Apple's Gil Amelio said recently that his company was faced with five major crises:liquidity, quality control, operating system development, an undisciplined corporate culture and fragmentation. We explore some of the pressing concerns which Apple must address today and discuss some strategies it can adopt to overcome its present crisis.
Apple is considering significantly raising the license fees it charges clone makers-fees that could effectively drive these manufacturers out of the market. On the contrary, Apple must encourage cloning because without a successful clone market there will be fewer reasons to develop for the Apple platform. Apple needs market share for its platform as much as it needs to grow its own business. Thus Apple should instead consider lowering the fees, leaving them unchanged or raising them insignificantly as to not make much difference to the cloners while resulting in slightly more revenue to Apple.
The cloners are doing a fair job of keeping the Macintosh platform in the game while Apple fixes what ails it and begins to head in the right direction.
Apple's hardware cost model has always had lower cost/performance numbers than the Wintel world. The reason Apple has not been pushing itself is because it tried to maintain itself in a sheltered environment by having a proprietary OS, by holding a control over the marketplace and therefore, not really competing.
Moreover, recent market-research reports, indicate any gains being made in Macintosh market share are going to Apple cloners and not to Apple. Apple needs to restructure its own processes to make its own offerings more competitive, not blame the success of others.
From history we observe that it's not the OS that made Apple, it was the Mac's killer applications. Apple's recent acquisition of NeXT and announcement of an extended timetable without providing any details has caused a lot of confusion amongst its app developers. Backward compatibility of existing software on the Next platform is one major concern that needs to be addressed. Developers and clone makers also raised concerns over plans to raise operating-system licensing fees.
To ensure the survival of the Mac, Apple must enable Rhapsody so that it supports the Windows interface and applications. NeXT's OpenStep already runs on Intel machines. By making this strategic move, Apple not only ensures that its users can run Windows applications but it also encourages Windows app developers to start developing for Rhapsody. Another issue is support for JVM which Apple is anyway committed to.
Its sad that an innovative company like Apple is yet to catch-up with the web. Apple should leverage its core strengths to provide web support for QuickTime,speech recognition technologies for enhanced web pages, multimedia authoring tools which facilitate remote page updating etc. In this way Apple not only keeps its customers happy but also lures new users to its platform.
Apple should leverage NeXT's internet application development tool, Web Objects, and embed it into their OS.
The adoption rate of OSes is not high at the start. Apple should draw a parallel with what Microsoft has done. When Microsoft started down the NT road they focussed on the server part first and did not undermine their Win95, Win3.1 base. They knew it would take time to make NT respectable and finally now (after 8 years) NT is all set and is commanding market shares. Rhapsody is more like NT and MacOS is more like Win95.
Apple needs to revive its consumer marketing efforts and rebuild confidence among retailers. The perceived lack of marketing is cited by store-level personnel as a huge problem. Moreover, Apple must ensure that retailers no longer rank second by introducing models of the Power Mac at the same time to both retail and corporate consumers. Apple needs to develop product plans for specific markets (education, consumer and coporate). Doing so will enable it to provide effective custom built solutions rather than having a large overlap as in its current product line.
Apple's decision in 1991 to limit K-12 resellers to those who agreed not to sell competing CPUs into the education market contributed to one of the most profound falls from grace. Apple has not clearly formulated plans for distribution and channel executives fear the current lack of communication may foreshadow the previous pattern adopted by Apple : impose channel policies without consulting the channel, and then reverse its decision when the strategy fails. The recent history of the channel with Apple has been one of frustration and confusion as to where the channel fits. Amelio has to clearly define what his channel strategy will be. The channel can make a difference to Apple.
The findings of my case study (on NCs) indicate that all major PC players will jump into the NC bandwagon. Apple has declared its support for the NC but has not come out with any plans for a sub $500 product. The explosion of the NC and information appliance market could provide Apple with with an avenue for growth - something it desperately needs.
Java remains a major stumbling block for Apple. Their JVM implementation is poor and the perception is that Java applets run slower on the Mac. Apple desperately needs to push for better Java performance. With a better implementation and the floating point capabilities of the PowerPC it is definitely possible for Apple to boast of having one of the finest JVMs. Given Microsoft's attitude towards Java, Sun hopes to provide "pure" Java support for desktops on Apple's computers. Apple in turn could in turn benefit from the apps arising from a platform independent JVM. Its a win-win situation for both.
Apple must take all out efforts to ensure the creation of a cross-platform system architecture, called CHRP (common hardware reference platform), which would allow a Macintosh to run more than one operating system, including Windows 95. This would promote competition by bringing in new players and ensure greater widespread acceptance of the Mac.
The Apple product line has been aging and with no new products being introduced for a while its market shares have fallen substantially. Apple needs to take R&D initiatives to develop new products, focussing on the Internet and how to integrate Internet technologies seamlessly into its existing products. Moreover, what Apple desperately needs is tools for rapid application development and it is in this context that Apple must invest time and money in component based software technologies.
As I am sure you are aware, Apple faces serious challenges in its technology strategy in the next few years. Following are some suggestions for improvement:
Apple should immediately and more liberally license its operating system and further open its proprietary hardware design to other computer manufacturers. This will help combat the strong network effects sustaining the "Wintel" (originally "IBM-compatible") PC.
Explanation:
Apple Computer's original strategic failure after introducing the Macintosh in 1984 was not licensing its operating system and proprietary hardware design to other manufacturers. The legacy of this strategic blunder is the current domination of the Wintel PC, the descendant of the original, open system IBM-PC design, to which computer manufacturers originally flocked.
If hardware manufacturers other than Apple had been able to create Macintosh computers, the Macintosh would likely be benefiting from economies of scale that the Wintel PC has been benefiting from for the last decade. Furthermore, the Macintosh would likely be benefiting from the strong indirect network effects in the personal computer industry. As a result of those network effects, software developers, peripheral manufacturers, and computer manufacturers are presently more likely to develop products and add value to the larger Wintel PC market, and due to compatibility, availability, and familiarity, users are more likely to choose Wintel.
Apple's hardware profit margins will likely fall with greater competition, but there will likely be more Macintosh's on desks if the Macintosh operating system is licensed. With wider manufacturing and cheaper products, the slide of the Macintosh market share will hopefully stop and reverse.
In truth, the Wintel PC has already become a de facto standard for the personal computing industry. Given that the Wintel PC is a de facto standard, licensing the Macintosh Operating System might not reverse Apple's woes. Standards ultimately are one of the most important factors in the adoption of computer technologies. Perhaps the Macintosh operating system should have tried to become the standard IBM-PC Operating System before MS-Windows was introduced, when it was easier to port to Intel processor-based hardware. In any case, Apple might need to differentiate itself from the Wintel PC and add value and attract customers in creative other ways.
Apple's should retain its core competency and competitive advantage: using Human Factors in design. Regarding product development, Apple should create a dramatically new user interface and computer experience that could become the standard of the future.
Explanation:
Many of the Macintosh's early accolades resulted from Apple's concerted effort to develop products using Human Factors principles. Apple should definitely retain its adherence to Human Factors principles in design of its systems.
True, other software developers and technology companies are adopting Human Factors design principles in design of their graphical interfaces. Apple is best off, however, differentiating itself from the Wintel PC market, by developing alternative computer interfaces.
The Macintosh should be the first mass market computer to readily use speech recognition and handwriting technology to improve the computer experience. Apple should concentrate on handheld devices andinformation appliances. These devices can become multimedia communicators that let users interact "virtually" with each other, wearing head mounted displays, data gloves, and other haptic input devices. With these devices, users can also take virtual tours and have virtual conversations with each other.
Apple is uniquely suited to approach these problems and new applications, because of its history of concern for Human Factors principles. Apple defined the Graphical User Interface at the start of the personal computer revolution. Apple is certainly capable of defining the next generation of computer-based technology.
With any of these products, however, history suggests that Apple is best off making sure that the hardware is based on open standards and has multiple manufacturers. It is, of course, critical to protect intellectual property rights over the new technologies. The new technologies are risky, but have the potential to create new network effects and could be tremendously successful. As they add value in innovative ways, they are likely to be high margin. Innovation is the ultimate key.
Apple should reaffirm and reorient its alliances with other companies, especially those also competing with the Wintel PC. It should make sure that all collaborators are horizontally, rather than vertically integrated.
Explanation:
At present, Sun, Oracle, IBM, Netscape, and Apple and others have voiced support for the Java programming environment and the Network Computer (NC) concept. This group aims to take market share from Wintel PC with the NC, much in the same way that Macintosh hopes to gain market share from the PC. It is unlikely that this or any alliance will be able to directly overcome the network effects supporting the the Wintel PC. Therefore, one key for this strategic alliance is differentiation from the Wintel PC.
It is possible that this alliance can create a product that offers the same capabilities as the Wintel PC. Applets that simplify basic word processing, spreadsheet, and presentation tasks are undoubtedly valuable. Hopefully the NC will also be able to provide novel, differentiated applications that will make it appealing over the Wintel PC.
Studies in interorganizational collaboration, this group is likely best off organized as a horizontally-integrated technology web, rather than a strategic alliance. For instance, Sun and IBM can concentrate on manufacturing hardware servers and network tools. Oracle can concentrate on network software. And Apple can leverage its expertise in Human Factors to enhance the end-user experience. This reoriented, united collaboration effort has quite a good chance of defining a new product and a new market, creating standards and generating its own network effects, and succeeding.
I hope these suggestions are valuable to you, Gil. The other option is wait to get bought out, but I bet you did not hire me to tell you that.