"Apple is in the process of disrupting itself right now .... Most companies cannot bring themselves to make decisions that result in the market for their existing core products being completely destroyed".
First of all, I'm pretty sure the notebook market is not being completely destroyed by tablets. Yeah, tablets are blowing up, and yeah, notebook sales are probably taking a hit, but lets be real. This claim is grossly exaggerated to the point that it is just not true. The notebook market has not been destroyed.
And disrupting itself? Really? Identifying a new product that has the potential to be hugely successful and profitable while possibly taking a small slice out the sales of an existing product means Apple is disrupting itself? Another word to describe this is 'innovation'. And anyway, I'm not even sure iPads are hurting Apple's notebook sales. I haven't done my research, but I've heard that it may in fact be the other way around - that the Macbook Air is hurting iPad sales.
Seems like the author just picked up the latest buzzword, and he's a bit fuzzy on what it really means. Apple is undoubtedly innovative and fantastic at what they do, but please stop fluffing up disruptive.
People tend to shove disruptive in wherever they can - I guess because it sounds cool. _Cannibalize_ might be better here?
Anyway, it's hard to argue Apple didn't cannibalize on its own iPod sales when it introduced the iPhone, and with some mild success. Not all companies seem willing to do that.
I guess what I'm saying is that if you just sed disrupt for cannibalize, the argument makes more sense.
Regarding use of word disruptive: one of the authors of the article is Clayton Christensen who coined the term "disruptive technology" in 1995. So he uses the term in that sense.
According to his theory, there are two types of innovation: disruptive and sustaining. Disruptive innovation creates new markets by applying a different set of values. Sustaining innovation merely improves a product in relation to competion in its current market.
So I believe the authors do know what the word disruptive mean and are very deliberate in using it instead of innovation.
Let's read what Apple CEO Tim Cook said four days ago:
"From there, Cook tackled a much-discussed topic in recent quarters: whether or not the iPad is cannibalizing sales of traditional PCs. “I think that iPad has cannibalized some Mac sales,” he conceded. “And the way that we already view cannibalization is, we prefer we do it than have somebody else do it.” Because of that, he added, “We never want to hold back one of our teams from building the absolute greatest thing, even if it takes some sales from another product area.” "
I remember reading this somewhere how Bill Gates scolded on the guy who came up with the idea of developing Office in the browser.
Its easier to say this but developing a product (iPhone) which could easily eat up the momentum of your best selling product (iPod) is a huge gamble by all means.
Desktops are taking a hit from iPad sales? Hmm.. have a link to back this up? Not doubting you - I'm genuinely curious.
By the way - even if iPad sales are higher than (Apple) desktop sales, and if iPad sales are on the rise and desktop sales on in decline, please do not assume that desktop sales are taking a hit because of iPads.
I call bullshit. Desktops taking a hit from tablets - are you crazy?
Desktops are taking a hit from desktops!
There are still acres of desktop real estate which is going to be replaced with more desktops.
Looking at this at a high level, there is actually pretty much sod all difference for the average user in the last 5-6 years technology-wise on a "desktop PC". They are just not buying them because nothing is compelling them to upgrade as they are fine as they are.
If there was a technological leap then we might see something but for most users, a 5-6 year old desktop would run the latest and greatest version of Windows fine.
Tablets are going to be a short lived "experiment" which will dry up in time, much as they always have been (Apple are far from being the first tablet vendor). Microsoft may have the answer to that in a hybrid device but we'll see.
I counter-call bullshit on your last part. Every time I get on a flight these days half the plan sports an iPad. On the tube, iPads and Kindles are abound. Sales trajectories aren't pointing anywhere but up. I think they left the realm of "short lived 'experiment'" quite a while ago.
Desktops aren't 'taking a hit from tablets', they're 'taking a hit from mobile platforms'. Phones, laptops, and tablets have all increased. Desktops have decreased. Tablets are chewing out part of the laptop market, but laptops in turn are chewing out part of the desktop market. Consider the desktop to laptop ratio you saw in offices 5 years ago compared to now.
I'm not saying desktops are dying, just that they're no longer 'the default' they once were.
I don't think Jobs ignored profits at all. His aim was to create a company that makes products that people love and more money to Apple enabled more of their creativity. I do think one of the things that make Apple very different is that they are not afraid of cannibalizing their own business for an even bigger market, and also they're better than most at recognizing what that market is.
Easy counter-argument: If Apple is placing the customer first, why not sell the product at half the price (thus only 5% profit margin), wouldn't that make more customers even more happier?
Branching out to different fields )i.e. iPod) than your current bread-and-butter is not ignoring profits, it is being smart and realizing there are opportunities in other markets.
Interestingly, Apple is placing the customer first by charging what they do.
Why? Because you couldn't do what Apple does with a 5% profit margin. They can ignore Wall Street, creditors (which they don't have), sharks, hostile investors (Carl Icahn etc), and so on all because they generate a healthy profit.
Who thinks it would be a good situation for Apple to be begging at Bill Gates' (ala 1997; whomever it might be) knees in the future if something goes wrong with an iPhone launch? I'm betting their customers don't think it would be good.
If Apple's customers love their products, it's in the interest of those customers to keep funding Apple's ability to keep doing what it does. What Apple does costs a lot of money. One slip at their scale could easily cost $10 billion. A 5% margin would not cover that.
If their next data center costs $5 billion in cash to build due to ever increasing scale and complexity, and they had had 5% margins all this time, it might be a stretch to pull it off (maybe with debt). If the global complexities of navigating a world wide mobile product increase to ever bigger scale, that 5% margin wouldn't cut it. I couldn't imagine trying to manage the iPhone at 100 million in sales, on a 5% margin. They're not selling jelly beans.
How about if Foxconn keeps having to raise wages by 15% to 25% per year for the next ten years. Again, 5% margins would not cut it. Or if that did happen, and Apple then finds it more cost effective to build completely automated robotic assembly systems, but it costs $20 billion to R&D and construct that... and so on and so forth.
I wouldn't want to have to ask them to do so, I'd seek out a bank that operates soundly. It's the difference between Wells Fargo (forced at gun point to take the TARP money), and insolvent vile blackholes like Citi and Bank of America.
I would rather my bank charge a profitable, common / historically normal interest rate, than go to the Federal Government (aka tax payers) seeking a bailout at a later date or collapsing into insolvency.
For example, by keeping interest rates at 0% for so long, and driving 30 year mortgage rates down below 4%, the Federal Government is going to burden US tax payers for decades to come with hyper expensive (to the tax payer), money losing mortgages. No sane business would lend money at 4% for 30 years on something like a house after the disaster we've just been through and what's still occurring.
Fannie & Freddie are going to keep costing tax payers tens of billions for many years to come as the Feds intentionally under price the market on mortgages. I don't think that's in any way sane or fair to tax payers.
Well, last I checked Samsung, HTC, Motorola, HP, Dell, Asus didn't receive bailouts. We are talking about tech companies here - arguing that Apple does not care about profit is naive at best, as shown by my original argument.
They could easily stay independent by other means. They care about their profit more, so that's why they don't lower their margins. As a public company, they don't have much leeway here - what do you think would happen when they come out saying at the next shareholder meeting "our customers are most important to us - half price on everything from now on!"
Who's arguing that Apple does not care about profits?
I've argued the exact opposite across numerous posts. They care about profits and it's in the best interests of their customers that they do. Which is exactly what I said in the parent.
I'd argue that the best interest of the Apple customer is maximum value, not cheapest price. And that's exactly why their customers continue to buy like crazy at a high price point. IE what's best for the customer and what's best for Apple are not mutually exclusive, but rather they're fully integrated. Apple's customers would not be served by an Apple with 5% margins.
from his 2007 iphone keynote intro:
26m game consoles sold, 94m digital cameras, 135m MP3 players, 209m PCs, 957m phones... 1% market share is 10 million phones. "Exactly what we're trying to do, 1% market share in 2008, 10 million units and we'll go from there."
> Most companies cannot bring themselves to make decisions that result in the market for their existing core products being completely destroyed. When they consider it from a financial perspective, it just doesn’t make sense to create new products at the risk of jeopardizing your profitable, existing products.
All Apple's profitable, existing products are eventually made unprofitable by shoddier but equally capable clones. Think Windows, Android, the myriad of MP3 players you can pick up for tens of dollars. The only way they maintain profitability is by bein innovative and creating new markets that they can dominate for a short while (and by generating brand loyalty for their older products because of their new products). So there isn't a profitability vs. innovation dilema for Apple. For them being innovative is being profitable.
While I don't agree with the headline the points made in the actual article are great. When a business makes a lot of money from a single source new ideas can seem too risky or even harmfull to existing profits.
Jobs ability to look beyond the current paradigm above all that was unique.
The thing about people like Jobs is that their definition of "ignoring" still means that they put more thought and effort into thinking about profit than your typical founder who is obsessed about profits. They simply operate at a different scale.
This is an absurd argument. Apple's profit margins have always been significantly higher than any other competing electronics or computer manufacturer.
Apple is the company that sells $3000 laptops that are comparable to most $1200-1500 laptops, but are slightly prettier and less serviceable and $70 keyboards with broken debouncers.
If you're going to write an article about 'ignoring profit' cite some specific products and how they were priced cheaply, or get off the frickin' pot.
Perhaps a better comparison would be the Apple Store's $400 price tag for 8GB RAM modules when you can get it for around $100 normally. I don't think the "customer service" is worth $300.
This comment may have been relevant many years ago, but these days companies are struggling to compete with Apple on price (notably Macbook Airs, iPads, etc).
I'm in the market for a nice lightweight laptop for development. I was amazed to see that the best one I can get is a Macbook Air. Other brands don't even come close to it, with regards to price:quality ratio. Heck, even ignoring quality the Air still beats other ultrabooks.
My friends have a hard time admitting that an Apple product is actually the saner choice.
My guess is that many executives at competing companies think just like this: Apple just sells "slightly prettier" laptops at a premium. So they give their designers the job of making the products "slightly prettier", and then they are surprised when these products fail to compete with Apple.
Clayton M. Christensen is the Robert and Jane Cizik Professor of Business Administration at the Harvard Business School, and is regarded as the world’s foremost expert on innovation and growth. James Allworth is a Fellow at the Forum for Growth and Innovation at Harvard Business School.
eh? they build phones in China - the other side of the world with a massive language and culture barrier with the sole purpose of saving money - how are they NOT thinking about profit !!!
Too bad Apple today is an appliance company, making entertainment devices for technophobes concerned solely with low support costs and above all profit.
At one point they made computers that were even appealing to software developers and the UNIX crowd. Those days are over.
That makes for a great headline, but it's wrong. He absolutely did not ignore profit: he understood its proper place better than most.
Jobs loved profit. He understood that the best products, marketed properly, can produce extraordinary profits. He wanted his products to generate a lot of profit so he could keep plowing that necessary profit back into producing ever better insanely great creations. He most certainly did not eschew profits, he understood not to put the profit before the product. There's a very big and critical difference between eschewing profits and knowing their place.
Yes, specifically between creating new, profitable products and protecting existing profits. As his biography shows, Steve Jobs was always focused on new products but took a long time to learn that profitability was essential to success. The Lisa, the original Macintosh and the Next cube were unprofitable. Had he not learned that excellence must come with a price premium, Jobs would have been a business failure. Once he learned this, well, look at the telephone handset market. Apple enjoys a small slice of the volume and the lion's share of the profits in the entire industry.
Moreover, I am pretty sure that Apple iProduct prices are carefully crafted to maximize profit. They could be sold with a much lower margin and completely crunch the competition.
So, it seems that at least between profits and market domination, profits come first.
'But the most lucrative and amusing part was the blue box. Wozniak showed its virtues to his friends. Wozniak made some calls to his sister who was working on a kibbutz in Israel. On Jobs's urging the pair turned a pastime into a small business and began selling the devices. "He wanted money," Wozniak said of his partner.'
One could start with their financials: Apple has 40% gross margins (5 year average). Since 2007, they have more than doubled these margins. In that same time, they've also introduced several new products. They are making more and making more from what they make. This all tends suggest that Steve Jobs not only valued profits but gave them the kind of treatment the OP suggests.
It's probably a good idea unless you're OK with your opinion appearing uninformed. In general, an opinion is not some magical thing which is exempt from evaluation. "IMO the Earth is flat" may be qualified as an opinion, but it would probably lessen your opinion of the speaker just the same.
It needs no citation. There is de facto proof. In an industry that has historically been driven to commoditization, Steve Jobs, at the helm of Apple, built a company that enjoyed margins many times that of their competitors.
actually i remember a video from a conference when he first returned to apple: he was doing an entire riff on "think profit" which was based on "think different". part of this was killing sacred cows when he got there: everything from hypercard to the newton was thrown away. he also learned his lessons from NeXT and didn't build a factory.
In his biography he talks about the importance of Apple generating a profit in order to re-invest into producing new products. That healthy profits were not only necessary but desirable to that end. I believe he has also said as much in interviews in talking in general about the nature of business (I will try to dig those up). It's why he recognized that a company was the best vehicle to use to marry his love of the arts with technology, as he is quoted in his book.
It's perfectly logical, as it's not cheap to do what Apple does when it comes to creating. There's a reason they just hit $100 billion in cash - Jobs knew full well the value of profit and what it should properly be used for. They know the value and safety in being able to build what you want to, and not being constrained for oxygen due to low cash or debt or lack of profits.
The way I see it is that because he wants to be profitable by innovating and delivering great products, he was aware that he should not let innovation be hampered by profit motives. This is especially important in the market he was operating in, and working around this problem gave them an edge.
People can form opinions themselves you know, we are not all content to be "secondary sources".
He doesn't have to have "learned" it in some specific source, besides observing Steve Jobs actions and words.
So, I find this "citation needed" meme, when the thing discussed is some personal opinion or a value judgement or an estimation or some sort, to be ridiculous.
> I find this "citation needed" meme, when the thing discussed is some personal opinion or a value judgement or an estimation or some sort, to be ridiculous.
It's important to note that these sorts of people are often not interested in a discussion; they merely want to be proved right on the Internet by hiding behind the perceived invincibility of empirical facts.
You are right: it is toxic, pedantic, and not something that most people would have the gall to say in real life. Thus, not worthy of being addressed. (edit: though the grandparent post was nowhere near as bad as others I've seen.)
Seriously, what could the citation be? A quote from Jobs saying "I love profit. I understand that the best products, marketed properly, can produce extraordinary profits."?
Asking for citations for fact-based claims is absolutely a good practice, but citations for opinions/conclusions are, in many cases, not feasible.
That said, I think the GP probably meant "what do you base this conclusion on?".
What a naively written article. Jobs was indeed a visionary with a passion for technology. But he was an extremely shrewd businessman.
igadgets are all manufactured (by hand) in china, in a factory that consists of 300,000 workers! They might easily work 12 hour days, 6 days a week. And suicide is rampant.
This keeps costs as low as possible, and allows apple to focus it's big profit on further innovation.
Fair game in my opinion, I'm not one to judge the morals on this issue, But call a spade a spade.
The Foxconn suicide rate is well sourced on Wikipedia [1].
Here's the interesting bit:
"In 2010, Foxconn's worst year for suicides with a total of 14 deaths, their total employee count was 930,000 people. The suicide rate for Foxconn this year was 1.5 per 100,000 making it well below the national average (around 7% the national average). Even if calculated as if all the employee deaths were from the Shenzhen factory complex alone (to simulate a localised area suicide rate), which in 2010 had a workforce of 450,000, the rate is still well below the national average at 3.11 per 100,000 (around 14% the national average)."
Also worth pointing out, that this is significantly lower than the US suicide rate, as documented by the national institute for mental health [2].
Please stop propagating this myth.
Also, this took me LESS THAN THIRTY SECONDS OF RESEARCH. Please learn to think for yourself.
Do you notice something about the Wiki sources? It lists people who climbed to the top of the building and jumped off it in a public manner. This isn't every suicide related to work at Foxconn. These are the undeniable suicides.
If you think this is normal, I'd like you to show me the list of large, public companies in America that had employees climb to the top of the building in 2010-2011 and jump to their death. It doesn't happen.
Could you leave it open to the fact that maybe, just maybe, there are interests at play here that may want to keep a story like this under wraps? Mainly the Chinese government who craves the foreign investment and Apple, the biggest company in America that's banking billions in cash? I bet if this was Goldman Sachs, we'd be all over over it.
>Please learn to think for yourself.
Exactly.
Knowing a bit of history, what is easier to believe:
1. That a massively profitable American company ignores the work environment of a factory in a second world country, but insists on low cost production, which results in worker abuse.
Or, 2. Everything is great at Foxconn and this is all a big conspiracy to bring down Apple.
I've seen it myself. When I was in high school, one girl committed suicide and days later two others attempted suicide in the exact way she did. This is a normal behavior of a depressed human mind.
I'm not saying that everything is great at Foxconn. I'm saying that their employees are often happy to be employed at all, and sending money back to their families. I have friends who work on the Xbox hardware teams and have been to those factories. It's my understanding that the working conditions are clean and safe, but intense and fast-paced.
Sure, it's a shitty life overall, but Foxconn is easily on the nicer end of the Chinese factory spectrum. Relative perception really matters to influence suicides. As a result, I'd expect the suicide rate to be lower than among peers. If we beat up on Foxconn instead of on the Chinese government, then all we're teaching these businesses is "You can still treat your employees like shit, just avoid showing up in US newspapers".
Really? The only two options are that Apple doesn't care or that it is a conspiracy? How about:
3. That most people will look at the situation with the same lenses they look at Apple with. Those that hate Apple will see their internal monitoring cynically as a PR move with little substance, and those that love Apple will be glad to know that it is doing more than the competition and will believe Tim Cook when he says he takes the problems seriously.
Even in the future if conditions improve, Apple lovers will credit Apple, and Apple haters will credit the increased demand for labor or the Chinese government for improving worker conditions.
The reality, like so much of the real world, is a complex grey area that is difficult to analyse just from what you read on the internet.
So, you mock the fact that I have two options, then throw out the generalization that people who believe Apple is at fault are "Apple haters"? That's the only option? Seems reasonable.
But in fact, there are only two options: either there is a labour issue, or there isn't.
I understand how this works. I know that working at Foxconn is better than working in the rice fields, and that this is how economic progress happens. History is filled with it. But that's also my point: history is filled with problems like this.
So, I'm going to challenge the assertion (most often made by westerners) that what has happened at Foxconn is perfectly normal. To make a statement like the OP, that this propaganda needs to stop, is ludicrous. These problems will solve themselves, and conditions will improve, but only if we maintain an open dialogue about the issues, rather then telling everyone that anything negative is propaganda.
The article, mid january, about the 100 or so workers 'threatening' to jump, the 'suicide nets', and a recent bill maher episode obviously swayed my perception for the worse.
You are correct, the high suicide rate seems to be a myth.
igadgets are all manufactured (by hand) in china, in a factory that consists of 300,000 workers! They might easily work 12 hour days, 6 days a week. And suicide is rampant.
Are Sony gadgets manufactured any differently?
Also, considering Apple is probably the only major consumer electronics company to actually be transparent about working conditions (unlike the others who also do the same thing but don't care), it's not only unfair, but seriously biased "hateboy" fare to keep picking on them about that, especially out of context for no apparent reason.
You're missing the point. ramblerman was just pointing out that Steve Jobs actually was interested in profitability and if he wasn't he probably wouldn't have moved manufacturing to China.
no sony, microsoft and many others employ the services of foxcon.
I own a few apple products, I wouldn't consider myself a "hateboy". I just think Steve Jobs should be called a businessman, and not some idealist who didn't care about profit.
Jobs actually tried to set up a custom factory to build computers in the 80's. He learnt from that lesson why it wasn't a good idea. (read this from an older version of an "unauthorised" biography).
it does keep costs lower, but there's nowhere else in the world that has the capacity to create the igadgets at such volume. foxconn creates about 50% of the worlds electronics (source:mike daisy's "agony and ecstasy of steve jobs - should probably be double checked)
either way, they don't have an options of another place to build the devices because of capacity reasons.
First of all, I'm pretty sure the notebook market is not being completely destroyed by tablets. Yeah, tablets are blowing up, and yeah, notebook sales are probably taking a hit, but lets be real. This claim is grossly exaggerated to the point that it is just not true. The notebook market has not been destroyed.
And disrupting itself? Really? Identifying a new product that has the potential to be hugely successful and profitable while possibly taking a small slice out the sales of an existing product means Apple is disrupting itself? Another word to describe this is 'innovation'. And anyway, I'm not even sure iPads are hurting Apple's notebook sales. I haven't done my research, but I've heard that it may in fact be the other way around - that the Macbook Air is hurting iPad sales.
Seems like the author just picked up the latest buzzword, and he's a bit fuzzy on what it really means. Apple is undoubtedly innovative and fantastic at what they do, but please stop fluffing up disruptive.