George Colony isn't very popular with diehard fans of Apple Inc. (Nasdaq: AAPL) right now. Many in the electronics industry refuse to agree with Colony's long-term prognosis for the company, but you have to give the Forrester Research Inc. CEO credit for taking an unpopular stance on the world's most successful technology company.
In a blog posted on Forrester's home page on April 25, Colony laid out the business and sociological reasons why he believes Apple will "coast, and then decelerate" over the next "24 to 48 months." This rather negative opinion, published only one day after Apple announced record profits and sales, has sparked a lot of debate on the Web. On Tuesday, Apple reported a 94 percent increase in March-quarter net profit (to $11.6 billion from $6 billion) and revenue of $39.2 billion, compared with $24.7 billion in the year-ago quarter.
Just to be clear, I agree with Colony's conclusion. In fact, if there are any areas where I don't exactly see eye-to-eye with the Forrester boss, it would be that Jobs's death isn't the only trigger that I believe would result in slower growth for Apple eventually. Neither of us is saying Apple will decline or stop growing, but the current pace of expansion is not sustainable.
Apple's revenue more than doubled to $108 billion at the end of fiscal 2011 from $37.5 billion in fiscal 2008. The company's current growth rate, if maintained, will push Apple's annual revenue pass the $200 billion mark by fiscal 2013 or even earlier. Where will it go from here? I know many people in the industry believe Apple is infallible, but even if Jobs was alive, the company was bound to hit a wall eventually.
Forrester's Colony focused in his blog on how the departure of a charismatic leader often results in the slow decline of the organization. Jobs, the Forester analyst said, was at the core of almost everything that Apple had done in the last 10 years. Without him and the passion he ignited both within and outside the company, the enterprise was bound to slowly begin to lose momentum.
"In charismatic organizations, the magical leader must be succeeded by another charismatic -- the emotional connection of all employees and (in the case of Apple) customers demand it," Colony said.
He expanded further:
When Steve Jobs departed, he took three things with him: 1) singular charismatic leadership that bound the company together and elicited extraordinary performance from its people; 2) the ability to take big risks, and 3) an unparalleled ability to envision and design products. Apple's momentum will carry it for 24-48 months. But without the arrival of a new charismatic leader it will move from being a great company to being a good company, with a commensurate step down in revenue growth and product innovation.
Do you agree with Colony? If you take a look at the comments on Colony's post, there are some thoughtful, high-level, and interesting viewpoints. Joe Wilcox of Betanews also makes a compelling argument. I encourage you to share your own opinions on the message board below.
Investors are also happy from Tim Cook because he interacts with them frequently. He sees them as people important to Apple Inc. In case of Steve Jobs, he was a guy from focused on innovation and internal organization affairs and saw investors as people not so desirable and interacting to them was a burden to him.
@WaqasAltaf, You're absolutely right. It's not right to compare Tim Cook's popularity with that of Steve Jobs' These are two different people with different views and business outlook. Yes investors are likely to lean more towards Tim Cook's as he's brought the company more profits well after Steve jobs' depature.
WaqasAltaf, Thanks for refocusing the argument. Steve Jobs did a fantastic job reigniting growth at Apple. Now that he is gone it's up to the Timothy Cook management to take the company to another level. Jobs wasn't given a great company to manage. He created it. They have a great company and now it's up to them to take it to another level.
Great post Bolaji and interesting comments from EBN readers.
George Colony's analysis of the business and sociological position of Apple in my view is correct. It is true that Apple's succession requires "likes for likes" after Steve Jobs departure (being a charismatic leader). Unfortunately this wasn't so. Far from implying that Tim Cook is not a great man with great vision for Apple, at least after Steve's death the company has gone on to and still raking millions in revenue. It is generally the norm when a charismatic leader steps down to replace with similar personality traits. In addition to this, like any other successful organisation, there'll come a time when growth eases, due to a number of reasons. I believe Apple is heading towards this direction too. Apple is not breaking new grounds in terms of innovation. Undoubtedly the company has achieved a great deal by producing products based on its customer's needs and demands. Combined with Steve Jobs outstanding charisma, it's brought Apple success and the company is basking in that glory today. Hence, I support the view that the company "will coast and decelerate". I equally agree with you Bolaji that "the current pace of expansion is not sustainable" With time, Apple will decelerate.
I don't believe it takes a great visionary to realise Apple cannot sustain its performance. If it did it would own the whole world in a few years. What's after that ...... the universe?
That's a good point. Again, it seems like the leadership style of the CEO or the change of the CEO is crucial for the performance of the company, either Nokia or Apple.
However, no matter what we discuss on forums, Mr. Jobs did enough to proof that he had enough of what it takes to take an organization to the pole position. He proved it and Apple and Tim Cook have to prove it. Within 2-3 years, we will be able to have a clear picture as to whether Apple was great with Steve Jobs or is also great without Steve Jobs.
"But supposed that Apple`s revenues dropped in a few years (This will likely happen because competitiors are working hard to dethrone Apple), are we going to relate that to the guru factor?"
That's a very good question. However, the competitors are not close enough to producing products that could seriously compete with Apple's products. Or, do you have one in mind close enough that could represent a threat in the near future? I just can't think of any, not even a Nokia Windows 8 future tablet at the moment.
The only reason why Apple's revenues might drop would be if its products lack the same quality and innovation that we are accustom to having.
I believe a lot of people working under Steve Jobs did not like his way of running the organization , his autocratic style of running the organization and sometimes his whimsical attitude. But Steve was so passionate about his work that the opinions of such disgruntled people were far outweighed by the people supporting his style of working.
May be after the departure of Steve, there will be more professionalism and more democracy in decision making in the Apple management and that will work in a psotive way for Apple to sustain on a long term basis as the top company in consumer electronics.
By moving to the core of the industry and offerings services that keep the system humming, a group within the electronics market has rendered irrelevant the question of ownership and control of the supply chain.
EBN Dialogue enables and encourages you to participate in live chats with notable leaders and luminaries. Not only editors and journalists, but the entire EBN community is able to comment and ask questions. Listed below are upcoming and archived chats.
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Thailand Stages a Comeback Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Euro-Crisis: What It Means for High-Tech Firms Join EBN Editor in Chief Bolaji Ojo and Contributing Editor Jennifer Baljko on Thursday, July 12, at 10:00 a.m. EDT for a Live Chat on high-tech and Europe's economic difficulties.
Microsoft Surface: Potential Winners & Losers What are the implications for the electronics industry supply chain of Microsoft Corp.'s decision to launch its own tablet PC? Join industry veteran and EE Times' systems and OEM expert Rick Merritt on Tuesday, July 3, at 12:00 pm EDT for a Live Chat on this subject.
Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
While no one really can accurately predict the future, we can take guidance from another Drucker saying which is the best way to predict the future is to create it.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
Where are these people? Are universities properly preparing the next generation supply chain professionals? How do train your existing workforce for these new, demanding positions?
Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.
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