Solving Apple's Innovation Problem
On the face of it Apple has one innovation problem that it needs to overcome – find a new category-busting product like the iPhone. Not so easy, of course. But the intervention of hedge fund manager David Einhorn, mad at the company’s inability to leverage value from its $137 billion cash pile, tells us that its innovation problems are significantly bigger.
It needs to re-instantiate the idea that it could be worth a $1 trillion.
Instead Apple is a company whose current, core customer-centric mission has acted like a dehydrator in the company’s idea closet. Its insistence on a very narrow definition of what it does has made it impotent to use that money. It’s creativity is all but dried up. …
… We face two simultaneous problems in the global economy. The first is the accumulation of capital for non-productive uses – Bain reports that by 2020 the total of financial assets in the world will be $900 trillion, $300 trillion more than today, and its effect is constantly to threaten a surge in non-financial asset prices such as commodities. Apple is a symptom of that problem hoarding cash it is too scared or unimaginative to spend.
The second is the growth of a global middle class that will be extremely resource hungry and that is causing enormous structural problems – or opportunities – because of the pace of development. These are Apple’s future customers.
I got talking recently about this, and the role of the USA, to Bhaskar Chakravorti, senior associate dean of International Business & Finance at The Fletcher School at Tufts University. Bhaskar also runs the Institute for Business in the Global Context.
“America’s future actually depends on a global system capability in innovation,” says Bhaskar, “that is deep, long-term investment in solving problems on a systemic basis.”
There’s some sense in applying this obligation also to corporations. As Bhaskar points out 40% of global GDP comes from emerging markets, yet only 10% of US GDP comes from these areas. America is letting opportunity slip by.
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