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Coming at a time when Apple (NASDAQ:AAPL) is engaged in multiple litigations, the iPhone map disaster may signal that the company is spending more time on litigation than innovation.
People do make mistakes. Companies do make mistakes. People apologize for their mistakes and for those of their companies. Consumers and stockholders usually accept these apologies, and all parties move on.
But when the company that makes a mistake enjoys a reputation for innovation and superb product quality like Apple, business strategists begin to wonder whether the mistake is just the result of poor judgment or a change in business priorities that may have far reaching consequence for the future of the company.
For almost a decade, Apple has been competing the old free enterprise way: Developing and marketing high quality innovative products that changed consumers’ lives, like the MacBook, the iPod, the iPhone and the iPad. But recently Apple seems to be moving away from this business model, engaging in prolonged legal battles with once main partner Samsung (KSE:005930.KS), which in the end may hurt smartphone customers.
There are several reasons business strategists become concerned about the future of companies that spend a great deal of time in the courtroom defending their products.
First, legal battles divert leadership from looking after the basic corporate functions -- most notably, the discovery and exploiting new business opportunities. Microsoft’s (NASDAQ:MSFT) leadership, for instance, spent a great deal of time battling the US and European governments in a period when Apple defined the market for mobile devices. MCI spent too much time fighting AT&T (NYSE:T) in court rather than in the marketplace. We all know what happened to the company.
Second, legal victories create a sense of complacency -- that the company is insulated from competition, which undermines any urgency to innovate and keep up with high quality standards.
And third, litigation may hurt the company’s image among consumers. Especially if they result in fewer choices, higher prices, and quality compromises, as was the case with Apple's Iphone map disaster.
Bottom Line: Apple’s leadership should get its priorities right. Place innovation ahead of litigation; and stay focused on the customer, not on profits.
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