Goodbye, IBM. Seriously.
mobileopportunity.blogspot.com
mobileopportunity.blogspot.com
IBM has its fingers and toes in a lot of things, including SmartGrid, Healthcare IT to name a couple. It is a good bet to say that it will take more than one bad product iteration to knock them off their perch. Ripping IBM off of the enterprise market will be akin to cleaning crap off of velcro. Not easy.
Apple as it grows defying expectations has to both make sure that future iterations of its products can keep enchanting their customers as well and stay innovative (at their current click) once Jobs is no longer involved in making product decisions.
Another way to look at it is that IBM is firmly associated with the fundamental technology, while Apple is associated with consumer devices. Well-designed, innovative, but still consumer stuff. It is a principal difference when it comes to the perception, and this makes IBM feel and look more valuable than Apple.
IBM doesn't need to lose for apple to grow larger than them. You're right that their diversification gives them safety, but as Buffett says of growth: put all your eggs in one basket and watch that basket.
It's hard for me to envision what this means...
Even when you think that selling iPads at Wal-Mart or iPhones at Radio Shack would dilute the exclusivity factor or shift the consumer attitude away from "hip, fresh, and new", it debuts another new thingie and BOOM! The frenzy starts anew.
They sold 18 Million iPhones in three months. They're selling more computers than ever (4 million now). Naysayers went from "they should just close and return all their money back to investors" to "they can't keep growing forever".
"Apple as it grows defying expectations has to both make sure that future iterations of its products can keep enchanting their customers as well and stay innovative"
Jobs perhaps won't be able to see the continued success by thinking up and touting, as if a carnival barker, their "magical" new products, but they can shift into an aggressive expansion into new spaces. Cisco is famous for doing just that, eating up companies voraciously to move into spaces like consumer networking (Linksys) and set-top entertainment (Scientific Atlanta).
If Apple can't out-innovate in the long haul, they could really shake up the consumer space with some killer acquisitions. I see them making smaller buys like TiVo to bolster their Apple TV product, then go after larger (more complicated) buys. I like them acquiring Nintendo, for example. I see them scooping up either Coinstar (for Redbox) or Netflix (or even Blockbuster, but that just has bad memories of VHS and late fees that even Apple couldn't, er... polish).
I could even see them buying a service like Kobo for eBook marketshare. Hell, they could buy Barnes and Noble for their bookstore, ebook marketplace, _and_ the low-end, low cost tablet (Nook Color). Now that would be taking a swipe at Google.
Here's where my crazy theories go full-crazy, though. I see them ridding themselves of the bloat and dependence on iTunes and buying Amazon for both the digital market, the Kindle (which will be rebranded the iBook since they already own that trademark), and the website itself becomes their "iTunes". No more plugging into a device to sync; it's all OTA over Amazon's existing cloud infrastructure. Buy books either on your device or physically. It would be the biggest coup acquisition ever IMO. Too bad it would probably never happen.
Cisco started out making enterprise routers and switches. They quickly gained dominance in that space, and began expanding into other areas. However, none of their acquisitions or expansions (e.g. Linksys, GoToMeeting, etc.) have achieved the same level of profitability as the core router & switch business. If Cisco loses its core router & switch business, it will still be in trouble, with or without Linksys.
The same principle applies to Microsoft. Yeah, they've expanded into a lot of new markets. There has been success in some (e.g. game consoles) and failures in others (e.g. mobile phones). But none of their expansions have resulted in products that would save the company if the Windows and Office cease generating significant revenue.
In the eyes of many investors, this strategy has actually hurt these companies. Rather than staying focused and building absolute best of breed products in one or a few categories, Microsoft and Cisco have lost focus, and are diluted their talents into a set of mediocre products across a wide range of categories.
Given that, I think it would be better for Apple to stick to making damn good PCs, MP3 players, and cell phones, rather than branch out into a wide number of product categories and lose their reputation for excellence.
Branching out into iPods (plus music), cell phones (plus apps) and tablets is what turned the company around and sent it into the stratosphere though. Prior to the launch of the iPhone and the launch of the iPad you would be hard pressed to find people who would have thought those products would have gone on to be the blockbusters that they've become.
The only problem I can see for Apple is how to continue coming up with successful products - how many cool, new consumer electronic devices could they conceivably conjure up?
EDIT: typo
The one hopeful difference that I see between Apple and Sony is that Apple is much more willing to kill off unsuccessful projects than Sony, as demonstrated by the EOL of the XServe line.
Apple and IBM compete in the same sort of way that all humans compete for oxygen: in a not-very-meaningful way.
IBM's move into PCs was defensive: As businesses started thinking about adopting these toys built from parts by neck-bearded garage trolls, the company wanted to make sure they didn't get left behind. Would every desk in corporate America have a computer on it today if IBM never got into PCs? I'm not so sure.
IBM's always been a top-down company: it sells to bosses who are telling their minions what they're going to be using, while Apple's approach has almost always been much more bottom-up.
IBM stopped selling personal computers when they stopped being uniquely relevant to big businesses. They still sell mainframes along with a long list of other things.
Also keep in mind (and this isn't meant to disparage Apple), but they were almost dead until one man, Steve Jobs took over. It's his vision that brought Apple back from the dead.
Over the long term (30 years from now), we'll have to see how that plays out. I couldn't name one specific person at IBM who's responsible for their success and they're doing very well these days too.
One (very) specific person: Louis V. Gerstner.
Like Jobs, he saved his company. Unlike Jobs, he was very much an outsider, but this apparently was what IBM needed to push change, given their hidebound culture.
From: http://en.wikipedia.org/wiki/Louis_V._Gerstner,_Jr.#IBM
"Gerstner is credited with saving IBM from going out of business in the early 1990s. In his memoir, Who Says Elephants Can't Dance?, he describes his arrival at the company in April 1993, when an active plan was in place to disaggregate the company. The prevailing wisdom of the time held that IBM's core mainframe business was headed for obsolescence. The company's own management was in the process of allowing its various divisions to rebrand and manage themselves — the so-called "Baby Blues."
Gerstner reversed this plan, realizing from his previous experiences at RJR and American Express that there remained a vital need for a broad-based information technology integrator. His decision to keep the company together was the defining decision of his tenure. The subsequent refocusing on the IT services business (which grew to nearly 50% of the IBM's revenues), the embrace of the Internet as a business phenomenon, and a broad effort to revive the company's culture are widely seen as having resulted in one of the most remarkable turnarounds in business history."
I thought IBM was still doing some great stuff. Maybe not as profitable and cool as some more modern companies, but still very important things which actually do make the world a better place, albeit not making a huge profit. I might be wrong, ofc.
But the scope of IBM is almost breathtaking. Look into the capabilities of mainframes, consider for one second the amount of engineering required, and you will nerdgasm. They do tons of research in electronics, semiconductors and fabrication. They are at the forefront of computer science -- they beat Jeopardy, beat chess, and sequenced the human genome. Then they sell a ton of other things like huge, robotic tape libraries. Seriously, go see one in action.
A few $billion in profit per quarter is nothing to sneeze at either. (http://www.google.com/finance?q=NYSE:IBM) I think the economies of scale play a big hand here -- I'm not sure if multiple smaller companies could eke a comparable, combined level of profitability, much less allocate resources for exploratory projects like Watson.
At the scale IBM operates at, Apple is essentially a one-hit wonder, being in a few very closely related consumer segments. It remains to be seen whether they can sustain their current momentum.
It's mostly based on design: good UI design and good aesthetic design. Apple is almost a fashion company.
It's not based on any of the things that the windup MBA idiots always harp on: marketing, performance, salesmanship, connections, etc.
Sure, Apple has those things. Apple is great at marketing, their stuff performs well, and they have plenty of salesmen. But so does everyone else. Apple's success is based primarily on aesthetics and user experience, which nearly all players in the industry have ignored completely in favor of the cliches beloved of MBAs.
I cannot say that Marketing and Salesmanship is not as important factor of the success of the company, which has undoubtedly the most charismatic CEO of this era, and one of the best salesman in the business.
To my understanding, that's pretty much what "charismatic" means. It's not a synonym for "friendly".
As an aside, for people who are interested, at MacWorld 2007, Steve summed up the whole thing in just 1 slide... http://i.imgur.com/gMIjp.jpg
To a lot of people 'design' means white/gray rounded rectangles, but that's really not why Apple is where they are today. As Steve said 8 years ago - “Design is not just what it looks like and feels like. Design is how it works.”
Aesthetics are practical.