As most of my readers know by now, I am a fervent supporter of Apple products for some 25 years. Not for some fuzzy nostalgic reason but because Apple has a completely different focus than other computing companies. I realized way back when Apple built QuickTime directly into the operating system, that the company set itself a fundamentally different objective in terms of the audience and values it aimed to pursue.

Apple aimed to address the 80% adoption greenfield with an upstream innovation strategy, rather than regurgitate incremental renewals to technocrats with a downstream computing strategy deployed by others. And that meant that the computing focus of Apple was the inverse of other technology companies.

At least when Steve Jobs was still around. Apple thought different, with Silicon Valley dismissive, and balking at every turn.

Closed is better than open

Technology socialism is the antagonist of groundbreaking innovation, simply because socialism and innovation are. And technology products that rely on the endless gestation of open computing platforms take a long time to agree on and hatch, are inflexible to meet marketplace dynamics, and provide an awkward framework for the provisioning of technology that is meant to serve a different audience.

Social economic value trumps technology

Since the pursuit of greenfield has no respect for the past evolution of technology (nor should it), social economic value provided by the ultimate user experience trumps the sum of the individual pieces of technology. Amazing to see how Apple competitors are still not getting this, and continue to try to “sell a house by focusing on the (easily replaceable) soil underneath”.

Prime beats subprime

The commoditization of the personal computing platform owned by Microsoft has flooded the world with subprime and stale innovation. Held hostage by the arbitrage of Microsoft’s timid pace of innovation and economically constrained by the few outliers that technology socialism (formed by its OEM’s) allows, Apple having built a technology foundation focused of people (greenfield adoption) rather than office workers, could deliver a prime computing experience its competitors still have no products for.

All its competitors can do today is play catchup and confuse the market by producing similar looking hardware products that lack the social economic value provided by integrated capabilities, and sell the public the proverbial subprime wolf in sheep’s prime clothing.

Many will fall for that disguise, as hard as they fell for the commoditization of computing deployed by Microsoft. But subprime and prime need each other to compose the evolution of innovation, like downstream and upstream do.

And then Steve passed

Steve Jobs was a fantastic entrepreneur, most importantly for his complete defiance of the technology-provider-socialism raging in Silicon Valley. A battle I know all too well, its mediocrity is deeply rooted, with few admitting the emperor has no clothes.

Steve was not always right, but more often right in the pursuit of upstream innovation than wrong in the pursuit of fixable downstream. His pursuit to use music as the social economic driver to make computing devices more attractive to a larger audience was spot on. His execution of the downstream implementation of iTunes using a wholesale model in violation of free-market principles is unattainable and reduces the creative and monetary freedom of musicians. A marketplace rigidity and artificial manipulation Apple continues to pursue with movies, music videos, and most recently with iBooks.

Demand benefits have outweighed supplier benefit, for now. But Apple’s perceived strength to appeal to new consumers with an artificial market model can quickly become its greatest disadvantage. Not much different from how Microsoft’s artificially restricted market model was once its greatest advantage, now kills it.

Mice are at play

When the cat’s away the mice are at play. That is how I described in a recent comment the state of Apple. Beyond the fallacies of the economics of iTunes (for which the record labels have fallen with their eyes wide shut), the real problem Apple faces under Tim Cook’s leadership is that it too will now succumb to socialism as the product decision-making that aligns with the social economic agenda have been pushed down one level, with some executives reportedly admitting; what would Steve have done?

Add to that uncertainty a much-needed understanding of new age economics the reach of the internet will subject every (technology) purveyor to. No longer can technology providers push out products that violate the meritocracy the world aspires to. So, technology companies and its CEOs need to acquire skill-sets never requested from them before. Tim has no easy job, I give him that, but he took it.

For me it all started to slide down with the acquisition of Siri, prior to Steve Jobs’ passing and arguably without his full awareness and consent. While I do not debate the value (nor the price) of the acquisition of the technology from the lovely people at SRI, I predicted early on in a conversation with Dag Kittlaus (I am not disclosing any secrets here) and the marketplace subsequently agreed, not to award Siri (as an independent iPhone application in the App Store) as a raging success. Siri had to sell, to deliver on the promise of a return to its newly acquired venture capital investors.

Separate hype from reality

The reason why Siri fails to stir up more than hype in my view is simple. Why would you want to talk to a virtual assistant with less intellect and vocational abilities than the average live help desk person in India?

Case in point: it just took me only 53 minutes to cancel my United flight to DC (as a result of tropical storm Sandy). Aren’t we all doing our best to avoid that kind of interaction? No one is helped by more unpredictable communication (provided by artificial intelligence), even when that at equally unpredictable times can supersede the predictability of a difficult user interface, and makes for great marketing spin.

Timing of innovation

Siri does provide intellectual property worthy of further development and perhaps becoming part of the way we can communicate with computers in the future, but it is nowhere near ready to deliver the high bar of innovation Steve had set for the company.

So, not the Siri deal confirms my suspicion about what is going on inside of Apple, but the decision to deploy this immature technology in today’s products does. Many innovations are worthy of acquisition, the timing of when to expose those depends on a conglomerate of critical success factors Steve used to guard adamantly.

Nobody home

I was even more astounded that SRI apparently has the ability to deploy its foundational intellectual property (first paid for by the government) elsewhere, as I recently saw a report of identical foundational intellectual property in another one of SRI’s activities. And so it seems, Apple does not even have full exclusivity to all of the intellectual property in Siri. Truly astounding.

Apple paid a premium for the artificially inflated valuation of a spin-out startup company with a flawed go-to-market strategy (probably because Apple has no tabs on startups in Silicon Valley), and it should instead have evaluated its desires and secured the intellectual property directly from SRI two years earlier. Apparently with Apple’s huge financial war chest, few are counting and even fewer are paying attention.

The dictator with merit is gone

But the point of this diatribe of Siri is not to diminish the value of the intellectual property contained in Siri, but to highlight how during Steve Jobs’ lack of physical presence months prior to his death, reduced his much-needed sensible arbitrage, allowed technocratic socialism of Silicon Valley to seep in, and already before his passing eroded the high standard of innovation that he in good health so vigorously guarded.

One year after Steve Jobs’ death the company has yet to produce an upstream innovation worthy of his continuum. All of the recently announced products are downstream optimizations of already existing products, or stop-gaps to artificially raise the company’s walled gardens from its competitors.

Socialism is poison to innovation

And it appears to be getting worse, yesterday The Wall Street Journal reported Scott Forstall (Head of Mobile Software) to be leaving the company and reportedly has said the company lacks a “decider”. Which means Scott was not allowed or able to decide on his own, while the direction and cohesion from the top appears to be missing.

Scott probably refused to submit to the socialism deployed and demanded by Tim Cook, who cannot make the independent product decisions with the same merit Steve Jobs could. Trust me, it is not the first time a company CEOs use socialism as the way to pacify their equally socialistic boards.

The real problem is that Tim Cook is not a product guy (I see it in the lack of detection of unthinkable and never-seen-before product errors), he earned his stripes as an operational executive chartered to drive downstream optimizations from upstream innovation anarchy. Yet foresight and operational efficiency, a close proximity to hindsight, are diametrically opposite skill sets, and the reason why many former COOs do not have a long shelf life as a CEO.


Tim Cook’s selection and now departure (after two months) of John Browett as retail executive was highly dubious too. Anyone who has ever visited a Dixons store (like I have) knows that brand is more closely related to the commoditized retail model and disheveled product focus of RadioShack, than a fit with the needs of prime innovation brand of Apple. Why would you let a commodity PC-era retailer run the post-PC-era retail you invented?

I surmise that the problem with Tim Cook is that he thinks he is Steve Jobs, going as far as copying Steve’s presentation style on stage. He looks like the proverbial Elvis Presley fan behaving like the person he wants to be, rather than is or ever will be.

The evolution of Apple

But how can a board steeped in socialism itself, select a viable successor to Steve Jobs who is not? The answer is it cannot. Until it realizes it has no other choice. In the same way Steve Jobs was re-hired into Apple in 1997.

Such is not just the evolution of Apple but the evolution of evolution, in which the cycle of innovation relies on the imminent death of upstream to be followed up by the many derivative downward spirals of downstream. Renewed only by upstream again when downstream optimizations run out of options and the company feels and acts vulnerable yet again.

Without that realization and help from above, and when Steve Jobs’ legacy of vision starts to wear off, Apple will gradually slide further into downstream aided by the absorption of the same crushing socialism that left other technology companies unable to make a dent in the pursuit of the world’s 80% adoption greenfield.

Let’s just hope for evolution to speed up.

Note: Georges van Hoegaerden is Managing Director of The Venture Company.

(C) The Venture Company