Tue. Jan 18th, 2022

Tim Cook became Apple’s CEO in 2011 just before the death of Steve Jobs. The problems he faced were similar to those faced by Alfred P Sloan when he became president of General Motors in 1923 (Great reading, FT Weekend, January 8).

At that time, GM also inherently had volatile revenues from automotive product sales, supply chain issues (various manufacturing facilities), and a lack of consistency across its diverse organization. But most of all, there was the existential question of what to do when the car market is saturated.

To address this, Sloan introduced his own “regular cadence of productizations” – he called this planned aging. Market leader Henry Ford has manufactured an undifferentiated standard low-cost engine for the mass market, the Model “T”. Sloan understood that markets change and fragment as consumers’ tastes evolve – so his mission was “a car for every purse and purpose”. He subdivided the market into five distinct consumer categories. Only Chevrolet, for example, competed directly with Ford in the low-cost segment. More affluent consumers can move to more luxurious cars, faster, smoother or more luxurious cars. Sloan’s foresight and innovation led to GM’s dominance, both at home and abroad, which lasted for many decades.

Cook designed a similar strategy pivot at Apple and began creating a “steady stream of recurring revenue” by moving to a service-based (e.g., Cloud, Music, News) business model. Services can be very profitable if supported by a strong brand – which Apple has in pieces. Segmentation of Apple products and frequent “product iterations” have taken place under Cook since the launch of the Mac and iPod two decades ago. Apple’s change of direction is illustrated by the departure of senior product-oriented executives Angela Ahrendts and Jony Ive in 2019.

Like GM a century ago, Apple sets the standard and dominates its sector and is likely to do so for decades. No one today suggests that Alfred P Sloan “had anything to prove”.

Neil McPhater
Longstanton, Cambridgeshire, United Kingdom

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