Photo Credit: Andy Ihnatko

I’m an Apple Stockholder and Apple Tribal Member with Tremendous Confidence in Our Leader, Tim Cook. He’s the right person to rocket Apple’s fanatic loyalty beyond its fanatical consumer base. Ginni Rometty, IBM’s CEO, describes Cook as the “hallmark of a modern-day CEO. It’s all about clarity of vision and knowing what to do and what not to do.”

Yet, critics shout: “Tim Cook is NOT Steve Jobs!” I disagree. Cook is a lot like Jobs.

Apple’s 21st Century Innovation Model is SICC: Simplicity + Inclusion + ControI + Collaboration

SICC Rhymes with SICK (and means the cool kind, not the feeling ill kind). Charlie Rose published his Tim Cook conversations after Apple’s September 2014 introductions for the iPhone 6, iPhone 6+, Apple Pay, and Apple Watch. Their conversations reveal Cook’s strategic vision for Apple and The Apple Ecosystem. His ecosystem-driven strategy explains the rationale for two (2) major 2014 corporate decisions:

• The IBM Strategic Alliance
• The Beats Music and Beats Electronics Acquisition

Cook explains these major decisions within the context of these central themes:

• Apple is about making great products enriching people’s lives.
• Killer products (and experiences) are designed outcomes by integrating Apple’s hardware, software, and services.
• Google is Apple’s primary competitor. Their respective battlefields are the Consumer and Corporate Ecosystems.

• Innovate By Creating Killer Products (Being First Doesn’t Mean You’re Innovative — See Peter Thiel’s Last Mover Advantage)
• Deliver Simplicity by Removing Complexity
• Enter Markets Where Apple Controls the Primary Technology
• Be The Best
• Stay Focused

Staying Focused Anchors Apple. Cook elaborated (paraphrasing):

“Unlike other companies, Apple’s objective is not to make larger product portfolios.”

“All of Apple’s major products could fit on this small table.” (in reference to Charlie Rose’s iconic interview set)

“It’s hard to edit. It’s hard to stay focused. The hard part is deciding what NOT to work on.”

Diversity in Thought Fuels Apple Innovation and Design (17:13 – 20:23). Cook’s leadership mission is ensuring Apple senior executives and team members collaborate at an incredible level. That mission begins with recognizing individuals who are historically strong Apple contributors. During this point in the conversation, Cook enthusiasically mentioned five to six senior executives (by first name) making considerable impacts during their Apple tenure — like Angela Ahrendts).

Brad Stone’s September 2014 BloombergBusinessweek article highlights Cook’s moves to include new perspectives at Apple. From January 2014 to September 2014, Apple hired approximately 20 senior executives from multiple industries (direct quotes below):

“(Cook) is very focused on finding a very wide range of people. It’s not automatically the way you think about diversity. It’s about bringing in experience, skill set, and perspective.”  — Susan Wagner, founding partner and director of asset-management firm BlackRock.

“(Cook) is comfortable enough to say ‘we need help here,’ and then he goes out and gets it.” — Jimmy Iovine, Co-Founder of Beats Electronics.

 

Photo Credit: Yutaka Tsutano

It’s the Ecosystem Stupid! (h/t James Carville) 

Betting the Farm on The Apple Ecosystem. Cook’s strategic bet makes collaboration an Apple strategic imperative. Apple senior executives are functional experts who collectively work as a team. Horizontal product development enables integration of hardware, software, and services to produce a killer product. Cook explains (20:08 – 20:23; paraphrasing):

“Respecting, trusting, and complementing one another (in thought and skills) is what makes this all work.”

This cultural shift drives Apple’s design process work because Cook believes the Apple Ecosystem (not an individual product) will drive consumer and corporate spending:

Collaboration may be a virtue, but Cook insists it’s more of a strategic imperative. Aligning thousands of employees is crucial now that “the lines between hardware, software, and services are blurred or are disappearing,” he says (Cook). “The only way you can pull this off is when everyone is working together well. And not just working together well but almost blending together so that you can’t tell where people are working anymore, because they are so focused on a great experience that they are not taking functional views of things.”

The result is only now becoming apparent with services that work across different Apple devices. Embedded in the iPhone 6 and the new iOS 8 and Mac OS X Yosemite operating system is a feature called Continuity, which lets users start an e-mail or some other task on their Mac, pick it up on their iPhone, and then move it to their iPad or even the Apple Watch. 

(Cook continues) “We would never have gotten there in the old model. These new products are reminders of why we exist.

The things we should be doing at Apple are things that others can’t.” 

Photo Credit: The Next Web

Battle of the Ecosystems: Apple Versus Google — Consumer and Corporate 

Google Is Apple’s Top Competitor (32:30 – 36:00). Cook’s answer to Rose’s “Who’s Your Competition?” question speaks volumes. He recognized Google twice during their conversation as Apple’s most formidable competitor.

He dismissed everyone else including Samsung and Amazon. Microsoft never entered the conversation.

Larry Page makes it no secret he’s pursuing an Android ecosystem-driven strategy. Google acquired Motorola Mobility in 2011 to gain control of the patents bolstering and protecting Android (and subsequent Google products and services). From Google’s Investor Relations Site, Page describes his strategic vision and rationale for selling Motorola Mobility to Lenovo):

“Lenovo has the expertise and track record to scale Motorola Mobility into a major player within the Android ecosystem. This move will enable Google to devote our energy to driving innovation across the Android ecosystem, for the benefit of smartphone users everywhere.”

Google Targets The Consumer Ecosystem. Just ask Tony Fadell, CEO and Founder of Nest. Just ask Walter Isaacson, Steve Jobs’s biographer. In January 2014, Isaacson declared Google passed Apple in innovation supremacy with the Nest acquisition (refer to CNBC video below).

Matthew J. Belvedere’s CNBC article concluded Apple and Tim Cook fell behind:

While acknowledging the China Mobile partnership is a “big deal” for Apple, he said (i.e., Isaacson) Google-Nest exemplifies the “amazingly strong integrated strategy that Google has to connect all of our devices, all of our lives, from our car, to our navigation system, to how our garage doors are going to open.”

Isaacson also pointed out that Nest co-founder and CEO Tony Fadell will be joining Google as part of this deal. “Fadell was one of the team that created the iPod. He was very deep into the Apple culture … when Apple was so innovative.”  To play catch-up, Cook has to think about what industry he wants to disrupt next, Isaacson said. “I think Steve Jobs would have wanted as the next disruptive thing to either have wearable-like watches or TV, an easy TV that you can walk into the room and say put on ‘Squawk Box’ … or disrupt the digital camera industry or disrupt textbooks.”  

“We ought to see in 2014, Apple do something huge,” Isaacson said.

 

Does Apple Lag Behind Google? Global Market Share – Yep. Global Market Profitability – #HellNo

Google-Android Commands Global Market Share, but Apple-iOS Captures Highest Profitability. Android is the defacto global, smartphone operating system. Conner Forrest’s Tech Republic article proves Android market share dwarfs Apple-iOS by a factor of four (4). His research strengthens Isaacson’s argument how Google is positioning itself as a consumer ecosystem powerhouse:

Photo Credit: Conner Forrest, Tech Republic

But, Does Market Share Dominance Mean Google Makes More Money than Apple? Tony Bradley’s November 2013 Forbes article shows Apple dominates profitability capture versus Android. That’s why “staying focused” anchors the Apple’s core values. Though not externally stated, Jobs knew and promoted that making money matters. Making money (or in Apple’s case, tons of it) bestows the rare, parallel luxury to sustain business AND develop new innovation.

Photo Credit: Conner Forrest, Tech Republic

Photo Credit: Neil Hughes, Apple Insider

Making Tons of Money Isn’t the Point. Apple almost went bankrupt 17 years ago. That’s the age of a teenager — it wasn’t that long ago. Walt Mossberg‘s November 2014 <re/code> article, The Mac’s Second Act: From Obscurity to Ubiquity, lends important perspective to Apple’s current financial situation versus its dire days in 1997. Jobs knew he needed someone of Cook’s supply chain and operations genius. That’s why Jobs hired Cook.

In 1998, Jobs and Apple needed Cook (not the other way around).

Taking on Google Requires a Little Help From Apple’s Friends (and Former Adversaries)

Photo Credit: W_Minshull

Driving Collaboration and Accessing Innovation Extends Beyond 1 Infinity Loop. The Charlie Rose-Tim Cook conversation turns instructive when Rose asks Cook if Apple is “more open (around 22:26).” Cook’s responses on iOS app developer relationship management, the IBM strategic alliance, and the Beats Music and Beats Electronics acquisition signal his mantra that creativity and innovation are a team sport (App Developers: 30:20 – 32:12; IBM: 22:26 – 25:37; Beats: 26:14 – 29:00).

Apple Manages Relationships with 9 Million Registered iOS Developers. MacNN News reported the number of developers registered with Apple has increased 47 percent since last year to 9 million. According to the United States Census Bureau, if “Apple iOS Developer City” was an American city, it’s population trumps New York (with room to spare for Nashville).

Cook recognizes the iOS developer community is key to Apple’s current and future success (paraphrased quotes from Rose conversation; 30:20 – 32:12):

“The June 2014 developer’s convention was all about giving developers access to iOS so Apple and iOS have access to innovation.”

“We treat working with them (i.e., the iOS developer community) that it’s Apple’s privilege.”

“Our (i.e., Apple’s) developers can sell their product (i.e. iOS app) worldwide in the Apple App store in 155 countries.”

Show App Developers The Money. Apple Does. Google Does Too. But, Apple developers earn tons more. Andreesen Horowitz Analyst Benedict Evans proves Apple paid app developers five times (5x) more revenue than Google. In the past 12 months, Apple paid developers $10 billion versus $5 billion by Google.

Photo Credit: Benedict Evans

Tim Cook Wants the Apple Ecosystem to Command the Enterprise Market (22:26 – 25:37). Steve Jobs transformed our daily consumer lives. Cook wants to reinvent our daily professional lives. That’s the mission objective for uniting with IBM, a former adversary. Cook shared with Rose the following anecdotes (paraphrasing):

“We believe we can change the way people work at an enterprise level.”

“The vision is to fulfill the unmet needs of the industry verticals down to the granular specificity of the job itself.”

“We can change the way people work. We spend so much of our lives working.”

Reuters reports the Apple-IBM alliance is developing inroads into the financial services industry (e.g., companies like CitiGroup). Furthermore, the same Reuters article states:

“The iPhone maker has worked closely with a group of startups, including ServiceMax and PlanGrid, that already specialize in selling apps to corporate America. The two people familiar with the plans, but who could not speak publicly about them, say Apple is already in talks with other mobile enterprise developers to bring them into a more formal partnership.”

A Play for The Enterprise Version of The Internet of Things? Sounds like it to me. Now, that would be both transformative and lucrative. Stay tuned. I’m looking forward to learning about the Apple-IBM alliance’s penetration and progress after Q1 2015 (even more than the Apple Watch Launch).

Photo Credit: mrgarthem

Apple Didn’t Buy a $3 Billion Headphones Company. They Acquired a Human Centered Design (HCD) Business Loaded with Entertainment Industry Insiders.

On the Surface, Beats Masquerades as a Headphone Company. Unseen by the deal’s critics is how Tim Cook discovered powerful and influential diversity in thought.When Rose asked Cook, “Why did you buy a headphones company?” he responded (26:14 – 29:00):

“Talent. It’s the idea of gaining great talent.”

“The creative genius of Jimmy Iovine and Dr. Dre.”

“Iodine’s deep knowledge of the entertainment vertical (i.e., music industry)”

“Dr. Dre knows artists and is an artist.”

Cook Recognizes Remarkable Human Centered Design (HCD) When He Sees It, Hears It, and Feels It. Cook shared with Rose how “not all subscription services are alike.” His enthusiasm in describing Beats Music after experiencing it himself is palpable (paraphrasing):

“Beats recognized the importance human curation can make in how you feel and experience something.”

“It (Beats) affects how you feel.”

“You know it when you see it and feel it.

Jimmy Iovine Nails It Why the Apple-Beats Deal Is Smart. Apple is about feel and emotional connection. That why the Apple Tribe continues shelling out big bucks to replacing their perfectly working iPhones with more expensive ones at a record pace. Check out Iovine’s commentary on feel, the state of the music industry, and why he believes Apple and Beats are primed to transform it. I can’t wait to see the impact of his influence at Apple in its future product development:

Strategy+Business’ Matt Egol and Christopher Vollmer Argue Why Apple Bet Big on Beats Music’s HCD Intangibles. Egol’s and Vollmer’s article describes how both companies focus on delivering an amazing HCD experience. The critics who say this deal is the tipping point for Apple’s inevitable innovation demise fail to recognize this fact. Here’s an excerpt their article:

The story behind the deal is much more nuanced, however. It’s not just about those tangible assets (referring to Beats’ headphone and streaming music platform), but rather a really big bet on capabilities—especially in product development, marketing, and branding. The fact that Beats has achieved a 59 percent share of the high-end headphone market in the United States and launched a high growth, buzz-worthy streaming service demonstrates the power of HCD principles at work.

Apple is well positioned to accelerate this momentum, given its own commitment to HCD.

 

Photo Credit: Gideon Tsang

Shunning Not-Invented-Here (NIH) Critics: Does It Matter in the Long Run How Apple Sources Innovation?

Cook’s critics point to the Beats acquisition as a leading indicator of Apple’s inevitable demise because it “no longer innovates from within.” Nonsense.

The Cautionary Tale and Parallel Paths of Apple and Merck as Fortune Magazine’s Most Admired Companies. From 1987 – 1993, the pharmaceutical company, Merck, graced the covers of Fortune Magazine’s Most Admired Company issues as the Number 1 company in corporate reputation. In 1994, the company tumbled to Number 11. Merck’s CEO at that time, P. Roy Vagelos, declared the company would return to Number 1 (direct quote from Fortune’s Most Admired Companies February 7, 1994 article):

”WE WERE the first company to be selected No. 1 seven years in a row. My plan is that we’ll be the first company to bounce back.”

 

So says Dr. P. Roy Vagelos, CEO of Merck, no longer America’s most admired corporation. A year of economic turbulence, plus a far more extensive survey of companies, has produced a new crop at the top, with half of America’s ten most admired corporations newcomers to that elite group.

 

The long-reigning king is deposed, relegated to No. 11.

Vagelos’ Bold Proclamation Never Materialized. Merck’s 2014 Fortune Most Admired Company Ranking is Number 65 (in 2013, it was Number 58). Why’s this important? For seven (7) consecutive years, Merck was Apple.

Guess Who Fortune Magazine Ranked as The Most Admired Company in 2014? Guess who’s monopolized this title for seven (7) straight years since 2008? Apple. But, the similarities end there. How Merck chose to sustain innovation in its “Year 7” (and beyond) proves instructive.

Merck Caved to Not-Invented-Here Syndrome. John Simons, February 2008 Fortune article explores Merck’s research and development insularity post-1994:

“Merck’s scientific excellence had long inspired admiration and envy; corporate leaders voted it America’s Most Admired Company in Fortune from 1987 to 1993. By the early part of this decade, however, Merck was finding it difficult to turn its science into new, profitable medicines. In Merck’s case, there was a unique element added to what was an industrywide drought.”

“Merck was so pleased and proud to be Merck that its research culture had become haughty and insular. The company refused to consider medicines discovered outside its own labs and spurned the mergers and research alliances that were reshaping the industry.”

To Peter Kim’s credit, President of Merck Research and Development from 2003 – 2013, Merck reversed its attitude course. The Simons article continues:

“By late 2004, Kim had overseen a new system that allows scientists to mine scientific literature to identify promising chemical compounds. He also encouraged Merck scientists to use their connections to open doors for Merck’s acquisitions department

“In 1999, Merck entered into just ten collaborative licensing deals; by 2006, there were 53 joint-development transactions and small acquisitions.”

10 years passed before Merck transformed its strategic thinking towards developing and accessing innovation. In three (3) short years, Cook’s decisiveness and focus proves what happened to Merck will not happen under his “Apple Watch” as CEO.
 

Diversity in Thought (with a Capital D): Innovation Isn’t ONLY From Within Apple Anymore

The Tim Cook Leadership Era Means the “I” in Innovation Means “Inclusion Inspires.” That cultural pillar extends far beyond sexual orientation. He’s driving cultural and strategic shifts at Apple to sustain and grow a core Jobs-Apple value (10:37 – 12:04): “To Be the Best.”

When Your Competitor is “The Most Ambitious CEO in The Universe,” You Better Continue Reinventing and Transforming. Talent isn’t enough. Company culture drives innovation and competitive advantage.

Here are two amazing books on the significant impact of company culture:

• Read Inside Apple: How America’s Most Admired — and Secretive — Company Really Works by Adam Lashinsky

• Check out How Google Works by Eric Schmidt, Jonathan Rosenberg, and Alan Eagle because company culture matters:

Final Thoughts: Blocking Out the Noise and Questioning Conventional Wisdom

Will Tim Cook Continue Being Criticized for Not Being Steve Jobs? Yes. When you succeed an icon and legend, that’s a given. But, Cook won’t blink twice. He described to Rose his skill in “blocking out and filtering the noise.” (20:59 – 22:05)

Tim Cook Bets His Legacy and the Apple Ecosystem on “The Corporate Internet of Things.” That’s a massive pivot for a company whose past successes are rooted in consumer fanaticism. But, Cook has no interest in “following the herd.” Cook described to Rose why he decided to leave Compaq and join Apple in 1998 (36:13 – 37:00; paraphrased):

“Well I’m just thinking I’m going to meet him and all of a sudden he’s talking about his strategy and his vision (i.e., Jobs), and what he was doing was going 100 percent into consumer. When everybody else in the industry had decided you couldn’t make any money on consumers so they were headed to services and storage and enterprise. And I thought, I’d always thought that following the herd was not a good thing, that it was a terrible thing to do right? You’re either going to lose big, or lose, but those are the two options.”

“He was doing something totally different.” (referring to Jobs)

Not Following the Herd. Questioning Conventional Wisdom. Being the Best. Sounds a lot like:

Photo Credit: Apple Website on October 5, 2011

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Tony Faustino is a marketing and corporate strategist.  He thinks and writes about how The Internet reinvents marketing strategy in his personal blog, Social Media ReInvention. Follow his tweets @tonyfaustino or circle him on Google+.