Is Apple no longer able to innovate?


Is Apple no longer able to innovate?

Apple Computer released earnings yesterday, and market reaction has been mixed.
 

Long story short, revenue has been pretty flat and gross margins shrunk. Different sources are interrupting these trends in different ways. Forbes suggested that Apple might be on the verge of a major turnaround, while CNBC provided a more cut and dry report.
 

Few outlets have anything interesting to say, with the exception of TechCrunch. Of all the analyses released, TechCrunch’s seems to be the most insightful.
 

Long story short, TechCrunch’s perspective is as follows:

  • Jobs reappeared in the mid-1990s and reinvigorated Apple
  • Under Jobs, Apple became a powerhouse that pumped out innovation after innovation
  • Now that Jobs is gone, there is still great talent at the company
  • The markets Jobs found under his tenure are not likely to return any time soon
  • Apple will probably be fine, though not the growth powerhouse it has been in the past

 
That’s all fairly remarkable. There’s been a rush of commentary over whether Apple can continue to innovate and grow without Steve Jobs, but relatively less attention has been paid to the macro environment Jobs found when he returned to Apple.
 

The launch of the iMac came at a time when the PC was moving from an interesting tool to a household staple that allowed access to the Internet. Jobs was able to refresh Apple’s computer business just as the web made operating systems less important and just as web applications were breaking down the Windows domination of software.
 

The Internet also made digital music downloads possible; not always legally at first, but these market forces paved the way for the introduction of the iPod.
 

Looking back at several of Apples (failed) innovations of the past, Jobs was able to integrate a personal organizer, a music player, a camera and a phone into the first iPhone, and later introduced the iPad a few years later. These latter two innovations came just as consumers began to grow tired of carrying non-PC multiple devices and then moved on to desire non-PC alternatives to a notebook computer.
 

To be clear, the continued purchasing of smart phones, tablet devices and digital media are not likely to slow down any time soon, but the massive migration and adoption of these items is not likely to take place again any time soon.
 

Put differently, it doesn’t look like there’s any big macro-economic shift on the horizon for Apple (or anyone else) to capitalize on.

 

The implications are subtle, but noteworthy. Apple can easily be just as innovative as it was with Jobs on board; the company could theoretically be even more innovative, but it simply won’t benefit from the macro-economic shifts described above.
 

Innovation is core to a company’s health and growth prospects, but success relies on a fair bit of luck and timing as well. Apple will likely be fine for the foreseeable future, but it is unlikely to deliver double digit growth on a consistent basis as it has in the past.
 

About the Kabardian Group: We help clients achieve profitable growth. Short, simple and to the point. Our clients include companies large and small and at every stage of their development, including start-ups. www.kabardian.com
 

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