Once a company renowned for breaking new ground, the tech company may be turning into a typical American corporation.
Last week, Apple’s CEO Tim Cook launched two new iPhones that aren’t especially new. One is plastic (or “beautifully, unapologetically plastic”, in Apple-speak) and comes in five colours, which you can admire for a minute before popping it into its case for all eternity. At £549 a pop, that’s still cheaper than the other model. The iPhone 5s can read your fingerprint, is faster than the previous model and comes in different hues, including grey (officially, “space grey”) and gold (sadly not “oligarch gold”). This makes it the most “forward-thinking phone” on the planet, claimed the Californian tech overlords.
Yet even those hacks who queued up for a few minutes alone with the precious object felt let down. Not ‘”wow”, but “meh”‘, wrote leading gadget blog CNET. No doubt I’ve missed a few mind-melding features. The fanboys can remind each other what those are as they queue up this weekend, in that traditional consumerist doomloop where the media report on a new Apple product, whipping up punters to buy the product, allowing the media to report on the crowds baying for the product. And in fairness, the new iPhones are updates rather than bold new steps (albeit pricey updates). Then again, treading water is what Apple has done ever since, sadly, it lost Jobs. Under the turtlenecked-one, we got the iPod, the iPhone and the iPad, one after another. Since Cook took over as boss in 2011, there has been reiteration rather than innovation. The iPad, except smaller. Now with a sharper screen. In pink. Ho hum.
Perhaps the firm will bounce back with some new thing. I’m more inclined to agree with Hartmut Esslinger, an early 80s designer of the Mac, who said this weekend that Cook’s company now resembles late-period Sony: its executives no longer pioneering, but concentrating on refining products and extracting maximum profit. And if that’s right, it’s not just tech heads who should be concerned how Britain, America and the west are going to pay their way in the world.
In the five years since Lehman Brothers fell over, mainstream politicians of all stripes – Cameron to Obama to Miliband to Romney – have all agreed on innovation as a kind of economic elixir. Only by designing new products and finding new sources of wealth will the west get out of this slump, runs the standard stump speech. With its combination of newness and private-sector sorcery and job creation, the i-word has become practically a political intoxicant. Yet if the world’s richest and most famously innovative company is no longer pumping out the novelties, that suggests governments need to think harder about how and when this wave of innovation is going to burst forth.
Jobs, remembered Esslinger last weekend, “stubbornly insisted on trying new things”. In other words, he was a believer in research and development. How else would his team make new products? But where Jobs’s Apple used to spend a lot on R&D, that has now tailed off. According to Colin Haslam at Queen Mary University of London, between 8% and 10% of all the money Apple made from sales would regularly go towards research and development. That’s now nearer 2%. This decline is partly the law of large numbers: Apple now sells a load more stuff than it did in the early noughties, so R&D spend would need to go up a lot to keep pace. But, as Haslam points out, the other behemoths of Silicon Valley such as Intel and Microsoft still spend around a 10th of their sales revenue on research. And he notes that Cook’s Apple is spending increasing amounts on marketing what it does have rather than coming up with new gizmos.
That’s one big change to the Apple business model. The other is structural. In the early days, Jobs laid a lot of emphasis on making his goods in the US. That’s barely the case now: Apple has morphed into a design and retail business that orders in its manufactures from a network of more than 150 companies, usually based abroad. That makes it a more profitable enterprise but it also means that Apple is effectively outsourcing its thinking about production and components to others. In 1999, a pair of organisational academics noted that there was something curious about Jobs’s employees: “People were recruited to Apple with the idea that they would be helping to change the world. Apple was more than a company; it was a cause.” But what happens to a cause when most of its parts and its software come in from a variety of points scattered far, far away from the Cupertino HQ?
None of these changes happened overnight in the summer of 2011. It was under Jobs that Cook came to prominence. What seems to be happening to Apple now is a culmination of trends that have been in play for years, and which are no longer being offset.
But one thing Steve Jobs wouldn’t have done is what his successor did this spring: cave into pressure from hedge funds and give the company a $100bn cashpile. When a tech firm starts buying back shares from investors, it’s as good an indication as any that it’s run out of ideas and oomph. William Lazonick at the University of Massachusetts Lowell says that Apple is no longer a design and product firm, driven by engineers and designers, but a “financialised” company focused on returning money to Wall Street. It is, he and a team of academics conclude, “becoming a typical American corporation”. That’s a damning verdict for the company that Jobs built. But it’s also worrying in its implications for modern, financial capitalism to deliver innovation.
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