The Economy Chosun Interview Part 1

Culture and Innovation

---

My thanks to Sungmin Ko, a staff reporter from Economy Chosun for allowing me to answer a few questions for an Article on Apple.

Economy Chosun is a highly respected economic weekly magazine, published by the Chosun Media Group, which has a legacy of over 100 years and boasts the largest readership in Korea

---

1. Apple has reached its 50th anniversary. A startup that began in a garage has grown into one of the world’s most prominent corporations. In your view, what explains Apple’s extraordinary success over the past 50 years? Was the core of Apple’s success its technological edge, its design, or the way it structured its relationship with consumers?

First, I must say that no matter how big any company gets, it always starts small. It’s the same with people. No matter how powerful we become, we all start out as babies. Now it certainly helps that we have powerful parents and grow up in a wealthy society. The analogy for prominent corporations is that they have talented founders and wealthy backers. But the story of Apple is not this. The founders were of modest means and they did not get large backers.

The success of Apple was more driven by good timing and persistence. The company was born almost at the same time as Microsoft. Both took advantage of the birth of the microprocessor and separately built the hardware and software that would harness that enabling technology. But they were not the only ones.

Hundreds of startup PC and software companies were born at the same time but did not become dominant or even survive. We become victims of survivor bias if we are to assume that Apple and Microsoft had unique configurations destined for dominance.

What matters more than birthright is how persistent and adaptable the company is. What I would note is that Apple almost died a few times. Most dramatically it was during the late 1990s when they had to bring Steve Jobs back. I see that as the death of one Apple and the birth of another. The second Apple was more grounded in well-designed software (an operating system based on Unix) and was able to pivot into devices (something which notably Microsoft could not do.). This idea of rebirth is crucial to long-term survival. Mostly it’s luck but sometimes it’s planning. Apple’s second life has little to do with the first but we still see it as one 50 year old continuity.

Although I’m saying that luck, especially timing, is a big part of this, there is a lot to learn from individual actions of management which helped it to leverage its circumstances. These are:

• A maniacal dedication to customer satisfaction. It sounds banal but few companies really prioritize this above all else. The idea that Apple did not try to convince enterprise buyers to buy Macs is a classic example. The decision that the user rather than the buyer matters more is not an “economically optimal” solution. This also led to strategic decisions on controlling the user interface which turned out to be essential in preserving their value proposition.
• Working on projects that bring only specific advantages to bear. We hear this often as “focus”. The idea is to say “no” to many good ideas. Apple may work on cars but they chose not to continue because they could not bring any unique advantage to the segment. Perhaps they could have made a lot of money making cars but ultimately it would have diluted their attention and responsiveness to market conditions.
• Integration vs. modularity pragmatism. Do you build a piece or the whole? Do you partner or do you go alone? It turns out that it’s not a binary question. Sometimes you do one and sometimes the other. Sometimes you do both. Apple carefully chose and sometimes flipped the “architecture” of the firm. Building their own Operating System then building on Open Source. Building their own stores but also having 500 retail partners. Buying multiple types of microprocessors but then building their own. Investing in Silicon but not in AI data centers. The list goes on and on.

1. At what point do you think Apple became more than just an IT company and turned into a cultural symbol? In Apple’s 50-year history, what was the turning point that made it a fundamentally different company? Also, if you had to choose just one product that most clearly represents Apple’s identity, what would it be?

Being the original “personal computer” was a cultural milestone. The whimsical name itself, “Apple Computer” and the counter-cultural hints, rainbow logo, youthful founder, etc. Apple positioned itself opposite IBM and government and business-oriented incumbents. This was a start. The Macintosh extended this branding with a rebellious attitude.

The magic of it was that this “rebel” was not cheap. It was not a product for the poor. It was a product for the upper middle class that allowed them to say they were revolutionaries. See also the “Think Different” campaign dedicated to the crazy ones. That was version 1.0 of Apple. The product was the Macintosh and the identity was “the computer for the creatives.”

Apple 2.0, started right around the turn of the century. It became first an entertainment brand with the iPod and then a device brand with the iPhone. The name change from Apple Computer to Apple Inc. cemented this transition. Apple Inc. could no longer be seen as a rebel as it had too many millions of users. Today it has over 1.5 billion users or 20 percent of the world. And they are a quintile with the highest income. The company had to project an image of premium, privilege and privacy. The product was the iPod and the identity was “the computer in your pocket”

My prediction is that the company has more pivots to go through. I don’t think they will stop where they are now and a future Apple will emerge.

1. Is Apple under Tim Cook a completely different company from the Apple of its founding era, or is it a company practicing the same philosophy in a different way? Some say Apple in the Tim Cook era is less innovative than it was under Steve Jobs, but has become a stronger company. What is your view?

Apple under Tim Cook is quite similar (though not identical) to Apple 2.0 under Steve Jobs. It is indeed very different than Apple 1.0 under a different version of Steve Jobs. I think Apple 2.0 differs also in that they decided to understand themselves. Jobs became more introspective and started to ask how to build an organization that outlasts him. He saw not only how Apple evolved but also Pixar and Disney and NeXT. He matured and thought about processes not just heroism.

Tim Cook took this and cemented it. The result is that Apple today is full of processes and many lament that it is no longer heroic. I think it’s a more complex picture than that but it is trying to balance what Clayton Christensen would call the “sustaining” vs. the “disruptive” under one roof. It is not an easy task. Being heroic can mean some leaps forward but also the leap could be into an abyss. Sustaining is growth but you are vulnerable to asymmetric attacks.

1. Is Apple today still an innovative company? Do you agree with the view that the innovation Apple has shown since the iPhone has fallen short of what it once was?

The rest of this post is for Asymco members. Continue reading on asymco.com.