Often Apple will take off-the-shelf components and cobble together a completely unique and disruptive product. Mac, iPod, iPhone, iPad come to mind. Despite the company’s unique stature, Apple faces the same problems every company faces.
Buy, Build, Partner
Apple’s entire product line of hardware is comprised of off-the-shelf components, or components designed by Apple and built by others, or components where Apple partners with vendors to design and build.
For example, Apple itself doesn’t build the ARM CPUs in iPhone and iPad, but designs them to custom specifications and gets Samsung (among others) to build the chips.
The same holds true with screens. Apple doesn’t build screens for Mac, iPhone and iPad, but relies on Samsung and others.
Apple’s dilemma is whether to buy components, build components (Apple does seems to outsource much software development), or partner with suppliers to design and build components.
These problems become amplified when vendors– insert Samsung’s name here— sell components to Apple, and use similar components to manufacture and sell products which compete with Apple’s products.
You can only imagine the growing disdain with Samsung among Apple’s engineers and executives. Now, imagine the fear Samsung’s executives and division heads have that Apple will take its highly prized and profitable component business elsewhere.
A Common Battle, Uncommonly Battled
This dilemma is not uncommon in industry, though Apple’s skirmish with Samsung is among the most public. Apple, by nature, remains mostly an insular company; despite some curtains being pulled back under CEO Tim Cook’s reign.
That Apple continues to pummel Samsung in public should serve as a reminder to the company’s many vendors and partners that selling ammunition to Apple is one thing, selling ammunition to Apple’s competitors is another thing, but using profits from selling to Apple to create ammunition to use against Apple is the proverbial straw that brought the camel down.
With nearly $150-billion in the bank– despite tens of billions spent on stock buybacks and dividend payments– I expect Apple’s pending purchase of Beats Electronics to be an example of where the company brings expertise and capacity in-house. It’s part of the so-called Cook Doctrine, circa 2009:
We believe that we’re on the face of the Earth to make great products, and that’s not changing.
We’re constantly focusing on innovating.
We believe in the simple, not the complex.
We believe that we need to own and control the primary technologies behind the products we make, and participate only in markets where we can make a significant contribution.
We believe in saying no to thousands of projects so that we can really focus on the few that are truly important and meaningful to us.
We believe in deep collaboration and cross-pollination of our groups, which allow us to innovate in a way that others cannot.
And frankly, we don’t settle for anything less than excellence in every group in the company, and we have the self-honesty to admit when we’re wrong and the courage to change.
And I think, regardless of who is in what job, those values are so embedded in this company that Apple will do extremely well.
Look at the words in the third line: ‘Own and control the primary technologies.’ For better or worse, the new Apple in the Beats era, wants to control and manage its own destiny.