Apple is still doing relatively well, but its valuation is falling like a rock, while Nokia and RIM are ascending from catastrophically low levels. Yet judging from Twitter feeds and relevant articles, it appears the people who disbelieve that Apple can fall are matched by those who can't believe RIM and Nokia will recover.
From my perspective, it would have been a bigger surprise had Apple not fallen after Jobs departed -- but given Apple's earlier recovery, I'm a little surprised folks don't think that either RIM or Nokia can come back. I think this speaks to how wrong our perceptions of companies can be.
I'll close with my product of the week: the one product at CES 2013 I wanted but couldn't figure out how to buy.
Applying Human Attributes to Companies
I think we are slow to see change in companies partly because we apply human attributes to them. Apple's personality is created by the generally positive press coverage on the firm -- at least, recently -- by the advertising we see in a variety of media, the stores we shop in, and the Apple employees we occasionally talk to.
RIM and Nokia are a bit more distant and have been defined of late mostly by the negative coverage that surrounds them. Over the last five years, we've come to believe that Apple can do no wrong, and neither RIM nor Nokia can spell "right."
This preconception, often referred to as "confirmation bias," was tested a few years ago in an elementary school. There were three classes, each comprised of students with a very similar range academic abilities. In one class, the teacher was told all the kids were geniuses; in the second class, the teacher was told they were all mentally challenged; and in the third class, the teacher wasn't told anything, so there would be a base line for comparison.
At the end of the year, the class of "geniuses" did incredibly well -- they were mostly A students. In the class of "challenged" children, most were struggling for Cs. As you'd expect, in the baseline class, there was a more even distribution of those who did well and those who didn't.
The teachers' beliefs caused a result in the kids that mirrored the belief. I still wonder what the parents of the kids in the "challenged" class had to say about this experiment when it was over.
Much like those kids, because we've been conditioned over time to believe that when Steve Jobs ran Apple, it was the company that could do no wrong. Now, even though the firm is very different internally than when it was run by Jobs, we still expect it to overachieve, and we figure that any miss is an anomaly.
Same with RIM and Nokia. Because they screwed up for so long, we're skeptical. Now that both seem to be getting their acts together, we view every piece of good news as an exception and believe that they will soon return to their failing ways.
Self-Fulfilling Prophecy
This actually works to Apple's benefit -- but not so much for RIM or Nokia. Strangely enough, Steve Jobs seemed to understand this from the start, because the very first thing he worked on fixing was the image of 1990s Apple as a failure. He got that US$100 million investment from Bill Gates because folks saw Bill as the industry's greatest success story back then, and if he was willing to bet on Apple, then Apple must be a success waiting to happen. Other investors jumped on board, buying Jobs the time he needed to develop the iPod and complete the turnaround.
This focus on image first was also what Louis Gerstner did with the IBM turnaround. One of his first big moves was to nearly completely replace IBM's marketing department and fund image work so that people saw IBM as successful again. Once that was done, actual recovery -- for both IBM and Apple -- was only a matter of getting the plumbing right.
If people don't come around and start believing RIM and Nokia can improve, then they won't invest in the firm's technology or stock as aggressively, which will make their turnaround efforts far more difficult. This could work for or against Apple.
Apple's Bigger Problem
While you'd think that the continued positive feelings toward Apple would be a benefit, that has not been the case historically. Rather than buying a company more time to turn its problems around, it tends to delay critically needed changes. We saw this with early Apple, then later with both Palm and RIM when they slipped into decline.
Even 1980s IBM showed all the signs that a failure was coming, but people simply chose not to see them until they were so incredibly evident the problems couldn't be ignored -- but by that time it was largely too late, and the catastrophe was unavoidable.
IBM made the biggest layoffs in history and emerged as a very different company, and it took two CEOs to fully restore its health.
When Apple reached its crisis point -- it was within months of going bankrupt -- the board took the critical step of bringing back a guy who had been fired for attempting a mutiny just a few years earlier, and who had been actively bad-mouthing the firm just shortly before it purchased NeXT. The members of that Apple board were desperate, and they were damn lucky their bet paid off. Had Jobs cratered Apple, they would have looked like total idiots. This is to say you don't see boards take that kind of risk very often.
Palm crashed and burned, and RIM hasn't recovered yet.
Wrapping Up: The Irony
The irony is that the very thing that is holding up Apple's image and keeping people thinking positively about the company may guarantee that corrective action won't be taken before it's too late. If RIM and Nokia pass Apple, it will be because they were able to repair their image, creating something closer to the asset Apple currently has.
So, the same thing that will ensure recovery for RIM and Nokia is at the core of what may lead to Apple's unavoidable fall. This likely reveals more about how we are wired than why any of these companies are in the places they currently occupy. As it turns out, positive perceptions can be a huge asset, but they can also delay corrective action to a near fatal point.
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