NO. 1 I APPLE TURNS IT ON
Apple has a valuation that’s approaching $1 trillion. But that’s not why it’s at the top of our list.
The only things more impressive than Apple’s financial numbers are the products that generated them. For a company routinely slagged for not having had a hit since 2010’s ipad, Apple, which as of mid-january was valued at more than $900 billion, had a heckuva 2017: Its wireless Airpods became ubiquitous from Brooklyn to Boise, and can now be paired with the best-selling Apple Watch Series 3, which has GPS and cellular connectivity, for a meaningful, new consumer experience. Developers embraced ARKIT, Apple’s augmented-reality framework, like nothing since 2008’s App Store (which paid out $26.5 billion last year). After a year of whining about what the new iphone might offer, most skeptics were blown away by the iphone X, with its facial recognition, camera quality, bezel-tobezel screen, and new user interface. Now, Homepod, first announced last June, offers a fresh take on the intelligent speaker. These category-redefining products don’t just defy the adage that scale hampers agility and creativity—they obliterate it. During a January 10, 2018, conversation at the newly opened Apple Park (itself an impressive product launch), Apple CEO Tim Cook sat down with Fast Company to discuss the overarching philosophy behind Apple’s everevolving universe and what unites its ambitions and endeavors. What makes a good year for Apple? Is it the new hit products? The stock price? Stock price is a result, not an achievement by itself. For me, it’s about products and people. Did we make the best product, and did we enrich people’s lives? If you’re doing both of those things—and obviously those things are incredibly connected because one leads to the other—then you have a good year. Do you look back at some years and say, Oh, that was a good year, that year wasn’t as good? I’ve only had good years. No, seriously. Even when we were idling from a revenue point of view—it was like $6 billion every year—those were some incredibly good years because you could begin to feel the pipeline getting better, and you could see it internally. Externally, people couldn’t see that.
With the ipod, before it came out, we didn’t really know that it would become as big. But it was clear it was changing things in an incredibly good way. Of course with the iphone it was clear that that was a huge change, a category definer, but who would’ve thought [it would have impact] to the degree that it [did].
We forget that the iphone wasn’t immediately embraced by everyone. [People said] it could never work because it didn’t have a physical keyboard. With each of our products there’s that kind of story. Over the long haul, you just have to have faith that the strategy itself leads to [financial results] and not get distracted and focus on them. Because focusing on them doesn’t really do anything. It probably makes the results worse because you take your eye off what really matters.
So what does matter? It’s always products and people. The question at the end of every year, or every month or every week or every day, is, Did we make progress on that front?
Given the relentless pace of change in the world, how do you prioritize what Apple is going to spend its time on, which things deserve attention and which things are distractions? There is more noise in the world than change. One of my roles is to try to block the noise from the people who are really doing the work. That’s tougher and tougher in this environment. The priorities are about saying no to a bunch of great ideas. We can do more things than we used to do because we’re a bit bigger. But in the scheme of things versus our revenue, we’re doing very few things. I mean, you could put every product we’re making on this table, to put it in perspective. I doubt anybody that is anywhere near our revenue could say that.
You have to make sure that you’re focused on the thing that matters. And we do that fairly well. I worked at a company a while back, many years ago, where every hallway you go in, you would see their stock price being monitored. You will not find that here. And not because you can get it on your iphone.
Do the investment markets make innovation harder? Or does Wall Street motivate change? The truth is, it has little to no effect on us. But we are an outlier. More generally, if you look at America, the 90-day clock [measuring results by each fiscal quarter] is a negative. Why would you ever measure a business on 90 days when its investments are long term? And the payoff doesn’t necessarily happen on that kind of cadence. No, of course not. If I were king for a day, that whole thing would change. But when I really get down to it, here, it affects a few of us because we have to do a quarterly call and so forth, but does it affect the company? No.
So what compels you to wow consumers year after year with new products? What drives us is making products that give people the ability to do things they couldn’t do before. Take iphone X, the portrait-lighting feature. This is something that you had to be a professional photographer with a certain setup to do in the past. Now, iphone X is not a cheap product, but a lighting rig—these things were tens of thousands, hundreds of thousands of dollars.
And an iphone X does more than just take pictures. There are so many parts. With ARKIT, we created something that essentially took the heavy lifting with [augmented reality] and put it in the operating system, which empowers thousands of developers eventually to be able to build AR into their apps. Some will be very profound, life changing. There is no doubt about that in my mind.
Sometimes Apple takes the lead, introducing unique features—face ID, for instance. Other times you’re okay to follow, as long as you deliver what you feel With its emphasis on sound quality, the Homepod smart speaker amplifies Apple’s commitment to music. is better, like Homepod, which is not the first home speaker. How do you decide when it’s okay to follow? I wouldn’t say “follow.” I wouldn’t use that word because that implies we waited for somebody to see what they were doing. That’s actually not what’s happening. What’s happening if you look under the sheets, which we probably don’t let people do, is that we start projects years before they come out. You could take every one of our products—ipod, iphone, ipad, Apple Watch—they weren’t the first, but they were the first modern one, right?
In each case, if you look at when we started, I would guess that we started much before other people did, but we took our time to get it right. Because we don’t believe in using our customers as a laboratory. What we have that I think is unique is patience. We have patience to wait until something is great before we ship it.
So this differentiation I’m trying to create between Face ID on one end and Homepod on the other, you don’t see it that way. I think about things from a core technology point of view. If you look at the core technology in each of our products, we had to start working on it years before the product shipped. With iphone X, for
example, if you look at the Bionic chip, we started working on that many years before it came out. Because we [design] our own silicon, it puts a level of discipline in our planning process. Now it also gives us an incredible advantage from a product point of view, because we can do things that others can’t.
In the magazine business, the issue doesn’t ship when we’re done with it, it ships when we have to print it. Sometimes that enforced discipline is valuable in pushing people. On the one hand, you’re patient, but on the other, you have to set deadlines, to create a forcing function somehow. You have to have a forcing function. For us, on the product side, we have to come up with our silicon requirements three, four-plus years in advance. So we’ve got things that we’re working on now that are way out in the 2020s.
You also want to have the flexibility to go right up until the last minute so that you are continuing to explore and use the product and discover more things that you want to do. There has to be a balance. If we try to allow that kind of flexibility in the silicon piece, we’d never ship a product.
[A product] is like a train—the train leaves the station, and if you have a great idea after that, it’s going on the next train. You’re not going to call this one back to the station.
We have events, other things, that give us goals, shipping by a certain time. But ultimately the question is, Is the product great? Is it ready? And if it’s not, we delay.
How do you factor in outsider opinions? Some people complain, “Oh, Apple isn’t coming out with anything new,” and others will say, “Oh, there is so much new that we’ve reached Peak Apple.” You’re grinning. We don’t have a tin ear. We definitely listen. But because we know what’s happening inside the company, we just have to find another channel to listen to and tune out the noise.
What about critiques that you get from consumers? Customers are jewels. Every day I read a fair number of customer comments, and they vary widely. Some are writing positive things about a store experience, an employee who did an incredible job for them. Some are saying, “Hey, I want a feature that’s not in the product right now.” Some are saying this feature should work this way, some are saying they had a life-changing experience with our product. I can no longer read all of them, but I read a bunch of them, because it’s sort of like checking our blood pressure.
Is there some pattern you’re looking for? I tend to weight the ones that are most thoughtful. That doesn’t mean polite—i don’t mind people saying I’m ugly or whatever. It’s just, what level of thought is it? I care deeply about what users think.
There’s a lot of talk right now at big tech companies about the unintended consequences of technological advances. How do you keep your ear open to those potential things without slowing down the machinery of change? I’m very sensitive to that. Our products are all about the people who use them. What comes with that is trying to anticipate not only the great things that people can use your products for but those things that might not be so good, and try to get out in front of those.
We implemented something in IOS 11 where it detects if you’re in a car and will shut off your messages and notifications. That isn’t us playing Big Brother. That’s us giving you a tool to help you do the right thing. You can override it; you may be a passenger instead of the driver, and that’s okay. But we would like to try as many of those as possible so that we help people do the Clockwise from top left: The Apple Watch, iphone X, and Airpods wowed consumers—and reviewers—in 2017. right thing. Back in the day, giving people the ability to buy music digitally. That was about doing the right thing in a simple and straightforward manner because at that time everybody was ripping music off. Essentially, music was becoming free. We really try to think through these things.
Music has always been part of the Apple brand. Apple Music has had a lot of user growth, but streaming is not a major moneymaker. Do you think about streaming as a potential stand-alone profit area, or is it important for other reasons? Music is interesting because it inspires people. It motivates people. There is a deep emotional connection. Apple was serving musicians with a Macintosh back in ’84–’85. So it’s something that’s deep in our DNA.
Music is a service that we think our users want us to provide. It’s a service that we worry about the humanity being drained out of. We worry about it becoming a bitsand-bytes kind of world, instead of the art and craft.
You’re right, we’re not in it for the money. I think it’s (Continued on page 104)