Apple's Innovation Problem

Apple CEO Tim Cook has a problem. It's huge, actually, and not one that he can easily solve.

New products? Competition? Cash distribution to shareholders?

Nope, nah and negativo. They all contribute but are primarily symptoms rather than causes.

The biggest problem he faces is that he is not Steve Jobs.

The challenges that flow from that fact are numerous and may ultimately prove insurmountable. Most of the criticism and/or hand-wringing about Apple - whether it is a paucity of mind-blowing new products, a decline in profits, trouble with subcontractors like Foxconn, with competitors like Samsung and Google or arguments with greedy hedge funders wanting a piece of the company's cash hoard have, at their root, a loss of faith in leadership.

Jobs was and is iconic. He could be counted on to do something idiosyncratic, difficult and brilliant. It wouldnt always work, but more often than not - enough - to put his iconoclastic tech start-up into competition with the likes of Exxon. His replacement, however smart and competent, does not inspire that sort of devotion.

There is a hoary tradition in business of wild-men and visionaries selecting or having selected for them, successors who are rational, guarded, precise and controlled. They generally have been loyal and effective Number Twos who understand the boss, deliver the execution of his or her sometimes poorly articulated demands and who have earned their chance to follow. But just as often, they fail because their success was rooted in being assistants rather than leaders.

Apple may have an innovation problem as the following article suggests or a financial problem or a vision problem or a competitive problem. But it's biggest problem is that it no longer has Steve, and never will again. So if it is going to move forward, it is going to have to figure out how to get it and its customers, investors and believers past that. JL

Greg Satell comments in Digital Tonto:

Many successful companies have innovation departments (such as Google X, the supersecret division responsible for Project Glass, autonomous cars, and who knows what else?).  Why would Tim cook want to dismiss innovation teams out of hand?
Apple CEO Tim Cook has a very tough job.  Not only does he have to run the most valuable tech company on the planet, but he has to follow one of the greatest chief executives in history.  Is he up to it?  I’m beginning to think he’s not.
There have been some missteps, of course, like some earnings releases that disappointed investors, the maps debacle, the continued lack of NFC or an Apple TV, but that’s not why I’m having doubts.
I find it easy to believe that those things would have happened if Steve Jobs were still around (well, except for maps, maybe).  Apple’s legendary founder had more than his share of flops, but he had a great sense of what technology could do.  Without him, Apple will have to learn to innovate differently and Tim Cook doesn’t seem up to it.

Focus Or Tunnel Vision?

I first began to have doubts when I read Mr. Cook’s remarks in a Businessweek interview, which I will quote here (with my own emphasis added):

Creativity and innovation are something you can’t flowchart out. Some things you can, and we do, and we’re very disciplined in those areas. But creativity isn’t one of those. A lot of companies have innovation departments, and this is always a sign that something is wrong when you have a VP of innovation or something. You know, put a for-sale sign on the door. (Laughs.)
Everybody in our company is responsible to be innovative, whether they’re doing operational work or product work or customer service work.

In just a few sentences, he encapsulates both why Apple has been so enormously successful and also why its future is so precarious.  Steve Jobs’ legendary focus can easily manifest itself into blindness about what’s going on outside the company.

Innovating The Apple Way

In Walter Isaacson’s acclaimed biography of Steve Jobs, he recounts the story of how Steve Jobs decided to build the iPad.  He was having someone from Microsoft over for dinner who showed him a prototype for their new tablet computer.  Seeing that it included a stylus, Jobs flew into one of his characteristic rages.  (Jobs hated the idea of a stylus).
He didn’t dismiss it though.  He thought it was stupid, just as he thought that the way MP3 players and countless other products were stupid (“sucky” was his adjective of choice), but rather than write it off, he went off and built something better and that’s what made Apple the world’s most valuable company (for a while, anyway).
While Apple has gained a reputation as a disruptor, in truth, its products generally don’t meet the definition of disruptive innovation (except for iTunes, which does). The thing that has set the company apart is that its products have been so “insanely great” that, even in established categories, an Apple launch has felt like something completely new.

A Model For Long Term Success?

I think three factors account for the company’s success innovating this way.  One, is the discipline that Tim Cook spoke of above.  The second is world class talent like Jony Ive and lastly, of course, is Steve Jobs.  It was his ability to see the incredible possibilities of technology along with his “reality distortion field” that drove Apple to create such wonderful products.
But that last crucial element is gone now and Apple will need to adapt.  Steve Jobs was a unique talent, one that might come along once in a generation.  He simply can’t be replaced.  To succeed going forward, they will need to develop a new model for success.
That doesn’t mean the company’s core values, such as quality and design, have to change, nor does it mean that it is in crises, with over $150 billion in cash and strong positions in rapidly growing categories like smartphones and tablets, Apple is in an enviable position.
However, what it does mean is that Tim Cook needs to look to the future rather than the past and that Apple will need to expand its vision and learn to innovate more broadly.

Innovation Across The Matrix

Apple, of course, is not the world’s only innovative company.  Google, IBM, Procter and Gamble and many others have consistently been able to develop new products and services that keep them ahead of the competition.  However, when you delve a little deeper, you find that they each approach innovation in a different way.
To add some clarity and structure to innovation, I developed the Innovation Management Matrix, which asks two questions:  How well is the problem defined and who is best placed to solve it?
I’ve put a version of the matrix below, along with organizations which excel at the type of innovation represented by each quadrant.

Apple, much like Toyota, has thrived in well defined areas.  They make important improvements to existing products, which is why Tim Cook’s approach of getting everybody involved in the innovation process works well there.
However, when it came to deciding which new directions for the company to develop, Apple had a committee of one: Steve Jobs.  Now that he’s gone, it’s imperative that they start exploring other innovation methods.
Basic Research:  In 1993, IBM research achieved the world’s first quantum teleportation that will form the centerpiece of the next digital frontier of quantum computing which will begin to take hold sometime around the year 2020.  It’s that kind of long term thinking that has enabled them to build products like Watson, today’s most impressive computing platform.
As I noted in an earlier post on Forbes, Apple spends very little on research and development and even less (or nothing) on basic research.  Investing in completely new paradigms, rather than simply improving existing ones, might be something that Tim Cook and Apple may want to consider.
Breakthrough Innovation:  Another thing that Cook highlighted in the interview is how tight knit Apple’s senior management is.  That’s great for running operations, but inevitably people who spend a lot of time together end up thinking a lot alike.
That makes it difficult to overcome tough problems when you get stuck as well. Breakthroughs, after all, happen by synthesizing across domains and that is very hard to do in a very focused environment.
Many companies are achieving great success with Open Innovation platforms like Innocentive or P&G’s internal program, Connect + Develop.  However, for Apple to create truly collaborative relationships with outside entities they will have to make serious adjustments to their famously prickly culture.
Disruptive Innovation:  Google and 3M have been able to consistently come up with truly disruptive innovations that have created new categories.  Products like Google Maps, which funds a satellite imagery service by selling ads to hardware stores and the like, isn’t the type of idea that thrives in a centralized structure.
Both companies have versions of the 15% / 20% rule which encourages experimentation on a massive scale, rather than a laser like focus on a few blockbuster products.  Other organizations pursue disruptive innovation with internal VC arrangements, innovation jams, hackathons, innovation days and yes, innovation departments.
So while Apple’s approach has worked magnificently in the past, that’s no guarantee that it will succeed in the future.  Before Mr. Cook dismisses workable approaches that other companies have adopted successfully, he might want to look around a bit more.
Which brings me to something else Tim Cook said in the Businessweek interview about what Steve Jobs told him when he handed over the reins:

He said, ‘I want to make this clear. I saw what happened when Walt Disney passed away. People looked around, and they kept asking what Walt would have done.’ He goes, ‘The business was paralyzed, and people just sat around in meetings and talked about what Walt would have done. He goes, ‘I never want you to ask what I would have done. Just do what’s right.’He was very clear.

Perhaps Jobs knew that, after him, Apple would have to become a very different company, that they would have to find their own way, set their own mark and operate differently.
And maybe even get an innovation department…