Apple’s Pivot: Project Titan

Neil Cybart, the author of the Above Avalon blog, pens the most compelling piece that I have read to date about Apple’s next big thing: Project Titan–“a start-up” within Apple focused on the electric car industry.

Meanwhile, Tim Cook has remained very tight-lipped about Apple’s future, which gives the impression that Apple isn’t working on ground-breaking ideas or products that can move the company beyond the iPhone. Instead of labeling this as a mistake or misstep, Apple’s product secrecy is a key ingredient of its success. People like to be surprised. Another reason Apple takes a much different approach to product secrecy and R&D is its business model. Being open about future product plans will likely have a negative impact on near-term Apple hardware sales. Companies like Facebook and Google don’t suffer from a similar risk. The end result is that there is a legitimate disconnect between Apple’s R&D trends and the consensus view of the company’s product pipeline. Apple is telling us that they are working on something very big, and yet no one seems to notice or care.

The increased R&D spending by Apple over the last couple of years is very telling:

Apple is not spending $10 billion on R&D just to come up with new Watch bands, larger iPads, or a video streaming service. Instead, Apple is planning on something much bigger: a pivot into the automobile industry. 

The word “pivot” has become a buzzword lately, often misused to simply mean change. In reality, pivoting is actually a sign of strength as a company takes what it learns from one business model in one market and applies it a new one with a different business model. Apple would be taking lessons learned from its long-standing view on the world based on the Mac, iPod, and broader iOS lineup to begin selling an electric car.

This sounds incredibly ambitious and bold, and that is the point. Apple wants to move beyond the iPhone. In this regard, pivot seems like the wrong word to use since the iPhone is a very successful product generating more cash flows than the rest of Apple’s product line put together times two. However, it is this success that ultimately serves as the greatest motivation for Apple management to figure out the next big thing.

If you’re at all interested in Apple and the future product pipeline, I highly recommend reading “Apple R&D Reveals a Pivot is Coming.”

Russian Transporter Planes and FedEx: How Apple Ships its iPhones

Apple unveiled two new iPhones this week: iPhone 5C and the iPhone 5S. While the specs of the phones are somewhat interesting, I think this piece in Bloomberg on how Apple is set to deliver the devices on launch date is even more so:

The process starts in China, where pallets of iPhones are moved from factories in unmarked containers accompanied by a security detail. The containers are then loaded onto trucks and shipped via pre-bought airfreight space, including on old Russian military transports. The journey ends in stores where the world’s biggest technology company makes constant adjustments based on demand, said people who have worked on Apple’s logistics and asked not to be identified because the process is secret.

The multi-pronged operation has been built up under Cook, who oversaw Apple’s supply chain before being tapped as Steve Jobs’s successor in 2011. Getting iPhones seamlessly moved from factories to customers is critical for the Cupertino, California-based company, which derives more than half of its annual revenue from the flagship product. Apple also relies on a sales spike after a product’s release. It sold more than 5 million units in the debut weekend for the iPhone 5 last year.

There are seven countries that will launch the new iPhones on September 20:

Before Apple’s formal unveiling on stage, iPhones are shipped to distribution centers around the world, including Australia, China, the Czech Republic, Japan, Singapore, the U.K. and the U.S., said one of the people with knowledge of the matter. Security personnel are with the devices every step of the way, from truck depots, airports, customs and storage warehouses until the product is finally unveiled, two people said.

FedEx ships Apple handsets to the U.S. mainly using Boeing 777s, according to Satish Jindel, a logistics-industry consultant and president of SJ Consulting Group. Those planes can make the 15-hour flight from China to the main U.S. hub for freight shipments in Memphis, Tennessee, without refueling, Jindel said. The 777s can carry about 450,000 iPhones and cost about $242,000 to charter, with fuel accounting for more than half the expense.

Read the rest here.

Apple after Steve Jobs

In an interview with Wall Street Journal columnists Kara Swisher and Walt Mossberg, Apple CEO Tim Cook offers a few answers on Apple after Steve Jobs:

Q: How is Apple different with you as the CEO? What did you learn from Steve?

Cook:  I learned that focus is key, not just in running a company but in your personal life. You can only do so many things great, and you should cast aside everything else.Another thing that Steve taught us all was to not focus on the past. If you’ve done something great or terrible, forget it and go on and create the next thing. When I say that I’m not going to witness or permit the change, I’m talking about the thing that’s most important in Apple—the culture of Apple. Am I going to change anything? Of course.

Q: At any one time, there is only one new iPhone. That’s not the way you did it with the iPod; that’s not the way you did it with the Mac. Why don’t you have more than one iPhone, and why don’t you have more than one iPad?

Cook: Our North Star is to make the best product. Our objective isn’t to make this design for this kind of price point or make this design for this arbitrary schedule or line up other things or have X number of phones. I think one of our advantages is that we’re not fragmented. We have one app store, so you know what app store to go to. We have one phone with one screen size with one resolution, so it’s pretty simple if you’re a developer developing for this platform.

Perhaps the most succinct point that Cook tries to make in the interview: Apple is still about making great products. It’s not about becoming a trillion dollar company. By making great products, other good things will follow.

Tim Cook on the Apple Culture

Earlier this week, the CEO of Apple, Tim Cook, spoke at a conference put on by Goldman Sachs. For his final question during the the Q&A session, Cook was asked how his leadership might change Apple, and what aspects of the culture he might try to preserve. Here’s what he had to say:

Apple is a unique culture and unique company. You can’t replicate it. I’m not going to witness or permit the slow undoing of it. I believe in it so deeply.

Steve grilled in all of us, over many years, that the company should revolve around great products. We should stay extremely focused on a few things, rather than try to do so many that we did nothing well. We should only go into markets where we can make a significant contribution to society, not just sell a lot of products.

These things, along with keeping excellence as an expectation of everything at Apple. These are the things that I focus on because I think those are the things that make Apple a magical place that really smart people want to work in and do, not just their life’s work, but their life’s best work.

And so we’re always focused on the future. We don’t sit and think about how great things were yesterday. I love that trait because I think it’s the thing that drives us all forward. Those are the things I’m holding onto. It’s a privelege to be a part of it.

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(via Dustin Curtis; full audio here)

Why the iPhone isn’t Made in America

Why isn’t the iPhone made in the United States? Sure, Apple brands its product as “designed in California,” but the actual production happens in China. In this excellent New York Times piece, where more than thirty individuals were interviewed, we learn why the largest company in America has made the dramatic shift of producing its product in America to China. Apple executives believe there simply aren’t enough American workers with the skills the company needs or factories with sufficient speed and flexibility.

First, mind-boggling statistics about the scale of production at Foxconn, the factory in which iPhones and iPads are made:

The facility has 230,000 employees, many working six days a week, often spending up to 12 hours a day at the plant. Over a quarter of Foxconn’s work force lives in company barracks and many workers earn less than $17 a day. When one Apple executive arrived during a shift change, his car was stuck in a river of employees streaming past. “The scale is unimaginable,” he said.

Foxconn employs nearly 300 guards to direct foot traffic so workers are not crushed in doorway bottlenecks. The facility’s central kitchen cooks an average of three tons of pork and 13 tons of rice a day.

This anecdote sounded familiar. I first read it in Isaacson’s biography of Steve Jobs:

In 2007, a little over a month before the iPhone was scheduled to appear in stores, Mr. Jobs beckoned a handful of lieutenants into an office. For weeks, he had been carrying a prototype of the device in his pocket.

Mr. Jobs angrily held up his iPhone, angling it so everyone could see the dozens of tiny scratches marring its plastic screen, according to someone who attended the meeting. He then pulled his keys from his jeans.

People will carry this phone in their pocket, he said. People also carry their keys in their pocket. “I won’t sell a product that gets scratched,” he said tensely. The only solution was using unscratchable glass instead. “I want a glass screen, and I want it perfect in six weeks.”

After one executive left that meeting, he booked a flight to Shenzhen, China. If Mr. Jobs wanted perfect, there was nowhere else to go.

On the Chinese preparation for a contract. So methodical:

When an Apple team visited, the Chinese plant’s owners were already constructing a new wing. “This is in case you give us the contract,” the manager said, according to a former Apple executive. The Chinese government had agreed to underwrite costs for numerous industries, and those subsidies had trickled down to the glass-cutting factory. It had a warehouse filled with glass samples available to Apple, free of charge. The owners made engineers available at almost no cost. They had built on-site dormitories so employees would be available 24 hours a day.

So why is the iPhone made in China? It’s not just the low wages paid to Chinese workers. The flexibility, scale, and the formidable supply chain of Chinese factories, combined with the ability to raise an army of workers (sometimes literally overnight), cannot be matched in the United States.

And so, as quoted in the article, the consumer electronics business has become an Asian business. On a final note: while other companies have sent call centers abroad, Apple has kept its centers in the United States. It’s only a matter of time when Apple decides to outsource the call centers abroad…

Steve Jobs Resigns as Apple’s CEO

Wow. Steve Jobs just resigned as Apple’s CEO. Biggest news of the day, by far. That earthquake on the East Coast yesterday? This is an earthquake for the West Coast. Tim Cook becomes Apple’s new CEO while Jobs transitions his role as Chairman of Apple’s Board.

The WSJ has a nice list of the best Steve Jobs quotes over the years, such as this one:

These technologies can make life easier, can let us touch people we might not otherwise. You may have a child with a birth defect and be able to get in touch with other parents and support groups, get medical information, the latest experimental drugs. These things can profoundly influence life. I’m not downplaying that.

But it’s a disservice to constantly put things in this radical new light — that it’s going to change everything. Things don’t have to change the world to be important.

And oh, this is my favourite Steve Jobs video. A must-watch, if you’ve never seen it.

Apple at the core…Its core value is that we believe that people with passion can change the world for the better. That’s what we believe. 

Think Different.