Worms in the Apple?

Just a few recent noteworthy headlines:

Apple Sued Over Siri’s Shortcomings

Apple report puts spotlight on overseas factory conditions

Apple patches record number of Safari 5 bugs with monster update

Android to overtake iPad in tablet market by 2015: IDC

Ambitious Apple Inc. leads to antitrust ‘wake-up call’

Yikes- that’s alot of ugly press all at once!

The latest is definitely the ugliest. You NEVER want your company’s name mentioned in ANY article that also says “The U.S. Justice Dept ” unless the same article also mentions the word “cleared”. Accusations of apple’s latest alleged antitrust violation may turn out to be even messier and more damaging than their Made In China (Foxconn) labor issues, a problem that hasn’t so much gone away, as been buried underneath all the stack of other messy press apple has been getting.

Apple is now the world’s #2 company in market cap (after Exxon). No longer an underdog. When you’re an Underdog, folks give you the benefit of the doubt-

  • artists because they understand starving,
  • students because they value irreverent, and
  • nonconformists because they value rebellion, etc.

 

But when you’re a giant profit-making machine, you have to think “Optics” when you’re tempted to subcontract out labor someplace cheap, so you can gouge out an even more outrageous (industry-best) gross margin, esp when you do so on the heels of laborers in poor working conditions. That’s a worm in the apple. If you use ‘market clout’ tactics of questionable ethics and legality, that’s a worm.

Having #1 status puts you under extra scrutiny; it denies you the benefit of the doubt.

Apple’s PR and Legal Department expenses will be sky-high this year, and will stay high until they figure out that #1 means not making such Optics Blunders in the first place.

What’s an example of an Optics Blunder? It is, for example, when a massive market player uses clout in a clumsy way that puts consumers or smaller competitors, or retailers on edge. This subheading from MSN Money:  “Apple and five large book publishers could be slapped with a lawsuit by the U.S. Department of Justice for allegedly colluding to keep the prices of e-books high, according to a report last Friday.” and from the Globe: “Apple also stipulated that publishers couldn’t let rival retailers sell the same book at a lower price:”.

Wanna know how to make enemies of both government AND consumers? Get accused of fixing prices so that consumers can’t get a good deal. Ouch. These are serious accusations.

It’s every retailer’s right to price aggressively- and every consumer’s right to get a good deal. Apple is accused of preventing book publishers from selling ebooks cheaper through other e-tailers than themselves? Hmmm.  Sounds like the swaggering strong-arm tactics that a #1 would use, no?

It’s the kind of action that makes everyday consumers dislike a brand, and makes image-conscious retailers less keen to carry a product-due to risk of boycotts etc. It rolls out a red carpet for Android, Samsung, HP, Dell, etc to take share amongst the image-conscious, the underdog-favorers, the socially conscious, etc- all of whom were predisposed to favor apple back in its the days of ‘Apple The Underdog in a Mighty Struggle against the Overlord’.

Apple now IS the evil Overlord. Or at least seems to be clumsily positioning itself to be seen that way. It had better get working at more than mere ‘PR and Legal ‘cleanup’. Apple needs to fix its corporate culture from the core, if its doesn’t want more worms to appear. It needs to train its Execs and Managers to recognize its #1 status brings extra scrutiny, sensitivity and, ironically, vulnerability. Yes, vulnerability.

Remember how gleefully the previously oppressed Soviets & Persians destroyed statues of former overlords? Underdogs of society detest Overlords, they’re hungry for any chance for revenge. Each time they find a worm in the apple, you can be sure they’ll show all their friends.

In case you think this is ‘just a phase’, fyi Apple has just completed a purchase of Nortel patents- imagine how that will play out! Imagine the press when The Overlord begins enforcing those patent rights: how likely is it that you’ll soon be reading “Giant squashes competition!” “Small players cry foul”

Steven Litt