Why Apple's future failure is certain

Idiots will flame this post "clickbait". It's how they draw attention to themselves, to inflate their egos; others mistakenly will assign motivation to my writing--e.g., for page views, when I couldn't care less about them. But I do care about Apple, as a longstanding customer (starting in December 1998). As a journalist, I developed a reputation for hating the company (I don't) so long loved because my stories aren't kiss-ass fanboyism. What's that saying about being hardest on the ones you love most? Kind I am not.

Today's theme isn't new from me and repeats my analysis that Apple has strayed far from the path that brought truly, disruptive innovative products to market. In 2016, the company banks on past successes that are not long-term sustainable. We will get a glimpse after calendar fourth quarter 2015 earnings are announced on January 26th. You will want to watch iPhone and international sales, particularly emerging markets. For analysis about that and more jump to the second subhead; the next one is for idiot clickbait accusers.

My longstanding Apple love-affair has been schizophrenic, because for so many years Microsoft was my main tech news reporting beat and using the company's products made my writing more authoritative by using them. But I preferred Apple platforms, frequently switching. For example, I celebrated Windows XP's release in October 2001 by declining dinner invitation with Microsoft cofounder Bill Gates and switching back to OS X the day XP launched. Even after boycotting Apple for six months in 2012, for its ridiculous patent lawsuit strong-arming, I returned to using the company's products.

But my platform schizophrenia changed in the years following Apple cofounder Steve Jobs' death. On the one hand, Google's platforms provide greater, and better, contextual utility than do its bitten-fruit rival. On the other hand, I'm the gambler who keeps going back convinced that this time he will win big, that the loseing streak will end. Meaning: I switch to and from, looking for the user experience that made me feel happy when using Apple products. But I can't find it.

Much of the magic goes back to Steve Jobs, and how he made you feel about new Apple products. For years I've explained: When Jobs had an off-day keynote, you left feeling like your life would be better for buying the new thing. But if he was on, you left feeling that if you didn't buy the thing your life would be worse.

But the magic was more than marketing. Or drinking the so-called Kool-Aid. For years, I always came back to Apple, never strayed far, because the products made me feel happy, and I got more work done in less time than, say, using Windows. But more than 17 years after hauling my first Mac out of a CompUSA, the fire in my heart is extinguished, and that's why I write this analysis. Deeply concerned am I.

Apple CEO Tim Cook is a manufacturing and distribution genius. He's a master at defying typical mass-market, consumer Â retail product pricing and SKU strategies and in process wringing tremendous gross margins in the process (39.9 percent during calendar third quarter 2015). He's the man that figuratively made the printing press that mints money ($11.1 billion net profit in Q3). He stayed the course of premium pricing and brand allure, when other PC companies competed for the lowest price and while analysts opined that cheaper Macs would build market share.

Cook's tenure as chief executive, and influence over Apple strategies, technically is longer than his officially assuming the role nearly 5 years ago. From then CEO Steve Jobs' January 2009 leave of absence to his death in October 2011, Cook's control over day-to-day operations shaped what would become the financially ginormous tech titan that marvels the industry today.

Among the many validations: During 2015, global PC shipments plummeted 10.5 percent year over year, according to IDC. Apple was the shining star, growing by 2.8 percent, despite the majority of its computers selling for significantly more than $1,000. During calendar Q3 2015, Apple's net income was 2.5 times that of Microsoft, which was the previous computing era's tech titan. Go back to the same quarter in 2009, Apple's net income was just $1.67 billion compared to its rival's $4.48 billion. Or, looked at differently, the company's net income was 6.6 times greater during Q3 2015 compared to the same calendar quarter in 2009.

Jobs may have been the visionary, but Cook's talented control over manufacturing logistics, effective expansion of retail distribution outlets, and sassy premium pricing strategies combined with intangibles like customer satisfactionÂ are the secret to Apple's decade 2010 success.

However, Cook has not proven to be the visionary leader that Apple needs to maintain long-term success. In a bitterly biting September 2015 analysis, I called Cook's crop--Apple Watch, 12-inch MacBook, and iPad Pro--"products without purpose." No matter how much revenue these devices generate, none is disruptive innovation. Apple Watch is more fashionable than functional. One-hundred dollar discounts from Best Buy and Target during the holidays hint at real sales demand, or lack of it.

For Christmas shoppers, Best Buy slashed $300 off 12-inch MacBook's MSRP, bringing the starting price to more reasonable $999. The laptop is pretty, and it sports clever keyboard and magnificent display, but the performance is more comparable to a budget Chromebook costing $300 or less..

iPad Pro is overly-large, and the dimensions, which remind of a giant iPhone, make the thing somewhat unbalanced in the hands; it's awkward. The screen size has a touch of Tim Cook applying pricing tactics. Like $9.99 feels much less than $10; the 12.9 inches diminishes size perceptions, which really can't change what the tablet packs: 13-inch screen, and that's laptop size.

True innovation is this: Invention of something people don't know they need until they use it and then react: "Wow, why didn't I think of that? It's so obvious."Â Apple achieved such success by focusing on benefits not features. But even then, a company has to identify the right benefits. I see lots of clever design attributes in all three aforementioned products but benefits are compromised for fashion. In other words, form trumps function, rather than compliments it.

Much of the "Ah-ha!" moments during a Jobs "One More Thing" unveiling, and experience using it that followed, sparked theÂ you didn't know you needed realization. Is that really the emotional reaction to an over-sized tablet or new features like 3D Touch. Honestly?

Cook strays from Apple's core philosophy, which extended from Jobs' personality, as I understand it as an outsider but intimate observer: The aforementioned disruptive innovation, which often is misunderstood. Analysts, bloggers, investors, journalists, and others like to waggy-wag their fingers about how Apple successfully disrupts new or even established categories. They're right. But what most of themÂ overlook: How during the Jobs era AppleÂ as often disrupted itself. The quality is fundamental to past successes and its absence assures Apple's eventual fall from the tree; that is if nothing changes.

Risk defined the bitten-fruit logo company under Jobs' leadership and willingness to drastically change the rules of competitive engagement. Let's separate the concepts, which both are fundamental to Apple's past disruptive innovation successes.

When Jobs launched OS X in March 2001, months before Windows XP, he disrupted OS 8.x-9.x, which had a fairly stable app ecosystem that developers supported. Architectural change coming when the majority of developers would follow the money, meaning XP, was madness--and done during a friggin' recession. The pay-off wouldn't come for years, but proved there can be great rewards from tremendous risk-taking.

Two months later, when Apple opened its first two retail stores, Jobs risked disrupting his tenuous reseller supply-chain. Channel conflict could have doomed the Mac, and definitely there were consequences as more stores opened. But this self-disrupting risk also paid off.Â As did many others.

My favorite is iPod nano, which introduction was a f**k you moment. During the Sept. 7, 2005, launch event, Jobs boasted: "The iPod mini is what all of our competitors have their sights focused on. We're going to do something pretty bold. Today, we're gonna replace it." Apple's cofounder went on to name the new iPod nano, then asked for a video camera to close-up on his jeans, and, pointing to the coin pouch, asked: "Ever wonder what this pocket is for? I've always wondered that." He then pulled out the diminutive music player.

Under Jobs' leadership, Apple did something unthinkable, by so blatantly defying the rules of retail: Killing off a product at the height of popularity, what was then the most purchased portable music player in the world. Just as competitors started shipping iPod mini knock-offs to stores for the holidays, Apple made their devices suddenly obsolete--bricks, by comparison. For all the cleverness of nanoâ€™s design, there was greater innovation from a product marketing perspective. The little music player was a giant middle finger lifted towards iPod mini imitators.

By contrast, Apple today stretches out the retail supply chain, which is good for return-on-initial investment and bolstering margins. So you see, for example, three generations of iPhone for sale and two-generations each for iPad mini and iPad Air. Adding the Pro disrupts nothing, but simply adds another SKU. That's supply-chain thinking, rather than the self-disrupting mind.

Someone could argue that iPhone 6 and 6 Plus were self-disrupting--that such dramatically larger handsets risked pushing away some customers. Not when Apple kept selling smaller, older models and when market demand had shifted to larger smartphones. If anything, Tim Cook demonstrated risk-aversion and supply-chain thinking byÂ taking so longÂ to release handsets with larger screens. This is where his genius bows before logistics that make short-term revenue-generating, margin-maximizing sense at the expense of Apple's innovation ethic.

By contrast, killing off the popular MacBook Air when introducing 12-inch MacBook would have been risky, self-disrupting innovation. But the innovative benefits, and plenty of them of them like the display or clever keyboard, are lost in continued strong sales of the older (and now less-costly) computer. Air eclipses MacBook's appeal, which is lessenedÂ by price ($1,299 to $1,599) and compromises made for lightness and thinness (Intel Core M processor, among them). .

Alongside risk, and associated willingness to self-disrupt, Apple exhibited another potent corporate characteristic under Jobs' leadership. Need, as much as anything else, compelled him to change the competitive rules of engagement, like David vs. Goliath in the Biblical epic.Â I first wrote about this concept on my personal blog in May 1999, posting to BetaNews an updated version but with same headline--"Why Apple succeeds, and always will"--7 months later.

I apply term "David Thinking", based on fascinating research conducted by Ivan Arreguin-Toft, who is an assistant professor of international relations at Boston University. In 2005 book, How the Weak Win Wars: A Theory of Asymmetric Tactics, Arreguin-Toft explains that seemingly weaker opponents can prevail against stronger ones by changing the rules of engagement. (So that you don't have to purchase the book, review paper "How the Weak Win Wars: A Theory of Asymmetric Conflict" as an alternative; another accessible read isÂ March 11, 2009, The New Yorker story "How David Beats Goliath." Writer Malcolm Gladwell later expanded his treatise into a book.)

Arreguin-Toft produces excellent historical data showing that, in wars, when smaller rivals apply David Thinking they are more likely to win, even against mightier opponents. The Biblical example of David vs. Goliath is good analogy. Rather than fight like Goliath--and almost certainly lose by dawning armor and sword--David relied on his own strengths. A slingshot and stone kept him out of Goliath's reach but on the offensive. The farmer changed the rules of engagement.

Goliath represents the status quo, as did Microsoft and Windows OEMs when Jobs donned title interim CEO in 1997. If you closely examine the categories where Apple disrupted established players during his tenure, the company changed the rules to favor its strengths and to prioritize benefits over features. Think of the wrapper that goes around your take-out coffee cup as a feature and protecting your hand from being burned as a benefit.

Apple's colossal success over the past half-decade makes it Goliath, which shouldn't predispose Tim Cook to status quo thinking but he does. And why not? Goliath naturally wants to play to his strengths, too. If you closely look at how little product SKUs change over several generations, how much innovation really is iteration, and how the approaches avoid big risks to protect existing revenue streams, Cook's leadership strengths and foibles lay bare.

In May 2014, I regretfully stepped back from the "always will succeed" position when asserting: "Apple has lost its way". As a long-time Apple customer, it was a disappointing realization reached.

The iPhone Empire

Why this all matters is the early-days changes sweeping smartphone markets. Five months ago, I warned about the "Collapse of the iPhone empire", which generated the typical clickbait crap accusations from the idiot crowd. I stand by the analysis, even more so in 2016. During calendar Q3 2015, iPhone accounted for 62.5 percent of Apple revenues--that's up from 34 percent the same quarter in 2010, when total company revenues were less than a third as much ($15.7 billion vs $51.5 billion). Apple's fortunes rose with iPhones sales success, and, given the current product lineup, will likewise fall.

So much dependence on a single product is the worst kind of risk, when taking risks to innovate could preserve and even extend Apple's dominance as tech titan. Already by calendar Q2 2015, Gartner reported slowdown in global smartphone sales and the first decline in the largest market, China, which is hugely important to Apple--accounting for 24.3 percent of total company calendar Q3 revenues, exceeding Europe. During that quarter, Gartner's global data shows increasing smartphone sales shift to emerging markets, where iPhone's higher pricing poses potential problems.

In the short-term, Apple likely will benefit from the continued shift of existing customers on smaller iPhones to larger ones and switchers on big Androids returning to the iOS ecosystem. But as smartphone sales slow in maturing markets, sales shift to emerging markets, and U.S. carriers do away with margin-lifting subsidies, there must come the quarter where iPhone sales growth stalls or retreats. If Apple Watch or iPad Pro is Apple's Plan B, uh-oh.

My personal loss of interest in Apple products is boredom, partly. For example, MacBook Pro is little changed from 2009 or the Air from 2010. Neither iOS or OS X is dramatically different or improved since Steve Jobs death. Logistics genius Tim Cook milks established product lines, which is great for preserving the status quo and maximizing margins. But as past innovations ripen, and some over-ripen, on the tree and no self-disrupting crop replaces them, the Apple orchard risks being bitten by blight. Risk would be less if there wasn't so much dependence on one variety of fruit.

I fully expected Joe Wilcox to be a bearded hipster millenial but it turns out he is a rather plain (and by plain I mean bizarre) looking, bald middle-ager.

Still, that doesn’t prevent him from using the kind of adolescent internet cliches that invalidate his piece through their sheer volume and triteness. To wit:

idiots, flame clickbait, egos, haters/hating, kiss ass, fanboy, f*** you moment

He also misuses ‘schizophrenic’ as does 99% of the rest of the world.

I realize blogs are exactly that but far too many of them extrapolate personal anecdotes and choices into macroeconomic certainties. Bloggers seem to lack any awareness that they are a minority within a minority ie power users who obsess over the smallest details and who will make wholesale changes in their technology over the smallest trifles or merely for the sake of change. They imagine there is a personal, emotional connection between them and a multi-billion dollar corporation. In other words, they scoff at the mass marketing while falling victim to that same mass marketing even as they tell themselves that the multi-billion dollar corporation is bound to care about their every thought.

Finally, the author’s thesis is...what? Inevitable? Cowardly? Blindingly obvious? Predicting that market leaders will eventually lose market share in large or small measures is the safest bet in the casino. The list would fill a book: GM, McDonald’s, Staples, et al.

His criteria for success are contradictory and odd: products that offer new and deep revenue streams are unworthy and ultimately detrimental because they are not - Hackneyed Phrase Alert - ‘disruptive.’

What follows is bewildering stream of consciousness that essentially says ‘Apple will ultimately fail because it has succeeded beyond anyone’s wildest imagination.’

The concluding paragraph is pure comedy: ‘My personal loss of interest in Apple products is boredom.’ This piece runs 2,497 words. If this is boredom I hate to see what keen interest looks like.

The products he’s lamenting aren’t “disruptive” are really extensions to existing lines, rounding out support for customers who find the product not quite to their liking, as they’re outliers.

Watch? it’s an extension to the iPhone. If you don’t have an iPhone, you’re not in the target market - period (until the product develops enough, over several years, to earn its independence). If you do have an iPhone, it’s _not_ a given that you’ll want one.

iPad Pro? the full-size iPad just isn’t big enough for some. Nothing wrong with making a “giant size” version for people who _would_ get one _if_ it were that big. It’s not intended for the general public.

12” MacBook? some people want a really stripped-down notebook, yes without any more ports than power & headphones. Again, not for everyone...it’s for those edge-case users wanting something special beyond the “one size fits all” products.

And yes, the core products are doing really well right now, not demanding a “wow! new! disruptive!” every cycle. Just keep incrementally improving the core, and customers will keep returning; be “disruptive” every cycle and people will give up for want of continuity.

I wonder what this author will think of the “disruptive” iPhone 7 featuring no headphone jack, forcing users into either Bluetooth headsets or proprietary Lightning plugs. Any bets he writes a screed about how Apple is going to fail because it’s too disruptive?

http://betanews.com/2015/08/30/collapse-of-the-iphone-empire/
iPhone is headed towards commodity status Other smartphones will swamp it.

Big stock market drop here and China will mean millions less vanity purchases these Apple junks. I dumped all my AAPL a few months ago and anyone with a brain will do the same.

Never get married to Tim KooK and never get married to a stock. Go ask Art Cashin.

And what is Apple’s vision for the next 3 years other than milking retread phones and tablets again?

Nothing? I thought so.

The author did point out an obvious flaw of Apple cheerleaders. They want their products to make themselves “feel good”.

Now, Swordmaker, before you go off into some giant gyrating novel-length response, please sum up this vision in a sentence or two justifying why you think Apple’s on the right path to future domination of the technology world.

There should be some catch words in this vision like “holographic”, “universal”, and “flexible”. Tell us why Apple is going to be a game changer.

The only time anybody needs to worry about Apple is when it gets to be more like Sculley’s Apple than Jobs’ Apple.

Just take a look at the difference in those three Apple eras (Jobs Era 1, Sculley Era, Jobs Era 2) and compare the Cook Era to them.

Of course the Cook Era is a moving target, but watch the trajectory and see where it’s headed in comparison to the aforementioned Eras.

I bought an iPad Pro around Xmas, and I still can hardly put it down. I rarely use my $2k laptop anymore. the iPP's performance and form factor are incredible. Favorite device ever...and I was an Android guy.

I got one too, a little earlier than that. Did you get Apple's Pro keyboard? I looked at it and selected Logitech's keyboard instead. It's a little less expensiveat $149 compared to Apple's $169 and, for me, has a better keystroke, and seemed to be better built. The screen is gorgeous.

The author did point out an obvious flaw of Apple cheerleaders. They want their products to make themselves â€œfeel goodâ€.

I feel fine about myself. My self esteem is not defined by the products I use or purchase, Up Yours. That over-used meme only comes from weak-minded amateur bloggers with little evidence to support it. How can they make such an unsupportable assertion about over 800 million consumers, many of whom were once Microsoft or Android users who made a conscious decision to buy another platform because of their poor experiences on the other? It is dancing in the graveyard hubris from people who are still using what those others have eschewed in favor of something those ignorant of the reasons for their moving on can not grasp nor understand. Therefore, they reason, it has to be something trivial such as self-esteem, and they shout this faux logic reason to themselves in their echo chamber to make them comfortable as more and more of their erstwhile compatriots leave.

I bought the Logitech, the case of which must be ballistic nylon, it is very strong. However I then also got the Apple Pro and haven't used the logitech since. It is not backlit, and lacks a few of the keys, but it is so thin and convenient, and protects the screen, and I got a thin leatherish sleeve for the whole thing together. The 3 rare earth magnets are so strong the pro keyboard stays on snug.

the screen is gorgeous indeed, and the iPP is FAST. I didn't realize my son had 10 games open in the backgroound while I had Chrome with 12 tabs, and the thing still FLEW, and with only 4GB. My Windows 10 laptop would choke to death with that load at 8GB.

http://betanews.com/2015/08/30/collapse-of-the-iphone-empire/
iPhone is headed towards commodity status Other smartphones will swamp it.

ROTFLMAO! You are seriously linking to another article by Joe Wilcox, the same BOZO who wrote this idiotic FUD article? Here's just an example of his evidence in your linked article:

"Previously disclosed financial results may already foreshadow the future. Apple's percentage of revenue from China was higher in fiscal Q2, 29 percent; sales fell quarter-on-quarter from $16.82 billion to $13.23 billion. Set the change against analyst revenue consensus for Apple's fiscal fourth quarter: $50.9 billion. Even 3 percent or 4 percent decline in China's contribution could carve $1 billion or more off the top.

The BOZO is using as evidence of the iPhone slumping Quarter over Quarter statistics, a huge financial fallacy! No one ever compares unlike quarters because each quarter is a different financial environment. In this instance, The idiot is comparing Apple's FIRST fiscal quarter, September to December, which inclusive of all the holiday sales, to its SECOND fiscal quarter that has only Martin Luther King Jr. Day and President's Day as holidays, unless you count Super Bowl Sunday as gift giving holidays? Then he points to this comparison to claim the iPhone's sales are in a slump, even though he admits there was a 29% year over year record breaking quarter in the second fiscal quarter! He's an abysmal moron!

And, if you use his conclusions to support your position, that makes you one too, Baron.

It would be interesting to find out whether Cruz uses any Apple products. I know that some of those claiming to be his supporters here are too â€œpureâ€ to use a product made by a company whose CEO is gay.

WASHINGTON -- Sen. Ted Cruz on Thursday called Apple CEO Tim Cook's coming out as gay a "personal decision."

"Those are his personal choices," Cruz said on CNBC. "I'll tell you, I love my iPhone."Ted Cruz on on Apple's Tim Cook coming out as Gay--The Trailblazer.com

My Logitech keyboard is backlit. I'm typing on it right now and the keys are lit. You might want to check that yours is not defective.

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