Apple Will Be the Same Apple Even Without Steve Jobs

In my previous post, I expressed my concerns over Apple's innovation power in case that Steve Jobs won't return from his medical leave (read it here). From reading the comments on the article, I had the impression that some of the readers thought of me as a short of the Apple stock. Actually I am not. In the disclaimer, I stated that 'I am considering selling my AAPL shares', maybe the more accurate words would be 'reevaluating my positions'.

But is it even worth to reevaluate? Under normal market conditions, sure we should look into the uncertainties introduced by Steve's leave. But we are in this unprecedented bear market and there are a lot of solid companies out there with a stock price at a bargain level. In other words, we have investment options that may bring in similar returns, but with lower risks, then why bother with AAPL? For me, I seriously considered switching my holdings of AAPL to Nike (read the analysis of NKE here).

I admit it is the emotions that drove me to look deeper into Apple's situation - I don't feel ready to give up Apple and I like their products. I owned several versions of iPod, and I am managing my music library with iTunes. I am waiting for my Sprint contract to expire in April to get rid of their crappy service, then I am going to buy an iPhone. Good chance my year-end gift would be a Mac Book. So my starting point is like this, if Steve's leave is a big negative factor, are there any positive ones that would keep Apple on its old and glorious track? My answer is Yes, there are quite a few. Honestly, I was a little surprised by my conclusion.

1) This is a logical inference. Steve Jobs was at the helm of Apple for more than 10 years, had been continuously and aggressively driving Apple from one innovation to another. There has to be something got embedded into Apple's corporate culture and management system, which, somewhat should be self-sustainable even without the big man on the top. For example, Apple still retains the top-talented designer team that envisioned and sketched generations of their beloved gadgets; there should be some process that guarantees the original ideas and innovative efforts to receive proper attention and, some form of established routines to facilitate the interactions between the design team, the technical team and the management. I briefly touched this point in my old post, and as an outsider of Apple company, I can't provide any proof. But again, I believe these are valid inferences.

2) Under Steve Jobs, Apple is a company with clear focuses. It has a very limited and straightforward product line, basically iPod, iPhone and Mac. IPod and iPhone share the same design concepts, and both leverage the capabilities of the Mac OS. This allows AAPL to pool its resources to develop winner products, while at the same time retain a relatively simple and agile organization structure, thus creating an innovation-friendly environment at the macro level. I'd like to say this is a strategy deliberately maintained by Apple. An example, it started accumulating cash since Steve Jobs took the office, and for the time being, has around 30 billion cash in the pocket. It could have used it to expand into other territories, but it didn't. In other words, as long as Apple continues this strategy, maintains its focus and avoids impudent business moves, they should be able to keep their innovation power from endangered by unnecessary or unprepared market pressures.

3) This may be my most important finding. Through years of brilliant design and innovation, AAPL developed a certain form of 'Personal Attachment' between the customers and its products. This is rarely seen in the technology world. This solid and expanding 'Fan Base', to an extent, provides a buffer between the company and the external competition, thus offering Apple a very open and forgiving atmosphere and a very healthy mindset for innovation.

I always hear people say, 'Apple never competes in price', which I agree and behind this simple statement, actually lies its unmatchable brilliance. You may not agree with me that all gadgets Apple manufactures in nature are commodities, but the fact is there are load of companies selling them at only a fraction of Apple's price tag. Simply put, Apple managed to differentiate itself from others by unique design in look and feel (hardware), providing different (better) user experience (software), clever marketing (those easily memorable commercials) and in the personal computer field, it actually benefits from Microsoft's monopoly position, which creates the appetite to look for alternatives. (one extra comment here, actually something interesting and bewildering to me. I know to be creative in software is at a more sophisticated level, but in hardware design, just the look and feel, for me it is virtually all about paying good money to find the talented personnel, I don't understand why there is no match with Apple even here. Or is it because I brain-washed by Apple's commercials?) Apple's success created two far-reaching results, the popular cravings to its products, and the second, it obtains the tight hold of its target customer - actually a group of people with relatively higher income. In return, the pressures that normally link to the commodity player are pretty much taken off Apple's shoulder, such as maintaining the market share, the thin margin, the excessive marketing efforts, and the timing (be the first few to rush the products into the market). As a result, you see today's Apple, taking its time to be creative and elegant, which is a form of 'temperament' that I don't see with any other companies.

I'd like to say only the greatest strategist is capable of leading Apple into this position, and no doubt, Steve Jobs is the one. Personal opinion, this is the greatest contribution as well as most precious legacy from him. On the other hand, Steve's leave won't take Apple off this position, and more importantly it doesn't necessarily require a CEO as great as him to maintain this position. In summary, Apple is already there, a certain pattern between the innovation, the products and the market has been in place; even just relying on the momentum should be enough to keep it safe on the right track for several years.

One more comment to make, I don't sense anything revolutionary in Mr. Cook, instead, he was regarded as a 'business operation maestro'. I view this as a big positive. After all, what we need for Apple is not an unproven innovator, but rather an executor that is well qualified to continue Steve's path.

4) Apple already reached the end of its innovation. I know it is a bold statement, but think about it, the way Apple makes a digital music player is the way it makes a iPod Touch, the way it makes a wireless phone is the way it makes an iPhone, and the way it makes a personal computer is the way it makes a Mac Book. Do you think anybody, or any company (including Apple itself) is capable of topping that? Another perspective, once you hold your own iPod touch or iPhone in your hand, do you think it is even necessary for any companies to come up with anything that is 'Better'?

Let's take the controversy away and make some realistic points. Innovation comes at two different levels, the concept level and the implementation level. Using Microsoft as the example - it completed the innovation at the concept level in 1980s and 1990s with the introduction of the initial generations of Windows Operation System, and since then, the innovation is mostly at the implementation level, including architecture redesign, adding more functions, features, etc. Obviously, it requires a prophet type of person on the top during the concept stage. For MSFT, Bill Gates is the one. But once the company stepped into the second stage of innovation, he is not that critical anymore. For Apple, it already completed the innovation at the concept level for all three fields it plays in. What Steve Jobs accomplished is not just a few versions of MP3 player/wireless phone/computer, but a concept/package/platform of how these gadgets should be built. Without Steve Jobs, Apple is not today's Apple, but in this implementation stage, Tim Cook should do OK.

With all these said, I'd like to say the impact of Steve's leave is somewhat exaggerated. The great CEO already lifted Apple to one level where the company is self-sustainable. We all know that eventually he will leave, then is it really bad if it is now? For me, his mission is completed, excellently completed, and I'd like to see how his successors will continue. Steve left the legacy which may turn Apple into an all-time greatest company, and if the new management team holds it well, AAPL might simply become a stock of a life-time.