A problem of riches – Apple

Apple's shareholder meeting was last week.  In an era where shareholders are most worried about the survivability of the companies where they are invested, the biggest issue at Apple is what to do with all its cash!  Reuters.com reported "Apple's Jobs says must think 'big' on cash hoard."  In 2009, when most companies saw their market value decline, Apple's value doubled.  Yet, it's cash is fully 1/5 (20%) of its current market capitalization!  Clearly the company is generating cash faster than it has found investment opportunities.  Even after launching the iPad with expectations of selling 2 to 5 million units in 2010!

We all should be so lucky, to have this problem of riches.  Apple has enough cash that it could buy all the equity of Dell.  Of course, why do that?  It just goes to show that the company that built its market cap in the 1990s on Defend & Extend behavior – focusing on execution in a growing PC marketplace – has seen its valuation multiple shredded as buyers have shifted to other solutions.  Meanwhile, Apple's value has skyrocketed because it entered new markets and created new solutions.   Yet, it's cash flow has skyrocketed even faster!

It is possible for all companies to follow Apple's lead, increasing revenues and valuation.  Last week I was interviewed by Zane Safrit for his radio program and highlights are on his blog, and the full interview is available for listening at the BlogTalkRadio site. In the interview Zane brings out how so many business leaders are stuck defending and extending broken Success Formulas that cannot produce better returns, and waiting for a "better economy" to "save" them.  What Zane also cleverly brings out is how The Phoenix Principle can be applied to any business, with results that can be as stunning as Apple's.  If leaders will start focusing on the future, obsessing about competitors, utillize Disruptions and White Space.

Of course, these are amplified in the "10 Ways to Stay Ahead of the Competition" I posted in yesterday's blog.  I've received comments that the links to the deeper discussion on both the Business Insider web site and the IBM Open Forum weren't working, so I'm reproducing them here again.

10 Ways to Stay Ahead of the Competition – Business Insider

How to Stay Ahead of the Competition – IBM Open Forum

All companies can grow like Apple.  But it takes a different way of approaching management.  I hope you can find time to listen to the interview and explore how your organization can become like a Phoenix, forever growing through constant rebirth.

10 Ways to Stay Ahead of the Competition – Guy Kawasaki

Guy Kawasaki contacted me a couple of weeks ago, asking me to write a short piece for him.  I was happy to do so, and he published it at the BusinessInsider.com War Room as "10 Ways to Stay Ahead of the Competition."  Fortunately for me, the article was also picked up at IBMOpenForum.com with the alternate title "How to Stay Ahead of the Competition."  Full explanations of each bullet are at both locations (although the graphics are outstanding at Business Insider so I prefer it.)

  1. Develop future scenarios
  2. Obsess about competitors
  3. Study fringe competitors
  4. Attack your Lock-ins
  5. Seek Disruptions
  6. Don't ask customers for insight
  7. Avoid Cost Cutting
  8. Do lots of testing
  9. Acquire outside input
  10. Target competitors

Blog followers know that this program has now worked for many companies who want to grow in this recession.  The reason it works is because

  • You focus on the market, not yourself
  • You avoid Lock-in blindness by avoiding an over-focus on existing products, services and customers
  • You use outside input, from advisers and competitors to identify market shifts that can really hurt you
  • You put a competitive edge into everything you do.  Competitors kill your returns, not yourself.
  • You use market feedback rather than internal analysis guide resource allocation

Of course this works.  How can it not?  When you are obsessed about markets and competitors and you let it direct your flow of money and talent you'll constantly be positioned to do what the market values.  You'll have your eyes on the horizon, and not the rear view mirror.

The biggest objection is always my comment about "don't ask customers for insight."  So many people have been indoctrinated into "always ask the customer" and "the customer is always right" that they can't imagine not asking customers what you ought to do.  Even though the evidence is overwhelming that customer feedback is usually wrong, and more likely destructive than beneficial. 

Just remember, IBMs best customers (data center managers) told them the PC was a stupid product, and IBM dropped the product line 6 years after inventing the PC business.  DEC's customers kept asking for more bells and whistles on their CAD/CAM systems, then dropped DEC altogether for AutoCad ending the company.  GM customers kept asking for bigger, faster more comfortable cars – improvements on previous models – then moved to imports with different designs, better gas mileage and better fit/finish.  Circuit City customers asked for more in-store assistance, then took the assistance across the street to buy from cheaper Best Buy stores.  The stories are legend of failed companies who delivered what the customer wanted, and ended up out of business.

Enjoy the links, and thanks to Guy for publishing this short piece.  Follow these 10 steps and any business can stay ahead of the competition.