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Apple Crumb Cake

[This article is just one of the many reasons why I love the Harvard Business Review.]

The HBR article I've linked to (and reproduced) here discusses the organizational, economic, and ecological failures of one of the most "creative" companies in the developed world. And maybe, when you think about it, Apple isn't the technological Eden it proclaims. As always, a welcome dose of reality.

Apple's Real Achilles Heel

12:07 PM Friday July 16, 2010 | Comments (46)

Herewith, the second in a series of posts discussing a new agenda for capitalism. To get the most out of it, a gentle suggestion: please read last week's first, if you haven't already. Enjoy!!

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So, does your iPhone 4 work? Its antenna issue, some say, including Consumer Reports, points to Apple's various weaknesses: arrogance, bad PR, poor testing, out of touch management.

So is this a great turning point for Apple? Well, yes and no. Apple does have an Achilles heel. But it's bigger — and more enduring — than any or all of the above. It's the second bullet point in what you might call an agenda for 21st century capitalism: building a high-impact organization. Apple's great weakness is that it isn't one — yet.

Here's a suggestion. Apple, when you think about it, is a microcosm of the global economy; a tiny but striking representation of both its strengths and its weaknesses. Apple mass produces "product" (with a smattering of services on top), mega-markets it (across mass media), and sells it in your local mall, mostly to developed-world "consumers."

Here are just a few of the downsides: The raw materials Apple uses are toxic to the environment; Apple's Chinese subcontractors have endured a spate of recent suicides; Apple takes advantage of a questionable Chinese exchange rate regime that effectively exports unemployment to the developed world (and subverts the very notion of "free trade"). And it does all this at a lightspeed pace of "innovation," which results in spirals of obsolescence; last year's junk heads, often, to the landfill. Finally, it's questionable whether Apple's products, as beautiful as they are, offer meaningful benefits to people. Are they just the technological equivalent of Jimmy Choos, the kind of stuff that underpins the consumption addiction at the heart of the global economic crisis in the first place?

Apple, to its great credit, strives mightily to minimize each and every one of these downsides. Yet, that it must do so is the very point. How different, as a linchpin of the economy, is Apple from the Ford of 1930, the GM of 1950, the P&G of 1980, or the GE of 1990? In economic terms, not so much: all are built on the same set of institutions: mass production, mega-marketing, "profit," hierarchy, opacity, "innovation." You know the score — and by now, you might just ask yourself: "isn't it time to move past the industrial age already?"

The hallmark of a 21st century business is having built a radically more fruitful set of economics, so a company, organization, or country doesn't have the downsides above in the first place. Hard as it might be, think of an Apple that can create awesome iStuff without a single one of the negative effects above — and then expand that vision to include carmakers, pharmaceutical companies, and banks — and you're beginning to picture a 21st century economy.

So Apple's Achilles heel is this: It's part and parcel of what you might call a global Ponziconomy. That's one where businesses do better by doing bad. There, companies compete to make some people better off by making others worse off. Like Bernie Madoff's returns to investors were largely illusory, so the benefits offered by a Ponziconomy are often simply fictional — as we've discovered the hard way over the last couple of years or so.

Permit me, then, to humbly offer a tiny challenge. Dear Apple — want to be the revolutionary you proclaim yourself to be? Then know this: being an economic renegade today isn't about building slightly better stuff, but making stuff better — building a 21st century business that does better by doing good. Today, you're about as revolutionary as a cup of lukewarm tea. From a larger economic perspective, you're still mostly a 20th century company in 21st century clothing.

Now, consider this. If I sound like I'm harshing on Apple — I'm not. Apple's perhaps one of the economy's most radical companies and one of its most explosive outperformers. Here's the point: It's still not good enough — not enough to create jobs, meet the needs of tomorrow's generations, give back to the natural world, spark higher-order innovation, or fuel a more authentic prosperity. If that's the best that our economy can do, well, we've got to do better.

No, it's not easy. In fact, Apple's Achilles heel is really the great challenge glaring down at all companies, leaders, countries, and the entire global economy. But if, like Apple, you yearn to be a revolutionary — well, then it's time to get radical.

Consider a small slice of history. When Steve Jobs was searching for his own replacement after his first tenure as Apple's CEO, he audaciously said to the front-running candidate, then-Pepsi CEO John Sculley: "Do you want to spend the rest of your life selling sugared water, or do you want a chance to change the world?"

Perhaps, today, I might gently ask the same question of Steve: "do you really want to spend the rest of your life selling slicker gadgets, or do you want take this chance to change the world radically for the better?"

The future of capitalism isn't about making prettier, cooler gizmos every year; it's not about helping sell more movies, music, or apps. It's about building revolutionary companies, countries, and economies: those that are hardwired to do meaningful stuff that matters the most, and begin making up for the industrial age business-as-usual's glaring shortcomings; those that can fuel a more authentic prosperity instead.

If the first bullet point on the agenda of 21st century capitalism is discovering a higher purpose for the economy, the second might be said to be building high-impact organizations — those that can change the world radically for the better. Because when you think about it, that's what's really scarce.

[This sure isn't cutting it. But it is tugging on some heart strings...aww. (Hack, cough, ugh.)]

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