Apple and Microsoft face similar Innovation Challenges

By Jim Lundy

Oracle CEO Larry Ellison did a Television interview with CBS News earlier this week and besides revealing his 25 year friendship with Steve Jobs, he offered an opinion that Apple will not do as well without Steve Jobs. I watched that interview carefully and after analyzing what Larry said, I realized that he also could have been discussing Microsoft and numerous other firms that have had their founders depart.

The issue Larry didn’t discuss was the Innovation angle and the role that founders often play in driving and executing the Innovation strategy for their respective firms. This blog is about the innovation challenges that firms like Apple and Microsoft face when their visionary leader isn’t involved. In the case of Apple, as we know Steve Jobs died of cancer, and in the case of Microsoft, Bill Gates remains Chairman of Microsoft, but he effectively stepped away from day-to-day involvement at Microsoft several years ago.

Innovation: Leadership and Talent Challenges

One of the biggest challenges that firms face when a founder departs is a leadership vacuum that can translate into delays in innovation. While Bill Gates was looked at as a technical genius, he should also be looked at as a Marketing genius, given how effective he was at getting enterprises to use new Microsoft products. Things have not been the same at Microsoft since Bill stepped away and part of the issue at Microsoft has been with the departures of so many other Senior Executives over the last few years.

Apple has been without Steve Jobs for a shorter amount of time than Mr. Gates has been out at Microsoft, but at Apple they too have had to deal with some amount of executive departures. One could argue that both Apple and Microsoft are still grappling with leadership issues since both founders left the day-to-day operations at their respective firms.

When the founder is also basically the company spokesman, the issues become magnified. This is what makes things challenging for  Apple and Microsoft. Both Tim Cook, CEO at Apple and Steve Balmer, CEO of Microsoft are following in the footsteps of founders.

Apple and Innovation

Apple set a very high bar for product innovation over the last few years by delivering a new type of Smart Phone, the iPhone, in 2007 and following that with the Apple iPad Tablet in 2010. Apple delivered new versions of these products that had new features and capabilities that delighted consumers. Many firms have copied Apple and today mobile apps and mobile devices are the rage. The question many ask about Apple is whether the Innovation engine is as healthy as it was, since Steve Jobs was the heart and soul of driving new product innovation.

At the same time, it has been chronicled that Steve worked very hard his last few years at Apple to pass the torch to his staff.  Jonathan Ive, the head of design at Apple is the one who has been tasked as the Torch bearer for Design, but there are many others at Apple that are working hard on new Innovative products.

Because Apple did so much in innovation, people have come to expect more from them.  One could argue that expectations are not as high for Google or even Microsoft. Apple has some major product announcements this fall and we will wait and see how the market will judge their level of innovation.  We expect that Apple may surprise people with some of the new products, particularly as they begin to shift to mobile devices that go beyond a rectangular plane of glass (ie wearable computers).

The one area where Apple has had some bumps in the innovation road is in the area of product delivery timing. In the Mobile era, consumers have very short memories. The iPhone 5 has only been out since the fall of 2012 and it is already viewed as having been on the market for a long time.  Apple used to offset the yearly update for the iPhone with a new Tablet launch in the Spring. This year that didn’t happen and it made many question if Apple was losing its ability to innovate in part because there was nothing new to talk about.

Apple iWatch in Waiting?

Expectations are so high for Apple that even a major update to the MacBook Air – which many have tried and failed to copy, doesn’t get much credit. Our opinion is that if  Apple announces a new iWatch this fall, many of the Apple naysayers will dissipate.

Microsoft and Innovation

Microsoft has grown to become the Enterprise Software firm that IT departments depend on.  Microsoft has dominated the PC industry for years, but since Bill Gates stepped down as CEO, one could argue that they have been slower on the innovation front. Tablet computing could be viewed as one of the biggest missed opportunities, in part because Microsoft had a Tablet prototype called the Courier a few years ago that most likely would have been a serious challenge to the Apple iPad, but that product never saw the light of day.

One of the strengths of Microsoft was its Business Units. It enabled a complete focus on product and we’d argue that structure was one of the reasons so many new products did well. The other reason was that Microsoft was able to leverage tremendous power by bundling its products together with its Software Licensing, something other firms have yet to be able to do as effectively.

With some misfires recently on Tablets and Windows, Microsoft just announced one of its biggest organizational restructurings in the history of the company (see Post – The End of the Microsoft Office Division). The Microsoft reorganization seemed to try to focus on an organizational structure that is more similar in nature to how Apple is organized. That may not be a good thing for Microsoft, which badly needs some Innovation wins. Microsoft appears to be getting energy from the Yammer acquisition in 2012. As a result of that and the new version of Office 365, we have seen a significant uptick in interest and purchases of Office 365 over the last nine months.

Innovation is at the heart of how companies are measured these days. Enterprises need to have a robust approach to Innovation Management. Often they bank on what we refer to a Big Bang product development process (one project). Going forward, we expect to see more focus on the process of innovation, which today is often based on trial and error approach. More on this next week.

 

Editors Note: Aragon Research will be releasing new Research on Innovation Management this month. Check back at aragonresearch.com/innovation-management/