Jobs made Apple great by ignoring profit
blogs.reuters.com
blogs.reuters.com
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.
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.
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.
http://www.asymco.com/2012/02/16/ios-devices-in-2011-vs-macs...
OTOH, they had a huge growth in Mac sales too.
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'm not saying desktops are dying, just that they're no longer 'the default' they once were.
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.
http://en.wikipedia.org/wiki/Disruptive_technology
EDIT: Clarified my point in the wake of downvotes.
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.
"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.” "
http://www.eweek.com/c/a/Mobile-and-Wireless/Apples-Tim-Cook...
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.
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 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.
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!"
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.
I'm arguing they pay attention to profits and that it's in the best interests of their customers that they continue to do so.
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."
http://www.blogcdn.com/www.engadget.com/media/2007/01/dsc_02...
they were thinking about profit. rest assured.
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.
Jobs ability to look beyond the current paradigm above all that was unique.
Value that most no one else could see.
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.
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.
So all those people who buy them are just stupid then, are they? What nonsense. This is little better than trolling.
There are people who care very much about the visuals. They're not stupid for paying extra.
My friends have a hard time admitting that an Apple product is actually the saner choice.
At one point they made computers that were even appealing to software developers and the UNIX crowd. Those days are over.
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.
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.
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.
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?".
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.)
^^ First sentence of the article.
You don't need to cite references to give a counter _opinion_
From Return to Little Kingdom by Michael Moritz: http://jmtame.posterous.com/hes-got-the-whole-world-in-his-h...
So, it seems that at least between profits and market domination, profits come first.
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.
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.
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.
No. It fucking isn't.
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.
[1] http://en.wikipedia.org/wiki/Foxconn_suicides
[2] http://www.nimh.nih.gov/health/publications/suicide-in-the-u...
You are correct, the high suicide rate seems to be a myth.
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.
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.
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.
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".
either way, they don't have an options of another place to build the devices because of capacity reasons.