Do Palm's Struggles Forecast Apple's Post Jobs Decline?

Friday Feb 26th 2010 by Rob Enderle
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Steve Jobs is unique in the market but his skills likely won’t remain in Apple when he leaves. What's next for Apple?

Palm dramatically lowered guidance this week amid speculation about the company’s future. A little over a year ago at CES they launched the Palm Pre, which like the iPhone stole CES and had the promise to save the company. Palm is largely run by ex-Apple employees and, before he left Apple, Palm’s CEO was thought to be Steve Jobs heir apparent. Recently Steve Jobs was reported to be looking to start an authorized biography, which generally isn’t done until toward the end of someone’s career, suggesting his departure may be eminent.

Given Palm is kind of an Apple without Jobs (granted with only a single product), does its problem foretell Apple’s post-Jobs future? I think it could. Or, at the very least, serve as a caution – which suggests Apple’s post Jobs success isn’t a given.

Focusing on Image

One of the things that makes Apple special is that its products are subordinated to image. In effect marketing, not products, lead in that company.

You can see this in how Apple brought the iPhone to market. When first introduced at MacWorld it was a concept that didn’t actually work. What Steve Jobs presented was an ideal: what the product could be but yet wasn’t. The firm then worked day and night to come as close to the concept Steve sold as they could before the product launched.

The initial iPhone had serious shortcomings but Apple focused on what it did well. And while it didn’t sell anywhere near as well as later, more complete, versions, it is remembered as a success and it stunned the phone industry, causing market leaders like Nokia and RIM to begin to chase Apple.

In short, by focusing on the image rather than the reality of the product, Apple entered the cell phone market not as a small player but as a mind share market leader. And it has been climbing toward actual market leadership ever since.

In profit, they are actually a market leader now even though they have the 3rd most popular Smartphone OS. The lesson Steve Jobs teaches (and once again I recommend you read “The Presentation Secrets of Steve Jobs”) is that perception trumps reality every time. And if you get people to believe you lead a market or have the best product it is better than having the best product that no one knows about. That is why he outspends everyone else on marketing in his segment and focuses tightly on demand generation.

Palm Missed a Meeting

At the CES launch of the Palm Pre, Palm had something Apple didn’t have at their own launch: A product that actually worked.

You would think that would have given them a huge advantage and, in fact, one of their top executives went on record saying that the Palm Pre would take the iPhone out of the market. This is an engineer’s way of looking at things, reality trumps perception, and clearly the Palm folks believed they had a better offering.

On spec it did a lot of things the iPhone didn’t do, was competitively priced and had some whiz bang features like inductive charging.

It couldn’t lose. So why did it?

One of the big problems they had to overcome was the idea that the iPhone defined the market. Because if people think the iPhone is the gold standard then anything non-iPhone is going to be inferior. Doesn’t matter if you (the builder) think it is better; the customer won’t.

Palm thought this a trivial problem and had the mistaken impression that the market would look at both products and compare them fairly. That virtually never happens. As a result they didn’t even acknowledge the iPhone and only spoke to what their phone did, assuming buyers would see their advantages.

We saw Apple deal with a similar problem in their Mac vs. PC campaign and Verizon successfully deal with the same kind of problem with their ‘Droid iDon’t campaign. In the first case Apple gets the audience to see the faults of the dominant Windows platform. And in the second Verizon points out the shortcomings of the iPhone and both then position against that message.

Palm didn’t do that. They did high concept ads that they hoped would intrigue buyers and get them to consider the new phones.

Sprint was little help because as much as folks disliked AT&T they dislike Sprint more and, unlike Verizon and the ‘Droid, Sprint didn’t step up to the challenge. This is a common problem with engineering-driven companies: they tend to live under the concept that if they build a good product folks will flock to it. And that almost never happens, particularly when competing against a marketing powerhouse like Apple.

In addition, Apple is expert at courting high profile product reviewers. Palm missed a meeting in that they provided top reporters with products along with other reviewers, and then let them off their NDAs a day early, blindsiding the others who then mostly broke their NDAs.

It was neither elegant nor subtle and many of us that were in that second wave were embarrassed and upset because we were blindsided and either stopped writing about the product or became more critical when we would have been.

In short, this firm that was made up largely of ex-Apple people – including a CEO who at one time was thought to be a Steve Jobs clone – made mistakes that Apple would never have made under Jobs.

The Problem for Apple

If anyone has ever worked for a powerful, micro-managing boss, who treats people very poorly (read any on the unauthorized Steve Jobs’ biographies, I like iCon) you may recall that when that boss leaves, people revolt and things can change very rapidly.

Once out from under Steve’s leadership the Palm executives walked away from both Steve’s good and bad practices. The end result was a train wreck. When Craig Barrett took over from Andy Grove he was like a kid in a candy store and Intel went into non-aligned businesses and got much more aggressive against AMD. Intel struggled and the resulting anti-trust litigation cost the company billions and the changes there are likely nowhere near as dramatic as Apple is likely to see, because Andy was nowhere near as controlling as Steve Jobs is.

Think of it as having a very controlling parent. It is our tendency to want to revolt and showcase our own judgment and skills when not being told what to do (and being called stupid for disagreeing). Over the years Steve has seemed to drive anyone that could replace him out of the company, so Apple doesn’t appear to have anyone like Steve to just step in and be a virtual Steve Jobs (you saw this while he was away on sick leave).

Now think of the iPad. Steve’s presentation was that it needed to be better than a notebook and a Smartphone which is solid on message. But the iPad is done and it isn’t better than either, suggesting that even now there is a big gap between his message and the company’s execution.

I wonder if Steve wasn’t more of guest host at this last launch. To me it didn’t have the same feel as other launches and clearly the device has a lot of people worried (be aware a lot of us were concerned about the iPhone as well, so this last may be nothing).

Wrapping Up: Skill Transfer is Important

One of the things that the technology industry does very poorly is skill transfer. Dennis Carter, arguably one of the best CMOs that ever existed in the technology industry, was followed by folks that seemed to fall at the other end of the scale because there was no apparent mentoring.

Steve Jobs is unique in the market but his skills didn’t transfer to Palm and likely won’t remain in Apple when he leaves. In all successful firms mentoring should be a higher priority to assure that the success the firm currently enjoys continues indefinitely – something that almost never happens.

Palm is a warning of not only what could happen to Apple but any successful firm when the folks who made the company a success leave the firm and don’t leave behind their success making skills. Something to think about.

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