How Tim Cook push Apple to become 2.5 Trillion-dollar Tech Monster
If we see Steve Jobs as a pioneer to create a ground-breaking product from the scratch, then we could see Tim Cook as a low-key but visionary steersman who leads Apple to grow 6 times bigger in the past 10 years. Today, we are going to understand how Tim Cook maintain Apple’s momentum and grow Apple’s market capitalization to the skyline.
In 2011, when Tim Cook just took the helm from Apple legendary founder, Steve Jobs who saved Apple from the brink of bankruptcy, lots of people thought Apple was doomed to decline. And some Apple die-hard fans even worried that Tim Cook can not inherit Steve Jobs disruptively innovative mindset and Apple won’t be sexy anymore. It’s true. Tim Cook is not like Steve Jobs but Tim Cook always remember what Steve Jobs told him “Don’t think what would Steve do when you make the decision”. Apparently, Tim Cook took Steve’s advice and led the company to go to another majestic path in his own way. Let’s figure out what is Tim Cook’s magic.
External Environment
Explosive mobile device needs: During 2010s, with improved hardware performance and the faster wi-fi speed, there are more and more applications available in smart phone which just made the needs of mobile device grow sharply. Everyone just has at least one smart phone at hands. Tim Cook tightly grasped the opportunity and kept pushing for the constant improvement of iPhone. From iPhone 4 to iPhone 12, the screen is enlarged from 3.5 inches to 6.7 inches and there are 3 cameras in the latest iPhone. Apple almost annually launched new models in the past 10 years. Different price strategy of each models and better integrations between hardware and software just make iPhone users keep growing and growing.
Outsourcing & lean inventory: When Tim Cook was still Apple’s COO, he was instrumental in optimizing its supply chain by cutting down on the inventory and squeezing the suppliers’ cost. After he stepped up as CEO, he maintained his strategy — “less inventory is better” and “make suppliers compete with each other”. This not only decreases the warehouse cost but also increases the supply chain efficiency. Also, Tim totally aware of two facts — “the rise of China” and “China is world factory”. Therefore he outsourced lots of work to China and one of the biggest supplier, Foxconn, now employs more than 1M employees to work in the assembly lines.
New Product & Service
With iPhone sales gradually trialing off, Apple started to look for others sources of revenue to offset the decline. There are two directions they target: hardware product expansion and service business.
Build Apple Hardware ecosystem: Apart from iPhone, iMac & iPad, Apple keeps expanding their product lines to gain more revenue. Launching new products such as AirPods and Apple watch is one of the most successful strategy for post-Steve-Jobs-era Apple. iPhone owners prefer to buy Apple products to make them more compatible to iPhones. More and more people purchase iPhone which means more and more people will buy Apple-related products to stay in Apple ecosystem. However, some people still consider those non-iPhone product to be extension of main iPhone, but if you just look at AirPods revenue solely, it is as much as Adobe or Uber overall revenue and its revenue surpasses lots of Fortune 500 company’s revenue such as Spotify & Twitter. That means if AirPods is broken up from Apple, it can be listed as Fortune 500. Unbelievable!
Service business growth: When iPhone’s sales have begun to plateau, Apple devoted on developing its service business. It includes Apple care warranties, subscription service like Apple music and iCloud, App store related business like app download and fee from portion of third party in-app transaction, licensing service like setting Google as default search engine on iPhone and so on… Actually, Apple have not broken down each individual service revenue for investors, so we can only understand the big picture in its service business sales. Compared to 2011, Apple’s service business sale has grown from nearly $3 billion to nearly $54 billion. It’s 1,800% growth. What an insane number! This number can not only show how great is the business transformation that Tim Cook has done but also can strengthen Apple’s determination to develop on service business.
Apple Service business revenue by quarter
Okay. I think I write too much. Just let me stop here and next week I will explain what is the next for Apple.
To be continued…
