Will Tim Cook lead Apple into the same sales volume trap that almost killed Nokia and Motorola?

I frequently blog about how Apple is a true price champion. They have after all built a company based on quality products sold at high prices. I admire how they simply say “no” to potential customers who buy on low price alone. It is that bold decision that has awarded them superior profits. It is those superior profits that have awarded them the resources to spur legendary innovation and incredible growth.

But changes are already underway.

With the death of Steve Jobs, Tim Cook now has some really big shoes to fill. Not only does he lack Jobs’ charisma, but the profit focus of the company already appears to be waning.

I am a fan of Apple and I have been following the presentations they have done introducing their new products and services for years. Jobs always had a laser focus on these product or services. They were always “amazing”, “magical” and so forth.  What some would say his “reality distortion field”. But he never presented a market as a business opportunity.

He knew that if you build a great product and market it right, not only to build demand but also to justify a higher price, business will come. But in terms of market share, you’ll get what you’ll get.

While all Apple fans have been excited to see the market share of the computers and other products rise, that market share was never a focus of Jobs. His focused on profits to provide resources for innovation.

Tim Cook, on the other hand, at the introduction of the iPhone 4S this last Tuesday, one day before Jobs passed away,  only really got excited when he showed a slide saying that Apple only has 5% of global cell phone sales. He felt that the 95% they do not have presents a tremendous growth opportunity.

And it is here that he will shoot himself in the foot.

The vast majority of these sales are in undeveloped, highly price sensitive markets. Think rural China, India, Africa and South America. And if he thinks Apple can build a business in those areas, he needs to abandon the profit focus that led to Apple’s success. He would lead Apple into the same sales volume trap that almost killed Nokia and Motorola. While Nokia almost disappeared from the US market, they are still the global market leader in number of sold cell phones – and without profits. What would be the point of running a company with no or very little profits?

I think this is such a sad development.

We will see what will happen. In other great companies who have lost there their charismatic leader, inertia typically keep them on the “right” path for 2-4 years, then a slow decline typically happen.

With subdued regards,

Per Sjofors

Founder/CEO

 

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AuthorPer Sjofors