Hypercritical
Apple Turnaround
I spend a lot of time thinking about what Apple should be doing differently. I wrote Apple Turnover because so many of my notions kept running into a dead end: I could no longer bring myself to believe Apple would do these things without a change in leadership.
When a company is described as being “in turnaround,” that usually means it needs to be restored to financial health and solvency. Apple in the late 1990s was in turnaround. Apple today is one of the most successful companies in the history of the world, regularly reporting huge profits, so the term may seem inapplicable.
There’s an old adage: never let a good crisis go to waste. When things get bad, people are more open to changes they previously wouldn’t consider. But avoiding a crisis entirely is even better. This is where Apple finds itself today: in need of turnaround-scale changes, but not currently in the kind of (usually financial) crisis that will motivate its leaders to make them.
New leadership is almost always part of a turnaround. In part, that’s because poor financial performance is one of the few remaining sins for which CEOs are reliably held to account. But it’s also because certain kinds of changes need the credibility that only new faces can bring.
So what are those changes? What are the things I think Apple should do, but that its current leadership seems unwilling to budge on? What changes require a level of engagement and understanding that Apple no longer seems to have?
A New Deal for Developers
Apple’s relationship with developers is an essential part of its long-term success. Apple cannot do everything on its own. It needs third-party developers to expand the capabilities of its products and platforms. Developers make Apple’s products more valuable.
Apple needs the things third-party developers produce, but it also needs something else: their trust and enthusiasm. When the iPhone was introduced in 2007—without support for third-party apps—Apple’s developer community was on fire with the desire to create their own iPhone apps. They wanted it so badly that they hacked their way to success even before Apple announced the iPhone SDK in 2008. This passion from developers helped rocket the platform to its current astronomical level of success. The iPhone was a rising tide that lifted all boats—at the start, anyway.
Today, developers are unsatisfied with their relationship with Apple. There are plenty of rational arguments for why they “shouldn’t” be, but as I argued in The Art of the Possible, none of that changes the facts on the ground.
Could Apple’s current leadership change some policies to turn this around? Maybe, but it would be an uphill climb to win back what has been lost. For years, Apple has refused to do what it takes to heal this divide. Even when ordered by the courts to make changes in this area, Apple has worked hard to ensure that its “compliance” with these rulings does as little as possible to make things better for developers. And all the while, Apple has done everything in its power (and some things beyond) to fight the changes.
So, yeah, it would be very hard for that Apple to convince developers that it has turned over a new leaf, even if it wanted to. (And, thus far, it very much does not want to.) New leadership would have a more convincing story and a stronger mandate for change.
When thinking about what those changes might be, it’s tempting to believe it would be as simple as altering the revenue split between developers and Apple. But money is not actually the heart of the matter. Witness how developer sentiment did not appreciably improve when Apple lowered its App Store commission from 30% to 15% in 2020 for businesses earning less than $1 million per year.
Developers like money, but what they need is respect. What they need is to feel like Apple listens to them and understands their experience. What they need is to be able to make their own decisions about their products and businesses.
To understand just how little power the App Store commission rate alone has to heal this relationship, consider how Apple might leave the rate unchanged and still turn developer sentiment around. Maybe something like this…
Start by changing App Review from a Kafkaesque nightmare to a sane, functioning, supportive process in which Apple and developers work together to successfully release software. That means timely, two-way communication with recognizably human entities at Apple. App reviewers should be able to convince developers that they have both read and understood their messages, and they should be empowered to help solve problems.
Next, create a public bug tracker (with an option for developers to keep some information or entire bug reports private to ensure proprietary information is not exposed). Develop Apple’s own software “in the open” as much as possible. Publish average response times and fix times for bugs, and maintain those numbers at levels that satisfy developers.
Finally, remove all restrictions on third-party payment methods and app stores. Provide an even playing field (to the extent possible) for third-party replacements for Apple’s own store and payment systems. Freedom of choice is the best way—perhaps the only way—to ensure that developers are satisfied with Apple’s App Store commission, in-app purchase system, and app review process. Developers who don’t like it can go elsewhere. If Apple wants them back, it will have to compete for their business.
An Apple that does all of this well could maintain its current App Store commission while also satisfying its developers.
In the end, the details don’t matter as much as choosing the correct way to measure success. Apple will know it has succeeded when third-party developers feel like Apple is their partner in success, rather than their adversary or overlord.
A Premium Experience for Premium Prices
One of the best ways to command high prices while maintaining customer satisfaction is to cultivate a reputation for standing behind your products. Apple today is actually pretty good at this. Its hardware is mostly sturdy and reliable, and its support experience is arguably among the best in the industry (even if that is an admittedly low bar).
But there’s one area where Apple falls far short of its ideals: software reliability. Premium brands accrue tremendous customer loyalty when their products work as expected. When it comes to software, achieving this goal requires the relentless pursuit of bugs until the ones that remain are so uncommon that most people never see them.
Though it might not be obvious to people who have never worked in the software industry, this is actually a leadership issue. Striking the correct balance between creating new features and ensuring that existing features work correctly (and gradually improve) requires leadership dedicated to this strategy.
Nearly everything in this industry will push leaders in the opposite direction. New features drive sales. When there’s a hot new technology, companies need to show that they’re able to use it, lest they get left behind. These are all good, important motivators—which is why it’s so incredibly hard for leaders to successfully defend the far less glamorous practices of fixing bugs and enhancing existing features.
But defend they must. Adding features wins games, but bug fixing wins championships.
It’s been 15 years since Apple’s leadership last demonstrated that it’s willing to emphasize software reliability at the cost of new features. Since then, bugs in major features have been allowed to fester, unfixed, for years on end.
The recent Apple Intelligence fiasco has revealed that the company is further away from properly prioritizing software reliability than it has ever been. Apple was seemingly willing to sacrifice everything, including its own reputation, to ensure that it had enough new AI features to announce at WWDC. If we want a different result, it seems like we need different leaders.
Growth the Hard Way
As iPhone sales have plateaued, Apple has turned to services revenue to maintain its growth. Unfortunately, selling more and more services to your existing customers is inherently corrosive to the core philosophy that has led to Apple’s tremendous success. Here’s Steve Jobs describing where former Apple CEO John Sculley went wrong:
“My passion has been to build an enduring company where people were motivated to make great products. The products, not the profits, were the motivation. Sculley flipped these priorities to where the goal was to make money. It’s a subtle difference, but it ends up meaning everything.” ―Steve Jobs
With every red badge in iOS Settings, every pop-up come-on to subscribe to Apple TV+, and every multi-billion-dollar product placement deal, Apple chips away at the customer experience in exchange for income growth.
The pursuit of financial success above all else inevitably leads to ruin. In the past, Tim Cook has demonstrated that he does understand this. But thus far, his dedication to services revenue growth has been unshakable. He either doesn’t agree that this runs counter to Apple’s core values, or he’s willing to undermine those values in exchange for growth.
New leadership at Apple will surely face similar pressure to continue growing. If pursuing services revenue is off the table, what options remain?
It’s conventional wisdom that iPhone sales have leveled off now that Apple has “run out of people.” Nearly every human who can afford a smartphone already has one. But they don’t all have iPhones. Android phones still dominate in worldwide market share.
If Apple wants growth, it should try winning some new customers the old-fashioned way: by making products that more people want to buy. In this case, that means making iPhones that current Android customers want to buy…and can afford.
Historically, going down-market has been anathema to Apple. Apple’s pricing is an important market signal that communicates product quality and desirability. It’s unrealistic to assume that Apple can compete with the lowest of the low-end Android phones. But it’s equally absurd to believe that the current market share line between Android (~70%) and Apple (~30%) is unmovable. Millions of “iPhone-class” (and iPhone-priced) Android phones are sold every year. Apple can and should compete for that business.
Future Days
This list of suggestions is not exhaustive. An inventory of all the things Apple should do would include getting its house in order when it comes to AI, reducing its dependence on China, hitting its 2030 environmental goals, making a decent Mac Pro again, and a million other things, most of which Apple can accomplish as it exists today.
This article is specifically about the things it seems like Apple can’t or won’t do without new leadership. I’ve described three of the most important and impactful, but there’s more. That’s the promise and the danger of regime change. New people have a chance to rise above the sins of the past and make new choices. They can also make new mistakes, and they’ll have their own strengths and weaknesses. There is no such thing as a perfect leader.
For example, if I had to pick one person to successfully transition Apple away from its current level of dependence on China, it would be Tim Cook. But that job will take many more years, and Cook has said he probably won’t be at Apple much past the end of the decade.
Finding a good successor for Tim Cook won’t be easy, no matter when it happens. But it does have to happen, and sooner is better than later.
I hope I’m wrong about all this. I hope Apple’s current leaders take a hard look at some of these longstanding issues and are brave enough to change their minds. Faith lost can be restored, with effort. Either way, as always, I’m pulling for Apple to succeed.