Over the years, I have watched a number of companies go from unquestioned dominance to being in trouble.  General Motors going into the 70s was the most powerful automobile company in the world and Toyota was a low quality challenger. But by mid-decade, GM was on the ropes and Toyota appeared unstoppable. IBM started the 80s as a synonym for the tech market and left it with a fired CEO and a future that was anything but certain.  Netscape owned the Internet and then lost it in a period of 5 years in the 90s. Microsoft, the power that was untouchable in the 90s, has been anything but for the last decade.  Each of these companies was not taken out by a competitor, though Netscape would like to believe otherwise, they were taken out by their own mistakes. Now, Apple may be on that path. Is Antennagate the beginning of Apple’s self-destructive phase?

Individuals seem to have problems with fame, power and controlling themselves as well. We are watching Lindsay Lohan self-destruct (not to mention Mel Gibson) right now.  The core cause may be the same, arrogance, a false feeling of invulnerability, and no concept for consequences of both. We’ll leave the Lohan issue for others and explore this with regard to Apple.

Causes of failure

I actually studied the IBM decline formally for several years and was required to study the GM decline in college. I covered Netscape and Microsoft’s problems real time and have followed Apple since the early 90s.

If I had to pick a common thread between the companies that either failed or came close to failure it would be arrogance. For each firm, they reached a level of success where it appeared the executive team was spending too much time reading glowing reports and believing them, and not enough time actually looking at the facts and made a lot of really bad decisions.

For GM, it was the belief that Toyota simply couldn’t build a better car and a competitive analysis process that focused GM on competing products that were five years old. For IBM, it was breaching trust and shifting what had been customer relationships that were co-dependent on highly dependent relationships and then using that dependency against the customers. These customers eventually revolted. For Netscape, it was the belief they really were the next Microsoft and that they could compete wherever Microsoft did, including the enterprise, and that they really didn’t need to provide the free browser they initially promised. For Microsoft, it was a breach of trust shift from the co-dependent relationship with the hardware OEMs to one where the OEMs were dependent and then treating those OEMs like dependents coupled with the belief that customers would take whatever they shipped, complete or not.

In each case, the company seemed to become convinced at a deep level that it couldn’t make a mistake and that if it had the power to do something, doing it was ok. In each case the firms found out that this perception was wrong.  GM almost failed, IBM almost failed, Netscape failed, and Microsoft’s executive team has been on death watch for an extended period, not to mention that Bill Gates left.

Apple’s Slip

Last week, Steve Jobs, after being accused by both Consumer Reports and a US Senator of covering up a serious problem with the latest phone, got up and pretty much said folks needed to get a life. He lied by arguing that the iPhone’s antenna problem was shared by other cell phone companies, he pointed at the folks who brought it up as alarmist and ill informed, he didn’t promise to actually fix the problem but provided a way for people to mitigate it for free, and he denied he knew anything about it earlier even though both Bloomberg and the Wall Street Journal (and others) had reported he did.

In short, his defense seemed to be that people are stupid and needed to get a life. That Apple would tell them what they needed to know and that they should be content with what Apple told them, and that Apple not only didn’t do anything wrong they really weren’t planning on fixing anything (even though it has been reported that a fix for products to be shipped later has been done).

This seemed to take arrogance to a new level in comparison to the other firms I’ve mentioned. It is not often you see the CEO of a US consumer products company call a US Senator and Consumer Reports stupid during the same event.

Apple may have reached that quintessential point, shared with the other firms, where it thinks that it can get away with anything. While Apple has been unique to date in being able to get away with things like stock option backdating, toxic chemicals in products sold to children, misusing a local police force to break down a blogger’s door (the search warrant has since been revoked), and some really questionable practices by partners this may indicate that, if they haven’t already, they are approaching their own come to Jesus moment.

Self Destruction

Every company has the power to self-destruct.  Historically, that power is demonstrated once a company reaches a point where their success seems unassailable. Then we see an avoidable bad decision, because it believes that consequences don’t apply.  Apple has clearly reached a point where they feel they can do no wrong and Apple may be having its Lindsay Lohan moment as a result.  Apple may have either made that move last Friday or indicated that one will be coming shortly as the firm explores just how much it can get away with while on top. Historically, the market hasn’t been that forgiving of supreme arrogance. Apple has survived more than most, but even Apple isn’t invulnerable to its own arrogance.  When the folks at Harvard start comparing a Steve Jobs to Bernie Madoff, maybe it’s time to think different.

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