Apple Economy
Stay the course, don’t run a risk to divert into three zones
A decade of successful succession is rare in business. Most CEOs don’t survive the turmoil of fast-changing business environment, especially information technology. IT industry keeps transforming adjunct industries such as automobile, retail, and advertizing. Any industry is in the middle of digital transformation, one estimate describes.
Last month, I flipped a page of the Economist magazine in business section. The story illustrates the presence and predicts the future of Apple, the most valuable company in the world. Mr. Tim Cook is at the helm. He achieved the greatest succession in his first decade. That is impressive, enough.
According to Spencer Stewart, executive recruiting firm, the average term of leadership in America is roughly seven years. Some CEO’s stay longer, others burn out soon. But Mr. Cook led late Steve Job’s company and grew it into a whopping $2.5trn “flywheel” machine in market capitalization today.
During his tenure, his team recorded the increase of $2,125 bn, steadily attracting investors to pure an average of $212.4 bn a year. Only two firms outperformed Mr. Cook’s feast, Sataya Nadella of Microsoft with $261.2 bn a year and Sundar Pichai of Google/Alphabet with $239.7 bn per year. But two bosses have not spent his leadership years in both companies for more than ten years.
The Economist explains the tress forces of success in Mr. Cook’s leadership. For a start, Apple harnessed a trend of digitization. Mr. Cook pushed a constant improvement of iPhone. In this September, Apple launches the iPhone 13. The new mobile is equipped with a processor nearly 50 times faster than the one installed in iPhone 4s.
The second force is present at harnessing a factory China through global supply chain. In China, Apple generates 19% of revenue behind Europe and America. At one time, 90% of parts suppliers of iPhone are Japanese ones known as Murata Manufacturing and Nidec Corporation. Both outfits made a remarkable record in revenues in last decade.
The third one resides in the use of network effect. Apple got on a digital “flywheel” with the initiative of Apple Store. The circle of wheeling is robust, luring more app makers, which invites more users and more developers, and so on. Sales of apps and the use of them.
The writer of the story predicts a tough future, describing three challenges. Three concerns are a requirement of another innovation, geopolitical negotiation with China over forced labor or persuasion of American people on privacy, and a cartel involvement. Considering these possible worries, I still respect Apple unless they run a risk of diverting into wrong areas.
In three years to 2024, the report says that Apple will be releasing “iCar”, an electric and self-driving vehicle. The automobile is a complex gadget. I think they should never attempt to do this in the public experimentation. The business of automobile extends beyond Apples’ boundary into unknown businesses such as insurance and loans. The new model will be compounding the finance industry.
The second danger exists in advertizing. The revenue model should stay in manufacturing gadgets and selling apps in the Store. Google and Facebook rely on advertizing revenue. Hence they face privacy and data ownership issues of users, often spending a large portion of their time with lawyers in Washington. The advertizing business works against the promotion of the firm and brand image. Supply chain management and operation are a core task. Apple thrives as a consumer electronic maker, escaping from the trap of irrational behaviors of human beings in advertizing and promotion.
The third area of concern goes with artificial intelligence. AI business doesn’t materialize in the next ten years. It is still experimental phase. E-commerce is a promising business for most IT firms in America but the move into e-commerce must meet a disagreement. Apple may end up with hiring a lot of content engineers overseeing the unlawful posts from users.
Apple economy is a success on its platform fro app developers. I observe it is working perfectly. If they run a risk of jumping into unknown ponds, which I doubt, they will meet severe challenges. The firm has already aced in a number of areas in manufacturing outfits in the right industry. Be careful on three As; automobile, advertizing, and artificial intelligence. Tough challenges are ahead, if selected.