By Randy Ottinger
I’m having déjà vu. In my 20 years in the tech industry, I have seen companies dominate an industry only to fall from grace. The latest was Dell, the company that created an innovative empire of just-in-time-built PCs sold direct to customers. The technology landscape is strewn with fallen stars such as DEC, HP, Yahoo, and Sun.
Rarely do we hear of once-dominant technology companies that rebound to become dominant again. A recent article in Fortune magazine points to Apple, IBM, HP , Priceline, and Ebay as five great technology turnarounds. These turnarounds worked because each company disrupted themselves. Just to point out the obvious, however, several of these companies are facing the need to disrupt and re-invent themselves again, including Apple. So the question is: Can Apple do it again? Will it be the next big turnaround story - or one of the fallen stars?
Apple recently capitalized on the emerging mobile phone market, leading to utter dominance in the consumer device market. Here’s how I see it:
- With a clear vision, great product design, and superior execution Apple became the cool consumer device company.
- In fact, the design and brand became so cool that lines formed as the new iPhones were released.
- Once you bought one Apple device you wanted another -- the newest, latest, coolest Apple anything.
- Apple became an interconnected web of products and services, creating a powerful ecosystem that sucks you into the Apple world and makes it hard to leave. Each new release of iPod, iPhone, iPad, Mac, or iTunes reinforced Apple's coolness and kept you wanting more.
Let's not forget that along with Apple’s cool factor, the stock price took off after 20 years of basically no growth.
Apple's rocketing stock price proved that disrupting itself had paid off. It went from competing head-to-head with Microsoft in the PC market to inventing a new kind of consumer device business.
Today, however, Apple's current consumer business is under siege. Low cost, innovative manufacturers are creating devices at a faster and faster rate, making it increasingly difficult for Apple to stay ahead of the pack. According to IDC, companies like Samsung and Lenovo are entering the market with lower cost models. If that weren't bad enough, both Google and Microsoft have recently strengthened their own positions. The Android system and Windows 8 now allow these juggernauts to create their own ecosystems, making it harder to draw new Apple groupies. And let's not kid ourselves, if Apple is cool Google is at least as cool. Just ask yourself, if you were a 21-year-old Stanford graduate with the world on a string, which company would you want to work for?
Then there’s Amazon, a company that couldn't care less about making money on the device. (That may be a slight overstatement). The company’s primary goal is for you to use the Kindle to shop for physical and digital content on Amazon.com. If Amazon is willing to lose money in Apple’s core market in order to gain share, it’s not a good place for Apple to be.
It’s time for Apple to ask itself a fundamental question: Can it continue to win big by focusing on its core market? If yes, they should (Plan A) double down on what they are doing today. If no, they need to (Plan B) disrupt themselves again. In my opinion, there is no way Apple can continue to win big doing what it’s doing. There are too many players, many of them with a better value proposition. As a result Apple needs to resort to Plan B.
How a Company Can Disrupt and Reinvent Itself
So what can Apple or any company do to disrupt itself? Let's take a page out of Apple's own playbook.
First, Apple needs a clear vision of an opportunity in the marketplace that leverages the company’s core competencies. Steve Jobs saw the chance to move from a PC company to a consumer device company and Apple had all the design capabilities to make this shift successful. It was the right vision at the right time. Granted, clarity of vision is not a common trait. It may not take a Steve Jobs to reinvent a company, but it will take a different approach to gain clarity on what’s happening in the marketplace, as well as invent the strategies that will allow a company to seize a new opportunity.
Second -- and in my opinion most important for long term success -- is the need for a whole new way of operating. A new philosophy that allows a company to accelerate ahead of its competition and then continually innovate to maintain that position. As I pointed out earlier, the most successful tech turnarounds need to continually re-invent themselves. Companies need to be entrepreneurial and agile, to seize new market opportunities while executing on the business that got them there in the first place. Steve Jobs himself called Apple the largest entrepreneurial company in the world. My colleague, Harvard Professor John Kotter, recently published a Harvard Business Review article that describes how to create a dual-operating organization to accelerate results.
The basic concept is that companies can be great at execution and agility, but both cannot exist within the same hierarchical structure. A dual-operating structure is required: Employees spend part of their time within the execution hierarchy, the rest of their time is spent in the entrepreneurial acceleration network. The result is greatly increased innovation, agility, and speed of execution.
Did Steve Jobs leave within the Apple DNA the ability to spot new windows of opportunity in the marketplace, as well as an agile operating structure to seize them? Even considering a great company like Apple, we’ll have to watch and see.
Randy Ottinger is an Executive Vice President at Kotter International, a firm that helps leaders accelerate strategy implementation in their organizations. John Kotter is the chief innovation officer at Kotter International, and is the Konosuke Matsushita Professor of Leadership, Emeritus, at Harvard Business School.
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For more about how organizations can develop the agility required to succeed in today’s rapidly changing world, read Dr. Kotter's recent article, Accelerate!” available from the Harvard Business Review.
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