Asia can beat Apple

2012-09-09 19:34

For analysts, a company as innovative as Apple could never be Asian. A recent example is Samsung being found guilty by a Californian court of stealing Apple’s intellectual property. With the next iPhone imminent, Apple appears more invincible than ever. And yet, this victory may well signal both the peak and start of the decline of the Apple Empire.

The man who created the personal computer as we know it ― the Macintosh of 1984 ― did it again, not just once, but twice.

The iPod (2001) and iTunes Music Store (2003) were just the appetizers. In 2007, Apple released the device the rest of the global digital industry had been trying to invent themselves: the iPhone. In 2010, Apple did it again with the iPad tablet. Now worth over $600 billion, Apple went from near bankruptcy in 1996 to being the most valuable company of all time, its heft more than China Mobile and PetroChina combined. How did Steve Jobs do it?

Henry Ford (1863-1947) said: “If I asked my customers what they wanted, they would probably say, we want a faster horse,” and not the famous Model T of 1908. To visionaries like Ford and Jobs, it’s the spoils for a rich future. Leaving those who keep scratching the market for clues to lose in a cruel zero-sum game.

Apple is what Sony should and could have been, when Akio Morita famously invented the Walkman while playing golf. If Apple’s triumph underscores the decline of the Japanese electronics industry, its most tragic casualty by far is Nokia. Ten years ago, the Finnish company ruled the mobile phone domain. With unlimited resources, Nokia’s top brains sat down to the conclusion: “We must now emulate Microsoft and Sony.” Nokia proudly released a series of monstrous hybrids, but no future super-phone. In 2007, the year iPhone launched, Nokia shares had peaked at $40. They are now worth $2.70. Apple shares traded around $10 in 2003. It has now surpassed the $660 bar.

The Apple story is of one man who single-handedly humiliated the world marketing elite. It may be a no-brainer ― you put Ivy League graduates round a brainstorm table and they will come up with rational ideas. Ideas that make sense, but ideas that may just as well be lethal. Perhaps it’s no surprise that Henry Ford, Bill Gates, Steve Jobs and Walt Disney were school drop-outs.

The visionary manager need not be an inventor. In fact, Jobs was a self-avowed shameless stealer of ideas. The mouse and graphic user interface (GUI) were spotted by Jobs during a 1979 visit to Xerox PARC. The iTunes/AppStore architecture takes from the Japanese DoCoMo iMode (2000), itself inspired by 1982 French Minitel.

Identifying a game-changer before anyone else and anticipating all its implications is what separates the visionary from the rest.

For Jobs, user experience is paramount. The mouse and GUI formed the game-changer that led to the Macintosh (1984). In the Noughties, it was the touch screen, not the resistive type that uses a stylus, but the finger-operated capacitive touch screen that lets the user physically interact with the page.

Most industry players would release a “work in progress” immature device. Not Jobs. He embarked on a three-year-long maturation phase in the secrecy of Apple R&D labs. Touchscreen technology was brought to its full potential in a forced and accelerated evolutionary process. And the obsessive Jobs would not concede until the touch was as slick and as smooth as silk.

“Make your projects as obscure and impenetrable as the night ... But when you decide to move, fall on the enemy like lightning.” You don’t have to read Sun Zi to understand the advantage of by-passing the Darwinian evolutionary process to stun the market with the perfect specimen out of the box. The competition is just wrong-footed and doesn’t know where to go next. Moreover, in those three years away from the public eye, Apple was comfortably patenting all aspects of the new touchscreen functions. The Patent Office was very generous, granting Jobs monopoly rights on human gestures that obviously belong to the public domain: tap, pinch and other multi-touches.

Steve Jobs calculated his three-year head start for his products. To maintain the lead, the company had to further innovate while keeping competition at bay through patent-related lawsuits. Alas, three years was all it took Samsung and Android to catch up. The Samsung Galaxy S (March 2010) was a great match, not for the original 2007 iPhone, but for the yet-to-be-released iPhone 4 (June 2010). This shock-awe brought back bad memories: Is Android the new MS-DOS/Windows that once dwarfed the Macintosh? It also raised a more metaphysical question: Is Apple capable of evolution at all? When you claim your device to be perfect out of the box, you allow only incremental improvements. Don’t expect a Galaxy Note stylus, or a Nokia Pureview camera, FM radio, SD card, USB port, file management or three buttons. The “less is more” mantra might just push iPhone to extinction.

Apple’s overstretched “reality distortion field” is bound to retract. The only question is when: After a disappointing iPhone 5 launch? Or in 2013, when the entire consumer electronics industry floods the market with more attractive and cheaper devices?

What are the options for Apple? Buy Facebook and a retailer to enlarge its perimeter? Or surrender market share to preserve the iPhone’s 40 percent profit margin? An aggravated patent war might also lead to a geopolitical divide ― Apple losing ground in Asia in trying to lock down its market in the West.

Whatever Apple’s fate, the next winners will have to combine Steve Jobs’ visionary magic with Western big-picture strategy, alongside Asian-style pragmatism. Among the five Western champions (Google, Amazon, Apple, Facebook and Microsoft), Jeff Bezos’ Amazon comes closest to that winning formula. But Asia has what it takes to build its own “big picture.” A blend of search (Baidu, Naver), retail (Alibaba) and social media (Cyworld, Jiepang, Renren, QQ and Weibo) with a mobile device (Samsung, LG, Lenovo, Xiaomi, Meizu, ZTE and Huawei) to channel customers.

The future has just begun. 

By Jean-Francois Susbielle

Consultant and associate professor JF Susbielle teaches geopolitics and competitive intelligence at Sciences Po Paris and Grenoble Management University in Europe. He has written eight books on IT and international relations. He can be reached at ― Ed.
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