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he last month has seen some major changes at the most valuable company in history. Apart from releasing the

iPad Mini and a new fourth-generation iPad, Apple has just had a significant management shake-up that could have a serious impact on the future of the corporation.

On October 29, CEO Tim Cook

announced the ouster of two senior vice-presidents – John Browett of retail and Scott Forstall of the iOS division. Cook also announced the elevation of Eddy Cue, Craig Federighi and Jonathan Ive to a ruling triumvirate at Apple. Make no mistake – this is huge news, and while the Apple press release makes it seem routine, these changes are anything but. They will fundamentally alter the way Apple does

business and could have a profound impact on the industry.

First signsLately, cracks have begun to appear in Apple’s veneer. The iPhone 5 release, while marked with (comparatively subdued) excitement from fans, failed to display anything truly innovative. Apart from serious issues in supply and quality control, many view its iOS A

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Can the recent shake-up at Apple save the company?

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December 2012 GlobeAsia 133

By Jason Fernandes

While the press release makes it seem routine, these changes are anything but. They will fundamentally alter the way Apple does business and could have a profound impact on the industry.

6 as merely incremental and providing Apple users features that had already been available on Android phones for quite a while.

Apple’s much-touted Maps application was an unmitigated disaster, reportedly misplacing entire cities and putting mountains and rivers in the wrong place. Cook was forced to make a public apology, suggesting customers use Google Maps instead.

Perhaps it’s not coincidental that Apple’s problems appear to have begun with the release of the iPhone 5 and its disastrous Maps application. The unprecedented management changes at Apple have left Wall Street confused and many thinking that the Maps fiasco is merely symbolic of a greater problem – that Apple has lost its way.

The “lightning connector” which replaced the earlier charging/sync cables on the newer products is also cause for concern. Customers are unhappy that they need to buy an expensive adapter to use their old peripherals. Unlike the earlier version, the new connectors contain an authentication chip that ensures that accessory makers must have a corresponding chip for every peripheral or dock they sell.

It’s no accident that Belkin is the only Apple partner that has confirmed new peripherals are in the works. The authentication effectively lowers the motivation for accessory makers to concentrate on iOS devices and could have the effect of increasing the net cost of these peripherals.

This may have been alright back in 2007 when the iPhone was the only game in town, but now that research firm Gartner has Android’s market share outnumbering iPhone 3 to 1, it’s going to be an uphill battle for Apple to stay relevant.

The iPad Mini is another example of Apple’s decline. Just two years ago,

when referring to 7-inch tablets, Steve Jobs famously remarked that the size was meaningless “unless your tablet also includes sandpaper, so the user can sand down their fingers.”

After years of vigorously arguing that the world didn’t need a 7-inch tablet, Apple releases a 7.9-inch tablet. The iPad Mini is clearly their response to the Google Nexus and the Kindle Fire. The launch actually compared the iPad Mini with another unnamed (but clearly Google) tablet, something that Apple would’ve never done in the past because it considered itself in a class of its own.

According to analyst group IDC, Apple’s market share in the tablet industry has dropped 10% over just the last three months. The introduction of several lower-priced, but respectably-featured, tablets running Google’s Android has done it no favors. The release of the new iPad just six months after the third generation has many of Apple’s own customers seething, as many rightly assumed their tablet would be relevant for at least a year.

Apple also faces an assault on its business market with Microsoft’s Surface. The Surface has been enormously popular and its design is reminiscent of something Apple would’ve probably come up with in its heyday. Steve Wozniak, co-founder of Apple, recently said that Jobs had been “reincarnated” at Microsoft, words that were surely a dagger in the heart to many an Apple employee.

Apple used to be the master of showing the consumer what they wanted before they knew they wanted it. The new Apple shamelessly copies other more successful products, reducing their features and rebranding them. What’s worse is that it has begun to think of that as innovation.

Apple seems to have lost its edge and has become reactive rather than proactive. Its newer products merely reflect trends pioneered by other companies. To borrow a term in vogue among American political commentators, Apple has grown used to leading from behind.

Company shake-upThe purging of Browett and Forstall, on the other hand, indicates that Cook is taking strong corrective action. Browett had been on the job only seven months and performed well in almost every quantifiable way as head of retail.

He increased customer walk-ins and annual turnover at Apple retail stores and also broke the quarterly record for Mac sales. Applying his experience from his previous job at Dixon’s, he introduced cost-cutting measures and layoffs that were unfortunately perceived as focused on boosting profits while lowering customer service. When his “staffing formula” letters were published by the Wall Street Journal, Browett was forced to publicly admit his error and rescind the orders. The damage caused to Apple’s image was irrevocable though,

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and has led to his removal. Forstall has always had a more

public role as the face of iOS, tasked with showcasing its new features. His conspicuous absence at the iPad Mini launch was the first clue to Apple watchers that all was not well in Cupertino. Forstall’s departure was precipitated by his reported refusal to sign the apology for Apple Maps, saying that the problems with the application were “overblown”.

This, coupled with Forstall’s tense relationships with senior executives and serious clashes with Apple’s golden boy Jonathan Ive all but assured his ouster. Cook’s decisive action showed that he intuitively understood the value of Apple’s brand and realized that he just could not keep Browett and Forstall around, given the furor caused by Browett’s restructuring and Forstall’s Maps debacle.

More important, perhaps, is how Cook has structured the company in the wake of the purge. Cook is not merely replacing employees but essentially changing the whole structure, dividing Apple’s organization not based on products, but on ideas and skill sets.

Apple enthusiasts will remember that the old strategy was in place going as far back as the 80’s, when the famously-tense relationship between the Mac and Lisa teams hastened the end of Jobs’ first tenure.

Weighing in on the changes, former Apple employee Matt Drance of AppleOutsider.com says “there’s a long-standing pattern of separating watershed products important to the company’s future . . . Suddenly, Tim Cook has pulled the reins in. Federighi owns software. Ive owns design. Cue owns services.”

The reorganization based on skill set will have far-reaching consequences in Apple’s corporate culture. Longtime

observers of Apple are thrilled that Ive will be taking on a far greater role, with many describing his new responsibilities as mirroring those of former CEO Jobs.

Ive will no longer confine himself to hardware, but will also be in charge of the visual aspects of its software across all devices including the Mac and the iPhone. Ive is apparently not a fan of digital products that mimic the design of their real world alternatives. This likely means that touches such as leather bound notepads and intricate stitching on the borders of Apple’s software are on their way out, to be replaced by the same clean lines and a focus on usability that Apple has displayed with its hardware.

The question is whether Cook’s bold actions have actually sent the right message. Wall Street’s immediate reaction was one of shock and confusion as Apple’s stock fell 2.5% in early trading the day after the announcement. Things didn’t get much better with time. By November 7, Apple stock had slid to a five-month low, down 4%. Problems with the iPhone 5 supply chain, coupled with increased concerns about the reorganization, have led many to question whether post-Jobs, Apple still has the ability to weather a multipronged attack by its competitors.

Fortunately for Cook, at least one group of people is taking the management shake-up well – the Apple employees themselves .The New York Times quoted an unnamed source who described Forstall’s ouster as “better than the Giants winning the World Series,” saying that people were “really excited”.

Gigaom.com quoted another source, saying “there are a lot of people going for celebratory drinks, even if there is a little bit of doubt about their roles in the future.” It appears that most

Apple employees are happy with the changes.

How this will all play out is anybody’s guess, but many are rooting for Apple. Former CEO Jobs is revered in the IT industry in much the same way saints were revered in the Middle Ages. Apple has a lot of history for a lot of consumers and its products have touched many lives. While I sit here writing what seems like Apple’s obituary, I hope the fears are overblown, and I hope it can resurrect itself. Unfortunately, things are not looking good. I’m not saying Apple isn’t making huge profits and selling boatloads of products. I’m just saying it looks like its free ride is over. Apple has taken its customers for granted, and will have to work hard to earn back their trust.

One can only hype mediocre products for so long before fatigue starts to set in. If Apple is to rise again it must again be revolutionary and not merely evolutionary. Apple’s reliance on smaller/thinner/faster as a business strategy must end. Apple must again learn to think different.

Jason Fernandes is a tech commentator

and the founder of SmartKlock.

Apple used to be the master of showing the consumer what they wanted before they knew they wanted it. The new Apple shamelessly copies other more successful products, reducing their features and rebranding them.

Column Jason F.indd 134 11/22/12 5:34:24 PM