Apple, America and a squeezed Middle Class – New York Times, Charles Duhigg and Keith Bradsher, Jan 2012
Not long ago, Apple boasted that its products were made in America. Today, few are. [At a Silicon Valley dinner with the president, Obama asked] “Why can’t that work come home?” Mr. Jobs’s reply was unambiguous. “Those jobs aren’t coming back,” he said, according to another dinner guest.
The president’s question touched upon a central conviction at Apple. It isn’t just that workers are cheaper abroad. Rather, Apple’s executives believe the vast scale of overseas factories as well as the flexibility, diligence and industrial skills of foreign workers have so outpaced their American counterparts that “Made in the U.S.A.” is no longer a viable option for most Apple products.
One former executive described how the company relied upon a Chinese factory to revamp iPhone manufacturing just weeks before the device was due on shelves. Apple had redesigned the iPhone’s screen at the last minute, forcing an assembly line overhaul. New screens began arriving at the plant near midnight. A foreman immediately roused 8,000 workers inside the company’s dormitories, according to the executive. Each employee was given a biscuit and a cup of tea, guided to a workstation and within half an hour started a 12-hour shift fitting glass screens into beveled frames. Within 96 hours, the plant was producing over 10,000 iPhones a day. “The speed and flexibility is breathtaking,” the executive said. “There’s no American plant that can match that.”
For over two years, the company had been working on a project — code-named Purple 2 — that presented the same questions at every turn: how do you completely reimagine the cellphone? And how do you design it at the highest quality — with an unscratchable screen, for instance — while also ensuring that millions can be manufactured quickly and inexpensively enough to earn a significant profit?
For Mr. Cook, the focus on Asia “came down to two things,” said one former high-ranking Apple executive. Factories in Asia “can scale up and down faster” and “Asian supply chains have surpassed what’s in the U.S.” The result is that “we can’t compete at this point,” the executive said.
“The entire supply chain is in China now,” said another former high-ranking Apple executive. “You need a thousand rubber gaskets? That’s the factory next door. You need a million screws? That factory is a block away. You need that screw made a little bit different? It will take three hours.”
Apple’s executives had estimated that about 8,700 industrial engineers were needed to oversee and guide the 200,000 assembly-line workers eventually involved in manufacturing iPhones. The company’s analysts had forecast it would take as long as nine months to find that many qualified engineers in the United States. In China, it took 15 days.
Toward the end of Mr. Obama’s dinner last year with Mr. Jobs and other Silicon Valley executives, eventually, the orbits of the men overlapped. “I’m not worried about the country’s long-term future,” Mr. Jobs told Mr. Obama, according to one observer. “This country is insanely great. What I’m worried about is that we don’t talk enough about solutions.
Why Kodak’s bankruptcy should scare Nokia – GigaOm, Jan 2012
Kodak, like many other businesses that have failed before it, made one fatal mistake – it forgot the true purpose of its business and instead focused on features, SKUs and products. Kodak continued to define itself by “film” when all it should have done is define itself with “photos” or moments. (My addition: most fail to cannibalise existing biz because new market looks too small…)
And from the Economist – Gone in a flash:
The firm was laid low by the rapid shift to digital photography and away from film, where Kodak once earned 70% margins and enjoyed a 90% market share in America. These handsome profits meant that the firm could invest huge sums in research and development. Yet ironically, extensive R&D contributed to Kodak’s undoing, since the firm ended up pioneering the very digital cameras that went on to kill its core business. The profits also allowed Kodak to be a generous and caring company for generations of employees in Rochester (New York), where it is based, and beyond. This, too, added to its troubles, since its pension obligations left it with less capital to diversify or invest in promising areas that might have saved it.
No firm, however strong, can count on continued success: market dominance is only a snapshot in time.
Why Best Buy is going bankrupt – Forbes, Jan 2012
Amazon neither invented nor appropriated its basic strategies from Best Buy or anyone else. It simply does what consumers want. Best Buy does what would be most convenient for the company for consumers to want but don’t, then crosses its fingers and prays.
Even a Giant Can Learn to Run – NY Times, Jan 2012
[Samuel Palmisano's] guiding framework boils down to four questions:
“Why would someone spend their money with you — so what is unique about you?”
“Why would somebody work for you?”
“Why would society allow you to operate in their defined geography — their country?”
“And why would somebody invest their money with you?”
The pursuit of excellence in those four dimensions shaped the strategy. To focus on doing unique work, with its higher profits, meant getting out of low-margin businesses that were fading. I.B.M.’s long-range technology assessment in 2002 concluded that the personal computer business would no longer present much opportunity for innovation, at least not in the corporate market. Internal arguments against a sell-off were intense: PCs pulled in sales of other I.B.M. products in corporate accounts, the cost of electronic parts for its larger computers would jump without the purchasing power of its big PC division, and the corporate brand and its reputation would suffer without PCs, the one I.B.M. product touched by millions of people.
Lately, Hewlett-Packard has engaged in a similar debate, first declaring that it was looking to sell its PC business, then backing off. “I’ve heard every one of the arguments, every one of them,” Mr. Palmisano says. “But if you decide you’re going to move to a different space, where there’s innovation and therefore you can do unique things and get some premium for that, the PC business wasn’t going to be it.”
Corporations and governments are drowning in a flood of data from internal systems and the Web, struggling to make sense of it. To get ahead of that challenge, I.B.M. has spent more than $14 billion since 2005 buying 25 software companies that specialize in data mining and analytics, looking for useful patterns in data in fields as varied as disease treatment, traffic management and crime detection.
The idea, Mr. Palmisano explains, is to “go to a space where you’re uniquely positioned and use the value of I.B.M.’s integration.” The Watsons, he says, always defined I.B.M. as a company that did more than sell computers; they believed that it had an important role to play in solving societal challenges.
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