Apple is at a crossroads. Its innovation engine is sputtering. Sales of its core products are falling. Major investors are worried; some are dumping the stock.
Apple should embrace and declare – for the first time – acquisition as its primary innovation strategy. It should also hedge its innovation bets with an aggressive conglomeration strategy. Acquisition and conglomeration will juice its stock, calm its investors and ensure its future.
“Apple is an amazing company. It has innovated at times in spite of itself and more recently because of its extraordinary creativity.
“But can it sustain its innovative momentum?
“How many companies that were once huge are now small – or gone? How many companies have stayed at the front of the technology curve? Remember Research in Motion, the Digital Equipment Corporation, Cingular, Sony Eriksson and Compaq?”
I also wrote (in a simulated Board Meeting) about “the inevitability of stalled innovation”:
“Nobody can create the greatest stuff forever. Not even Apple. So my fellow Board members, let’s take the cash we have, and the amazing market cap we enjoy, and hedge, hedge, hedge. Our shareholders will love us a decade or two from now. Given the value of our stock, we can afford to do things today that we may not be able to do even a year from now.”
I realize that many of you are shaking your heads: “I know Apple. Apple is a friend of mine. Apple’s no RIM.” (For the record, I have been an enthusiastic consumer of Apple products and services since 1984.) I developed a strategy for Apple based on the principles of conglomeration, suggesting that Apple become more like the old GE and the current Berkshire Hathaway.
But it’s worse now. iPhone sales are down and Carl Icahn dumped his Apple stock. Everyone’s asking: “just how many iPhones can Apple sell?” “Is the iPhone like Microsoft Windows?” “Will there be an iPhone 10 – or 15?” But questions remain around Apple’s ability to continuously innovate with first-to-market disruptive products and services. Other questions surround Apple’s ability to thwart US and global competition
Apple has three choices: conglomerate, acquire innovative technologies – or both. I like Option Both.
Since I’ve already explained what conglomeration might look like, let’s focus on technology acquisition:
- First, and as previously suggested, Apple needs to conglomerate, the ultimate hedge against stalled innovation.
- Apple needs to embrace and declare – for the first time – acquisition as its primary growth and innovation strategy.
- Apple needs to expand its definition of personal devices to include cars, planes, ships and homes. The expansion and integration of the existing technology platform (operation systems, interfaces, payment systems, etc.) should be step one.
- Longer-term, Apple needs to create new disruptive products about which no one can say: “it’s like ____ ’s device.” The iWatch is an example of a late-to-market and therefore non-disruptive product rollout. Whole new products based on revolutionary automated reasoning, interface (including virtual reality), chip and security technologies should be developed – or acquired.
- Apple should go on a technology company and technology IP buying spree and become the most acquisitive technology company on the planet. It should also seek and destroy internal NIH (not-invented-here) bastions that still believe Apple can do no wrong. Cisco’s acquisition-based innovation strategy is a good role model.
- Apple needs to control its own buzz: has it learned nothing from Donald Trump’s manipulation of news cycles? A series of announcements about the acquisition of killer companies – like Netflix, Pandora, Fitbit, Box, GoPro, ARM Holdings, Twitter and Adobe – would go a long way to redefine Apple’s image. Buying Tesla, FedEx, Sony, SpaceX and Uber would cautiously launch its conglomeration strategy (versus acquiring SAIC, Target and Lockheed Martin, for example, which are purer conglomerate acquisitions).
- Apple needs to make sure that it cooperates with those trying to discover terrorists and terrorist activities, as well as all law enforcement authorities: this is not the time to feed the perception that Apple is uncooperative with government and insensitive to humankind. It also needs to credibly respond to outsourcing and inversion critics.
- Apple should lead the way in social, economic and political innovation by clarifying its identity. It should support technology-enabled voting, technology infrastructure investments, organizations like #YesWeCode and Code2040 (which it does), worker rights and other progressive initiatives. It should repatriate the billions of dollars it holds offshore and rededicate and redefine itself as an American company – or not: but it should stop living a double life.
Everything changes. Apple was once the source of all new things digital. But no longer. The good news is that the company’s incredible success leaves it strong and resourceful. It can pivot to a different strategy, so long as management sees clear paths to innovation and growth. Tim Cook’s comments about the recent bad news were not encouraging: “despite the pause in our growth, our results reflect excellent execution by our team despite strong macroeconomic headwinds in most of the world.” Figuratively or actually staying the course is ill advised.
