Apple's Stupendous Success: The Top 10 Reasons from CEO Tim Cook

Apple CEO Tim Cook (Image by Getty Images via @daylife)

While most companies today would love to be able to claim growth rates in the high single digits, Apple’s revenue last quarter grew 73%. How did Apple achieve that?

While most people agree that sales of tablets will soon top sales of PCs, most vendors’ tablets have generated little revenue and no mass momentum. Yet the iPad has been nothing short of a phenomenal success in every market it’s available. How has Apple been able to turn the tablet market upside-down?

Indeed, Apple’s ability to defy marketplace gravity and to sustain its position in the highly rarified air of the world’s most-valuable and most-admired companies with one of the best-known brands in the world has aroused enormous interest in one very simple question:

What’s Apple’s secret?

More specifically: How does it manage to create products that outperform competitors’? How does it create a booming retail business while other retailers are retrenching? How does it pounce on publicly available new technologies like Siri and turn that into a worldwide phenomenon? How does it rack up, quarter after quarter, financial results that are so impressive that they seem almost unencumbered by the same laws of physics and marketplace reality to which the rest of us mere mortals are subject (please see Apple’s Mind-Boggling Financial Results)?

Apple Tim Cook offered some revealing glimpses into Apple’s strategic thinking and core philosophies at a recent Goldman Sachs investors conference during an interview with analyst Bill Shope. And, from a transcript of that interview posted on the macrumors.com website, I’ve combed through Cook’s remarks and extracted 10 strategic perspectives that provide at least a fleeting glance into the decision-making and operations of a company that is quite possibly growing more rapidly and profitably than any company its size has ever done before.

I’ve rolled out this Top 10 list in ascending order, starting with #10 and finishing with #1, and I’d welcome your comments on Twitter at bobevansSAP.

#10: Embrace your inner cannibal. iPad has cannibalized some Mac sales. The way that we view cannibalization is that we prefer to do it to ourselves than let someone else do it. We don't want to hold back one of our teams from doing the greatest thing, even if it takes some sales from another product area. Our high-order bid is ‘we want to please customers and we want them buying Apple stuff.’

#9: Invest heavily in the right things while pinching pennies everywhere else. (Cook reacts to a question about Apple’s intentions for its $98 billion in cash.) I disagree with your use of the word ‘sparingly.’ We've spent billions in the supply chain. We've spent billions in acquisitions, including on IP. We've spent billions on retail, the infrastructure of the company, the data centers et cetera….. I would say we're judicious and deliberate. We spend our money like it's our last pennies. I think shareholders want us to do that. They don't want us to act like we're rich. We've never felt that way. It may sound bizarre but that's the truth.

#8: Pursue innovative distribution models: a.k.a. ‘think different.’ The paramount thing is the product. It is the focus. Of course distribution, we've recognized the difference there and in purchasing power. Unlike many people, I don't subscribe to the premise that prepay is prepay is prepay. We convinced China Unicom to try postpay. It wasn't big there but they tried it and it's working really well. Postpay is great for everyone because the customer gets a cheaper phone and the carrier locks in a customer. It's a different way to look at the issue and it's been successful in China.

#7: Realize the iPad has triggered the onset of a post-PC world. This 55 million [units sold in 21 months] is something no one would have guessed…. The reason that it is so large in my view is that the iPad has stood on the shoulders of everything that came before it. The iTunes Store was already in play, the App Store was already in play. People were trained on iPhone. They already knew about multitouch. Lots of things that became intuitive when you used a tablet, came from before…. From the first day [iPad] shipped, we thought that the tablet market would become larger than the PC market and it was just a matter of the time it took for that to occur…. That doesn't mean the PC is going to die. I love the Mac and it's still growing and I believe it can still grow…. There will be a strong PC industry but tablets will be stronger in units.

#6: Exploit the ‘halo effect.’ The iPhone introduced Apple to millions of people -- our brand -- to people who had never met Apple before. Now, it's interesting to look -- take China as an example -- last year the Macintosh grew more than 100% in China, year-over-year. Not on a big base, but 100% is pretty good. The market grew 10%, so we outgrew the market 10x. The iPhone is creating a halo for the Macintosh. iPhone has also created a halo for iPad. You can definitely see the synergistic effect of these products, not only in developed markets, but also in emerging markets where Apple wasn't resonant for most of its life.

#5: The China factor makes it first among equals in emerging markets. We didn't launch the iPhone until 2008. In 2007, the revenue combined from Greater China, several other parts of Asia, India, Latin America, Eastern Europe, Middle East, Africa, was $1.4 billion. Revenue last year for that same group of countries was $22 billion. We're only on the surface. That's how I feel. We focused mainly in China. Last year we began to focus increasingly more in Brazil and Russia.

#4: Dazzle and delight your developer community. What happened last year, everybody that was in the PC industry and everybody in the phone industry decided they had to do a tablet. There was 100 tablets put on the market last year! They aimed at iPad 1 and by the time they came out with something we were on iPad 2. We wound up with 170,000 apps and I'm not sure there is a hundred yet on the other platform…. If we had a meeting at this hotel, and we invited everyone doing cool stuff on PC, we wouldn't have anyone here. But if you invited everyone working on iOS or on that other operating system, you wouldn't be able to fit everyone! That's where the innovation is!

#3: Don’t make customers pull their hair out. [About 10 years ago,] Steve announced the strategy for Apple as the hub for someone's digital life. Out of that we developed iLife. You could connect many gadgets off of this and sync all of your music and photos. You can edit photos and movies. The Mac becomes the repository. iCloud turns that on its head. It recognizes that in the last 2-3 years, we live off multiple devices. It's no longer a great customer experience to have to sync your iPad to your Mac and then your iPhone to your Mac and then resync your iPad to your Mac. This is a hair-pulling exercise. iCloud recognizes the Mac or PC as just another device and now your life is a lot easier.

#2: Repeat after me: 'Great products trump everything else—including price.' What we're focusing on is the same thing we've always focused on: making the world's best products…. Price is rarely the most important thing. A cheap product might sell some units. Somebody gets it home and they feel great when they pay the money, but then they get it home and use it and the joy is gone. The joy is gone every day that they use it until they aren't using it anymore. You don't keep remembering "I got a good deal!" because you hate it! …. What I see is that there is a lot of commonality in what people around the world want. Everyone in every country wants the best product as it turns out. They're not looking for a cheap version of the best product -- they're looking for the best product.

#1: Keep Steve Jobs’ vision burning inside terrific people. Apple is this 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, 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, these are the things that I focus on.... Those are the things that make Apple this magical place that really smart people want to work in, and do not just their life's work, but their life's best work.

So aside from all of these good things Apple has going, where are the danger zones for Tim Cook & Company? Last year, in a column called Steve Jobs and His War on Google, I proposed that Jobs believed that Apple’s biggest threat was itself, and the almost-understandable risk of complacency from all of its remarkable success.

And I suggested that Jobs decided to use his company's escalating battle with Google and its Android mobile platform to give every Apple employee a very specific, very credible, and very powerful enemy to focus upon.

Nothing that’s occurred since then has caused me to change that opinion. So maybe the Top 10 list above needs an addendum: stay focused on creating great products, but don’t forget to have an enemy—because Steve Jobs didn't want to wake up one day and realize that Apple's worst enemy was Apple itself.

(Follow me on Twitter at bobevansSAP.)

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