Tim Cook became Apple’s CEO in 2011 just before Steve Jobs died. The problems he faced are similar to those faced by Alfred P Sloan when he became chairman of General Motors in 1923 (Big Read, FT Weekend, January 8).
At this time, GM also had inherently volatile revenues from automotive product sales, supply chain issues (disparate manufacturing facilities), and a lack of consistency in its diverse organization. But above all there was the existential question of what to do when the car market is saturated.
To solve this problem, Sloan introduced his own “regular cadence of product iterations” – he called this planned obsolescence. Market leader Henry Ford made an undifferentiated standard low-cost car for the mass market, the Model “T”. Sloan understood that markets change and fragment as consumer tastes evolve – so his mission was “a car for every purse and every goal”. He subdivided the market into five clear categories of consumers. For example, only Chevrolet was in direct competition with Ford in the low-cost segment. Wealthier consumers could move upmarket to faster, smoother or more luxurious cars. Sloan’s foresight and innovation led to GM’s dominance, both at home and abroad, that lasted for many decades.
Cook is designing a similar strategic pivot at Apple and is beginning to create a “steady stream of recurring revenue” by shifting to a services-based business model (e.g. cloud, music, news). Services can be very profitable when backed by a strong brand – which Apple has in spades. Apple product segmentation and regular “product iterations” have taken place under Cook since the launch of the Mac and iPod two decades ago. Apple’s change of course is illustrated by the departure in 2019 of senior product managers Angela Ahrendts and Jony Ive.
Like GM a century ago, Apple sets the standard and dominates its industry and looks set to do so for decades. No one today is suggesting that Alfred P Sloan had “something to prove”.
Neil Mc Phater
Longstanton, Cambridgeshire, UK