achieved a demand for equipment that exceeded 4 percent of its manufacturing capacity.

Does Apple have a future without Steve Jobs? There is, in my opinion, no compelling argument to support that Apple's best years are behind it. Tim Cook, Jonathan Ive and the rest of the team need more time to show what they can do. Until then, some of us will keep thinking that predicting the demise of Apple is pure hip.