Ted Goranson - Personal Blog

The blog of Ted Goranson. This is both a personal blog and an ongoing update on his projects.

Apple Branding

Published: 22 Jul 2015

I connect with Apple in several ways. I am a consumer of their products and services. There is not much novel to say in that department other than my concern with privacy; apart from all else, I believe Apple’s competition will dissolve when people discover the tradeoffs they have made.

I am also engaged with others as an Apple shareholder. Until this month, my faith in their stock price has rewarded me, allowing me to follow my passions without employment. That streak has ended, in part because the seed corn has been eaten. But more important than that is the irrational depression that public analysts have imposed on the price.

I write this the day (22 Jun 15) after Apple reported their quarterly sales. Sales are up, way up; iPhone is crushing Android; business in China is amazing; they can’t make watches fast enough; innovative iPhone and iPad designs have entered production; the IBM alliance is huge in the enterprise already. Signs of whole new product categories are appearing. They have over $200B in unallocated, liquid cash.

But today the stock price is profoundly down. The superficial reason seems to again be that some folks wild-ass guessed the numbers would be different and so Apple ‘missed’ the numbers.

A slightly deeper but still superficial reason is that stock prices are based on the crudest of metrics, long obsolete for disrupters. Buyers of stock guess what future buyers will think of those metrics. What’s missing in all this is what this post is about. The people we trust to understand corporations for us don’t understand Apple. It isn’t just interesting, it is essential to understand what they are trying to do; it could be our future.

The Future of Commerce

Apple as my hope for changing the nature of business.

I spent a substantial part of my life with a goal of having business be better for society. I had good financial backing. An elevator pitch noted that multinational corporations can subvert governments and distort markets, developing countries usually become engaged in a damaging way and technologies are being applied by powerful corporate interests in ways that negate the best elements of the great American experiment.

Said differently, our goal was to allow contributions by individuals and small groups to be well recognized and fairly rewarded for the value they add to their customers’ lives, individually and as societies. Some of the things we did enabled Apple’s remarkable supply chain. But other results were adopted in ways that gave new life to what I believe are obsolete behemoths.

I regret this.

The fact is that companies do what is in their best interest. Often, very often, they flub even that because the people in control have only the fuzziest of visions about what they do, what they can do and what would be loved. Because of this, the usually profound control they might exert is misdirected or ineffectual. When they can do what they want, it is often harmful in subtle ways.

That is to say, when companies work, they don’t mind doing harm. They don’t know what harm is or can be. And companies usually don’t work in any case; they only stay alive because their competition is equally broken. So if we help large companies work, a primary result is we increase their ability to do harm.

Apple as the Counterexample

It is unlikely I will be welcomed into another such role, which is why I root for Apple as the leader in disrupting the basic model of how business is done. Yes, they disrupted the PeeCee business, the music distribution business and the phone business. Less appreciated is how they developed a unique mix of centralized and decentralized control over an agile supply chain to iterate at scale faster than competitors. This is a more profound disruption.

But an even more profound dimension, leaps larger by whatever scale you might use, is their functioning approach to what business is.

The obvious: Apple is based on making delightful products. Internally, return on investment is never used in this quest. There is an obsessive fear of being ordinary, of presuming that old conventions are best. They’ll get to an advanced design phase on ten projects for each one they commit to. When they believe that have an answer, they commit with all their heart. The primary focus is on delight and a secondary focus on profit. All this is common knowledge and notunique.

In our world of business metrics, this is all rolled up in the concept of design. Detractors then demean the value of this single characteristic, and customers that appreciate it.

Apple is already a (or the) leader in alternative energy, construction techniques, (civil rights in a corporate environment) and general public health. From an outside observer’s perspective, their growing role as positive citizen seems unrelated to their mission. Some attribute it somehow to weakness in Tim Cook, or a corporate public relations gimmick. For some folks it is even the devil’s conspiracy.

None of this is captured in the metrics the stock market uses. Strangely low stock price is good for Apple because the biggest purchaser of Apple stock is Apple itself. At current rate, they can own themselves in less than two decades. (For perspective, that is about the length of time of Jobs’ second tenure at Apple.) Perhaps the best thing for us all is for the company to be private, even more secretive.

If we were going to measure the effect Apple has on us, and the effect that makes them attractive, we’d have to model something beyond these notions of delight, design and dedication.

Branding as the Vehicle

I think we can get there by thinking of this dimension as a reinvention of branding.

Common examples of brand management are Harley Davidson, Coca Cola and Tylenol. Each of those companies sell relatively ordinary items in the sense that anyone could make the same thing. Each is a marketing powerhouse, not because their products are superior, but because they sell something in addition to the physical product: life style association, the illusion of common joy and safety respectively.

More resources are spent on these than on the physical product. Accounting standards allow for companies to value their brand and the good will it carries. Apple plays this game as well, and pays close attention to the cache of its products. They carefully nurture this notion of brand and customer engagement.

But there is something else, beyond…

A few miles from where I live is a shipyard.

They are the only yard in the world that builds nuclear aircraft carriers and one of two in the US that build nuclear submarines. It is a big, important place.

It was founded by Colis Huntington more than a hundred years ago, in an era of robber barons, where fortunes were based on thuggery, bribes and class. Huntington was one of the men who built the key railroads of the era, enabling our industrial revolution. He seems to have been one of the good guys, Apple-like in some ways. When he founded the shipyard, he imposed a slogan which he had engraved in big letters at the entrance: “We shall build good ships here, at a profit if we can, at a loss if we must, but always good ships.”

A version of this slogan was used by his teams previously in building the western half of the transcontinental railroad.

The Slogan Before It Was Removed

(Image) A photo of the slogan as he placed it at the entrance.

A photo of the slogan as he placed it at the entrance
I visited this yard many times. Some visits would not have taken me through this gate normally, but I went the long way just to see the stone.

The stone and plaque were removed when the yard was acquired by its first megacorporate owner. Currently, that is Northrup-Grumman.

The Future of Branding

How to think about the way Apple subverts and changes the business relationship.

In Apple’s famous Monday morning meetings, they deal with two kinds of issues. Like any other organization, one of these will be operational, dealing with issues of existing and forthcoming projects.

The other kind of issue, I am told, addresses grander ambitions: disruption/disrupting projects. Some of these are product and market oriented: what about cars, toilets, dwellings and aircraft? And some are grander still; how do we change the way we finance the food chain? How do we change the nature of application development? Some of these we clearly know they work on from what we see. Others we see only indirectly, like how they want to change/disrupt the notion of branding.

They have been hiring branding geniuses lately. The press remarks on the market they came from: cars, watches, clothing, music, but they miss the bigger picture. Apple wants to master branding to the extent that they can redefine it.

This isn’t much different than how they become leaders in other things. They define what a laptop is, what a music player is, what a phone is, what a store is and everyone else works with that definition. With their contractors, they are the world’s largest investors in industrial robotics and in a few years they will have redefined both how supply chains are financed and how the actual work is done.

They are the world’s largest managers of free cash and have developed some cool internal financial innovations there that we will soon see as consumers in the redefinition of personal banking. Why wouldn’t they want to disrupt the very nature of branding?

Recruitment

One area where this rethinking is full in force is in who Apple thinks of as the audience. It has paying customers of course. But it also has a whole ecosphere consisting of outside and inside developers and engineers. Apple’s ability to make the coolest stuff is severely constrained by getting and motivating the coolest talent. Good people are in demand and you cannot outbid everyone else. Among all the benefits you can offer must be coolness and reinforcement of life values.

Potential employees today like Apple and what they stand for. It isn’t just about money, though that is necessary. It isn’t just about making the process easier; in this case Apple doesn’t do as well as its competitors for several reasons, and in spite of this talent comes.

Reinventing branding to cover the whole enterprise, from designers to users is novel.

How are they doing this? One rather obvious strategy at the moment is Apple Music. They won’t make money on this. And they are taking big risks where they didn’t have to for business reasons. They could well fail. Music is powerful, but the business is broken. They can fix it and take credit for guiding the entire (recorded) musical enterprise into more creative, more vital and human territory. It is about brand, the new notion of brand. The brand has to come from the creative soul. We cling to the brand in this case because we ally with creative commitment.

I sometimes participate in the leading ‘amateur’ Apple stock analysts’ group. When I mentioned that part of the cost for acquiring Beats was justified by building a brand for recruiting I was laughed out of the group.

© copyright Ted Goranson, 2015