Tim Cook: People See Innovation As Change, But We Have Never Really Seen it Like That

Apple CEO Tim Cook and other top executives such as Craig Federighi and Jonathan Ive have given Bloomberg BusinessWeek great interviews. I’ve put together several quotes from the piece and provided our take on what was said. Please visit the source for the full interview.

You’ve said that iOS 7 is not change for change’s sake. Tell me more about that.

Some people see innovation as change, but we have never really seen it like that. It’s making things better. iOS 7 is a great example of that. It’s significantly better than 6 or any of those that came before it, and obviously significantly better than the other OS out there.

TTS Take: Tim Cook is right. People want a new category or redesign products from Apple every year. Not realistic.

What’s your take on the state of the mobile market today, as it compares to even a year ago?

For smartphones, I think it’s even more a two-operating-system world today than it was before. Maybe that changes. Maybe it doesn’t, but that is the state of things today. I think that Android is more fragmented than ever and, as a result, when you look at things like customer satisfaction and usage, you see the gap between Android and iOS being huge.

There is a huge difference between market share of units and usage share. And it shouldn’t surprise anybody that it’s like that. Anybody that’s used both should not be surprised that that is the natural result. And that’s really important to us because we have never been about selling the most. We’re about selling the best and having the best experience and having the happiest customers.

Happy generally means using more. You know, you find something you like. You do it more. And so I think that has become even more the case over the last year.

I think that, you know, the market has grown even more. It’s even clearer—if it was not clear to everybody—that everybody in the world is going to have a smartphone. There are a lot of people that maybe worry that the market is so big now it can’t get any bigger, but it’s going to get a lot bigger. So there is a lot of runway in this market.

The tablet market in some ways is the smartphone market, just with a lot more players in it. The way I think about the tablet market is that everyone that’s making a PC feels like they must make a tablet, because they’re doing it from a defensive point of view. Everyone that’s making a smartphone sees it as an incremental kind of thing, so they want to make one.

Then you’ve got something akin to sort of the white-box-PC kind of builder that has entered, and so the number of people making tablets has exploded in the last year. That doesn’t mean there is a lot of great stuff out there by any means, but in terms of the number of people playing, it’s materially larger than it was.

But the results are much like a smartphone in some ways, in that usage is very skewed. It’s even more skewed, frankly, on iPad vs. everyone else. Customer satisfaction is as skewed as it is, and so you have that kind of variable to the smartphone. I think the fragmentation is at least as much, if not more, on a tablet.

I think if I bought [an Android tablet] and used it, and I thought that was a tablet experience, I’m not sure I would ever buy another tablet. The responsiveness isn’t there. The basic touch is really off. The app experience is a stretched-out smartphone kind of experience. It’s not an optimized experience. However, that said, I have always said that the tablet market was going to surpass the PC market. I was saying that well before it was viewed to be sane to say that. It’s clear that we’re 24 months away from that.

So that probably has accelerated even more than I would have thought over the last year. And so to do well in the PC market, you have even more differentiation. There has to be a different reason for buying a PC.

Of course, we think about that a lot with the Mac and believe that we’re doing that with the Mac. But if you’re a PC player, it’s not a great world to be in right now.

TTS Take: Agreed with Tim Cook.

Has Android’s rise in market share surprised you in the time that it’s happened?

I don’t think of Android as one thing. Most people do. I mean, from a consumer point of view, if you look at what Amazon does with Android, forget the name Android for a minute. If you’re coming down from a different planet and you were going to name it, you wouldn’t name it the same thing as what another company does. If you compared that to what Samsung does, I’m not sure you would name that the same thing either.

I think that the importance of that is overplayed. The truth is that there are more people using iOS 6 than there is any version of Android. And in days from now, iOS 7 will be the most popular mobile operating system. And so what does it really mean at the end of the day to show these share numbers and combine all of these disparate things as if they’re one thing? I’m not so sure it has a great meaning to it at the end of the day.

TTS Take: Slightly disagree with Tim Cook on this point. I don’t think Google counts Amazon’s forked Android OS in their activation numbers. And Android is still huge. The only thing that is could stop it for total dominance is the fragmentation.

What’s your take on Android’s many versions? The “fragmentation” issue.

It’s a growing problem.

From a functional level?

Yes. And it’s just not growing in the—it’s not like a baby that becomes an infant. It’s not like that. It’s an exponential. It’s a compounding problem. And think about all these people that they’re leaving behind from a customer point of view. People do hold on. Most people hold on to their phones a couple of years. They enter a contract and honor that contract and then upgrade after that two-year period. So in essence, by the time they buy the phone, many of these operating systems are old. They’re not the latest ones by the time people buy. And so by the time they exit, they’re using an operating system that’s three or four years old. That would be like me right now having in my pocket iOS 3. I can’t imagine it.

It’s not because it was bad. It’s just because the world has changed and there is so much more. And so anyway, I think it is a growing issue. It will show up in developers. It will show up for people that no longer have access to certain apps. It will show up in security issues, because if you’re not moving your customer base to the latest version, then you have to go back and plug holes in all of this old stuff, and people don’t really do that to a great degree. So they are more susceptible to issues.

It just shows up in—I mean, name it. And that issue grows, and because the population is growing, it becomes bigger and bigger and bigger. So we’ll see.

I’m not really thinking about it very much, though. I’m thinking about this and opportunity for us and, you know, the time in front of us. Things that these products and the next ones and the other things we’re working on, and other things that we can do for customers.

TTS Take: Spot on. I think Google is well aware of this that is why they are pushing the “Nexus” branded products. And recently the company has tried another strategy of launching the Nexu experience on Samsung S4. But the “Nexus” market is too small to make a difference.

When you entered the smartphone market, three of the biggest players were Nokia (NOK), Motorola, and BlackBerry (BBRY). We know where BlackBerry is today, and Motorola obviously is now part of Google(GOOG), and now we’ve heard about what’s happening to Nokia. Do the fates of those companies teach you anything?

I think they do several things. I think they’re a reminder to everyone in business that you have to keep innovating and that to not innovate is to die. That’s something that’s deeply embedded in our company.

I think that they also show, from a strategy point of view, that everybody is trying to adopt Apple’s strategy.

TTS Take: What more can you say here. My heart goes out to the 4K+ that are facing redundancy at Blackberry.

That was my next question.

Right? It wasn’t that long ago that people thought it was an absolutely ludicrous strategy to try to do hardware and software, and at that point in time nobody was even thinking about services. They thought it was crazy, and so as you know, the Windows/Intel model of everybody does their specialty [led to the] innovation that produced. And it clearly produced some innovation at the processor level, although that ran its course. And it produced some innovation at the OS level, but that ran its course. But there was no innovation for the product that the customer was getting. It was a shoebox, basically.

But everybody thought that was the right thing for so long, well beyond when it was right—well beyond that. When Apple entered the smartphone business, most people were still beating that drum. Clearly Microsoft wasn’t thinking about buying Nokia then, and I doubt Google was thinking about buying Motorola.

So now all of a sudden you have the three folks that have operating system expertise, forgetting about BlackBerry for a moment. They all have hardware entities, or Microsoft is about to have one. It took them a longer time. Google has bought one. You can argue how well it’s done, but they concluded they needed to do that.

We were never looking for a validation. We’re not looking for external validation of our strategy, but I think it does suggest that there’s a lot of copying, kind of, on the strategy, and that people have recognized that importance.

Now, we’re well beyond just the surface level of design of hardware and software. We’re deep in the guts. This week you saw the A7. You saw our new M chip. Well, these are only possible because many years ago we elected to start building our own silicon team, and now we have many, many people designing silicon.

And you saw us go to 64-bit. Well, why are we able to do that first? It’s because we’re at that level of being vertical. Does anybody—do these other three companies have silicon expertise? You can answer that. Maybe they have something that I’m not aware of, but in terms of the depth of it …

So it will be interesting in the next round, the next wave, to see what happens there. What do people do? When we looked at it, we concluded we needed to do our own stuff because we were dreaming of products that couldn’t be done with silicon that you could go buy. So we designed our own and built an incredible team.

You look at innovation like the iPhone’s camera and the detail that went into the camera. Most people hear the word camera, and they think of hardware. And hardware is really important to it, you know? With the stuff we did with the flash on this. But it’s software, and it’s the silicon—I mean, it’s everything.

So the way I think about Apple is that the magic of this place really comes up at its best when hardware, software, and services come together. And it’s sort of the intersection of those things is where things get incredibly magical. So facilitating that to happen and getting the collaboration level for that to happen is the magic here.

And one of my proudest moments is when other people see that. They don’t know that they’re seeing that, and that’s also the beauty. They don’t have to do it. But look at these (gesturing to iPhones). These are perfect examples where the hardware and the software and the service begin to blend. In some ways you don’t tell one from the other.

And we don’t want the consumer to have to focus on what they are. But I think we’re executing better than the company’s ever done in that area. Well, you talked to a couple of the guys yesterday [Craig Federighi and Jonathan Ive, Apple’s software and design chiefs, respectively]. I don’t know how that went, but I would be shocked if it didn’t go really well. I mean, they complete each other’s sentences because they really like each other! And it’s just not “like” in the friendship sense, but there’s an enormous respect and trust, and that’s sort of at the base of what makes this place operate. We don’t have tons of people, and so we can’t double- and triple-check things. We trust each other and respect each other, and everybody pushes everybody else, and that sort of combination of the collaboration and the friction and getting that the right mix produces products like this.

I went well off-track with that answer.

TTS Take: Give it a few more years and Apple’s competitors will fall further behind. Unfortunately Samsung and others cannot execute this level of vertical integration. This famous quote  comes to mind. “People who are really serious about software should make their own hardware.” Alan Kay

I’m glad you did. While these phones represent the high end of the industry, there’s another part of the industry that’s racing toward the bottom. Chinese manufacturers, Indian manufacturers, $100 phones, $150 phones. What do you think about that? What does that mean for Apple?

I think it’s important that we grow, but I don’t measure our success in unit market share. So if there are a lot of $69 tablets sold that you’re just pounding on to get something to work and get some responsiveness, and it’s thick and fat and just a terrible experience, I don’t really weigh that unit of share like I do a different unit of share. I don’t weigh them to be equivalent.

So I think in most markets in consumer electronics, there’s always a large junk part of the market. We’re not in the junk business. We don’t want to make something for that. What we want to do is make a really great product and provide a great experience. And I’m sure we’ll get enough customers that want to buy that. We want to please them.

That other business, it’s not something—we don’t spend our time obsessed of how to make a product for that because that’s just not who we are and what we’re focused on.

I think, fortunately, these markets we’re in—the smartphone market, the tablet market—these are huge markets, and yes, the market might bifurcate. It has to some degree, as you just pointed out. There’s a segment of the market that really wants a product that does a lot for them. And I want to compete like crazy for those customers and really convince those customers that the iPhone is the best experience for them.

The tablet market is the same case. It sort of bifurcates. You’ve got the players down here that would say—you know, your kid is tugging at you saying, “Daddy, I got to have a tablet.” And you just want to shut them up and buy something cheap. That’s not a market I’m crazy about. I’d like to convince you that the iPad is a better experience and that your kid’s going to learn a lot from using it. And the experience they’re going to have talking to their grandmother across FaceTime is unbelievable, and it’s going to change your life by doing that. I’m not trying to say “Pick me” to shut up your kid.

So on this market, the market that cares about those things, I want us to just over-index like crazy on those. I want us to convince everyone to buy like that.

I’m not going to lose sleep over that other market, because it’s just not who we are. Fortunately, both of these markets are so big, and there’s so many people that care and want a great experience from their phone or their tablet, that Apple can have a really good business. A really good business. And you can see that.

TTS Take: The amazing thing is that Google is happy to count these devices towards their Android activation number. This results in a 70 percent market share for Android and everyone saying Apple is doomed!

You’ve had so much success with the iPhone and iPad before that low-end market really developed. But here it is.

It happens in every market that I’ve seen. Every single market. It happens in cars. It happens in all consumer electronics, from cameras to PCs to tablets to phones to—in the old world—VCRs and DVDs. I can’t think of a single consumer electronics market it doesn’t happen in.

And so for companies that want to chase that, that’s fine. I’m not criticizing it, actually. I call it junk. I don’t do that in a mean way. It’s just my label for it, right? But it’s just not who we are. I refuse to be driven by a blind ambition of unit share.

TTS Take: In other words, you can’t stop the copy cats from doing their thing. But my problem is when some consumers do not give the innovator enough credit for their hard work.

Last question: What is Apple’s mission?

To make the very best products in the world that really deeply enrich people’s lives. That’s what we’re about. And now it’s not to make the most. It’s not to have the highest market cap, but that’s the result of doing the first one well. That’s what we’re about. And hopefully you can see that in our products and, more importantly, feel that in the experience you have using them. That’s what we’re about.

And everybody here knows that. That’s the beauty of this place. We don’t have to put posters on the wall to remind people of that. Everybody knows it.

TTS Take: I’m definitely happy this guy is Apple CEO. He totally understands the company.

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