Tim Cook became Apple chief executive in 2011 just before the death of Steve Jobs. The problems he faced are similar to those that confronted Alfred P Sloan when he became president of General Motors in 1923 (Big Read, FT Weekend, January 8).
At that time GM too had inherently volatile revenues of car product sales, supply chain issues (disparate manufacturing facilities) and lack of consistency across its diverse organisation. But above all there was the existential question of what to do when the car market saturated.
To address this, Sloan introduced its own “regular cadence of product iterations” — he called this planned obsolescence. The market leader Henry Ford manufactured 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 purpose”. He subdivided the market into five clear consumer categories. For example, only Chevrolet competed directly with Ford in the low-cost segment. More affluent 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 engineering a similar strategy pivot at Apple and is starting to create a “steady stream of recurring revenues” by moving to a services-based (e.g. Cloud, Music, News) business model. Services can be high-profit when underpinned by a strong brand — which Apple has in spades. Segmentation of Apple products and regular “product iterations” have taken place under Cook ever since the launch of the Mac and iPod two decades ago. Apple’s change of direction is illustrated by the departure of senior product-oriented managers Angela Ahrendts and Jony Ive in 2019.
Like GM a century ago, Apple is setting the standard and dominating its sector and is likely to do so for decades. Nobody today suggests that Alfred P Sloan had “something to prove”.
Longstanton, Cambridgeshire, UK