GigaOM » Apple’s reorg

Without a leader, what’s next for Apple retail?

Erica Ogg — Tue, 30 Oct 2012 22:22:05 +0000

Going into the most critical sales period of the year, Apple’s retail ship has no captain. Again.

On Monday CEO Tim Cook let two of his top executives go. While the departure of iOS software honcho Scott Forstall is getting most of the attention, the retail operations department lost its leader too: John Browett, who just joined Apple in January, was also shown the door Monday. It’s also nearly a year to the day that Apple’s valuable retail empire lost Ron Johnson, who had built Apple’s formidable retail operation from scratch, to JCPenney. But this time, Apple has to start a sudden search for a replacement from scratch and the timing is far from ideal.

Hoping for happier holiday sales

Between October and December 2011 the the company saw its best quarter ever; Apple sold 37 million iPhones, 15 million iPads, more than 5 million Macs and 15 million iPods. The retail operation alone made $6.1 billion in sales during that quarter, and Apple stores sold more iPhones, iPads and Macs than ever before. And it’s no coincidence it happened when it did: the last three months of the calendar year have long been the most lucrative for PC and consumer electronics companies.

Of course, the holiday shopping time is big for any retailer. But for Apple it’s becoming critical to its success — last holiday quarter brought in more than half of the company’s net income for the entire year. But as big as last year was, Cook is actually putting more pressure than ever on holiday sales now, and likely for the foreseeable future: he’s lined up all of Apple’s most important products for a holiday season debut. Every department is looking to beat last holiday’s record sales, but the iPhone and iPad teams are done pushing out products; it’s up to Apple’s retail and operations department to get those devices and services into customers’ hands now.

Who will lead them?

Browett’s exit was not surprising to people paying attention. He made a series of bad moves once he arrived from U.K.-based Dixon’s, most notably trying to cut back on staff in Apple stores in hopes of boosting profit. He also failed to open new stores in China at the rate Apple had forecast.

Still, his departure is not the same as Johnson’s planned exit — Johnson gave more than four months notice before he left to assume the chief executive spot at JC Penney. This was a quick firing and now Cook has to start an executive search. To figure out who he could be looking for, it’s useful to look back at what he did last time.

Finding the right resume

The 10-month long search took him to a company outsider with international experience from an electronics retailer. On paper, that reads well. In practice? It didn’t work out because Cook chose someone with a discounting and cost-cutting mentality.

This time around, Cook could look inside. Apple retail operations veterans were passed over before, such as VP of Retail Jerry McDougal. Would Cook give insiders who know Apple’s culture and corporate expectations a better look this time?

Sanlitun Apple Store, Beijing, China

It also seems like going with an electronics industry veteran wasn’t a great move. Apple doesn’t do electronics retail the way that Dixon’s, Best Buy or Fry’s does it. Perhaps Apple would be better suited to branch out to someone with experience in lifestyle retail, from Nike or Coach, someone who understands Apple’s extremely valuable brand. After all, Apple Stores are more lifestyle boutiques that happen to sell a limited amount of gadgets than a traditional electronics store anyway.

Global brand experience is a must, as is someone who knows how to operate a network of international stores. Apple’s growth is coming from outside the U.S.: Last holiday quarter in particular international accounted for 58 percent of Apple’s sales. Apple continues to grow in China — it will open its seventh store there next week. Apple had planned to hit 25 stores by the end of 2012, a goal it didn’t come close to hitting, so that’s likely to be an important priority for whoever fills this position. But it’s not just the Greater China region. Cook has said in the past the Apple would like to grow more in Brazil somewhere down the road too.

Whatever decision Cook makes is going to be watched carefully and have implications for the future of Apple’s growth and its very valuable retail brand. Doing this search while ramping up for the holiday isn’t ideal, although it’s possible Cook has been planning this move for a while: Browett was known to be on thin ice. But this does represent is a bigger and more symbolic opportunity for the company: to mix up the makeup of the leadership team so it’s not uniformly male and white.

As long as Cook is remaking the company into his own, it’s as good a time as any.

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From inside Apple, the Scott Forstall fallout

Om Malik — Tue, 30 Oct 2012 05:19:40 +0000

Tim Cook, Apple’s chief executive, put his stamp on the Cupertino, Calif-based iPhone maker Monday and shook up his management team. That meant promotions for some and exits for others. While executive changes are as routine as replacing shoe insoles at other companies, at Apple they are stock-influencing moves, especially since one of the executives was widely (and incorrectly) viewed as a CEO candidate.

And since we are talking about Scott Forstall, senior vice president of iOS and someone who had worked with late Steve Jobs since NeXT, the news is getting dissected in countless ways.

A lot has already been reported – the New York Times has a fairly good summary and behind-the-scenes color. John Gruber’s analysis of the situation can be summed up in two words: Ive Up. And Gdgt’s take is pretty spot on. Now here is what my sources deep within Apple are telling me.

There has been a lot of talk about Scott Forstall being asked to sign an apology letter for the Apple Maps debacle. He refused. None of my sources were able to confirm this bit of news, though The New York Times reported that is indeed the case.
Forstall’s firing was met with a sense of quiet jubilation, especially among people who worked in the engineering groups. Or as one of my sources quipped: there are a lot of people going for celebratory drinks, even if there is a little bit of doubt about their roles in the future.
While the now-rescinded resignation of Bob Mansfield was masterfully planned, my sources say that Forstall’s exit was fairly last minute and not something he initiated. Many within the iOS and OS X teams only heard about it minutes after the news went out. Engineers were caught off guard, a source told me.
Many feel that Craig Federighi, who is taking over Forstall’s job in addition to overseeing the Mac OS X software business, is someone who needs to prove himself. He is not as decisive and divisive as Forstall.
There is a sense of excitement around Jony Ive taking over as head of the newly created human interface group. The reason for the excitement: hope for a new design direction for many software products. Most think Eddy Cue taking over Siri and Maps is a smart and natural thing to do.
According to my sources, there have been fissures in the management team for a while. Steve Jobs and Forstall were close, but none of the executives really cared for the deposed iOS chief. He really built a reputation by executing on Steve’s vision and acting as Steve’s mouthpiece.
Forstall had less-than-pleasant relationships with many senior executives, including Cue and Mansfield. My sources confirm what the Times reported earlier – Ive and Forstall had a rocky relationship .

Schedule-driven follies

In conversations, I learned about something that is troubling from a long-term point of view. Unlike in the Jobs era, when the company would ship features when they were ready for primetime, a culture of schedule-driven releases has become commonplace.

The time-based schedule is one of the reasons why Siri and Maps arrived as half-baked products and were met with derision. Many engineers inside Apple could foresee problems with Maps. Why? Because Maps were driven by a time schedule.

Maps and Siri are complex products whose dependencies (for the lack of a better word) go deep into different parts of the phone and even the network. The schedule-driven release culture makes folks less daring — why take arrows in your back for failing to deliver a radical new feature on a pre-dictated time? If this cultural warp continues, Apple might have a bigger headache on its hands. Ive’s appointment as the Human Interface honcho means that more risk-taking needs to come into the products. Ironically, the news that should garner more attention has flown under the radar.

Bob Mansfield will lead a new group, Technologies, which combines all of Apple’s wireless teams across the company in one organization, fostering innovation in this area at an even higher level. This organization will also include the semiconductor teams, who have ambitious plans for the future.

In other words, Apple understands that in our cloud-centric connected future, the company needs to not only care about the “human interface” and the “industrial design” but that all of those pieces have to work seamlessly with the guts and nerves of digital devices — chips and the networking technologies. With Cue, Ive and Mansfield, Cook has ensured that Apple is putting its best foot forward. Forstall is no longer part of this future.

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Make no mistake: it’s Tim Cook’s Apple now

Erica Ogg — Tue, 30 Oct 2012 00:56:45 +0000

Tim Cook’s biggest challenge at post-Steve Jobs Apple was supposed to be keeping together its brilliant executive leadership team. But after the failed launch of Apple Maps last month and his own hiring mistake, Cook put his own stamp on the company Monday with Apple’s biggest executive shakeup in years.

Apple fired two from its leadership team: SVP of iOS Software Scott Forstall, and SVP of Retail Operations John Browett. Sure, the company didn’t outright say it had dismissed the two men, but in the carefully crafted world of public relations, the message was clear. The move was pitched as part of a large-scale reorganization of the top leadership team’s responsibilities, and emphasized “improving collaboration” between groups at Apple, which are otherwise clearly doing a lot of things right since Cook took the helm.

Cook had made some tweaks to the team since he became permanent CEO in August of 2011 — promoting Eddy Cue from VP to SVP of Internet Software and Services right away, and in January he filled the retail operations position with Browett. But nothing like this. The decision to remove company veteran Forstall — as well as his own new hire Browett — is the boldest and most significant move Cook has made in his 14 months as chief executive.

Scott Forstall demonstrates a feature of Apple Maps. The problems with the product likely led to his ouster at Apple.

Browett clearly wasn’t working out, something predicted by many company observers, so his departure isn’t much a surprise. But Forstall’s removal would have been unthinkable just a year ago — after all, he was mentored by Jobs himself going back to their days together at NeXT in the 1990s and mentioned as a possible future CEO of Apple. Cook’s decision to let him go after a major misstep involving Maps shows that Cook is unafraid to remake Apple into a company that works for him, not just for Steve Jobs.

The Maps mess

Forstall was hired to work on Mac OS X starting in 1997. But he will be remembered for leading the development of iOS, which started out as a top-secret project within Apple to power the first iPhone. Today, the software Forstall created is on 400 million devices. And that still wasn’t enough to save his job.

Fault for the Maps debacle can be laid squarely at Forstall’s feet. As head of software for the iPhone it was his responsibility, and the poor state of the software at launch – with incomplete and sometimes wrong data, without integrated transit directions, and worst of all, without a “beta” label — was shocking to many customers. The uproar over the software’s severe shortcomings threatened to overshadow the iPhone 5 launch, although the device appears to be selling well. Such events are usually publicity boons for Apple, but instead of simply reveling in yet another successful device launch, just a week later Cook was forced to publicly apologize for Maps.

Not only was Cook unafraid of getting rid of a Jobs’ protégé, he also doesn’t appear to mind admitting he made a huge mistake. Browett’s tenure leading Apple’s retail empire lasted less than nine months. Cook was the one who signed off on Browett’s hire, and he did so despite the obvious cultural mismatch identifiable by anyone who’d shopped at a Dixon’s in the U.K. before: the discount electronics retailer with middling customer service seemed the polar opposite of Apple Stores. The failure of Browett is clearly Cook’s fault. But to his credit, he didn’t waste too much time; he didn’t even wait to hire a replacement before letting him go.

The new-look Cook era

There’s a domino effect in the decision to let Forstall go, and years from now, the result will likely characterize how we think of Cook’s tenure at Apple.

The move should have a noticeable impact on Apple products and overall direction. Cook put iOS development into the hands of the same guy who’s in charge of Mac software, Craig Federighi. Apple has always treated to the two operating systems as distinct, but complementary. However, OS X has been taking on more and more features initially developed for iOS, and this new organizational direction foretells possibly even deeper integration between the two divisions and their software for future devices.

SVP Eddy Cue will take over Siri and the problematic Maps app in CEO Tim Cook’s major company shakeup.

Another possible impact of the change: the overall look and feel of Apple products. Forstall had reportedly clashed with Jony Ive over the design philosophy that underlies iOS and Apple’s own apps. The philosophy, called skeumorphism, was favored by Jobs, and continued to be championed by Forstall. Some designers regard Apple’s software design for applications such as GameCenter and Passbook as cheesy and outdated. By removing Forstall, it appears Ive will have full control over the look and feel of hardware and software.

Cook also chose to put Maps and Siri into the hands of Cue. While it means Cook trusts Cue with these products that are particular weak spots for Apple, don’t expect an instant fix. Online services in general, which Cue oversees, are Apple’s big weakness — problematic Maps and Siri are joining iCloud, whose record for reliability is far from spotless.

Some Apple watchers thought Cook wouldn’t be up to the task of leading the kind of company that Jobs built; the thinking was that he’d look at his role as simply a caretaker, and that he lacked the capacity to be bold or visionary like his predecessor.

But the move today contradicts that thinking, and the result is a pretty different organization, one looks less like Jobs’ Apple and more like Cook’s.

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Head of iOS software Scott Forstall out at Apple amid big reorganization

Erica Ogg — Mon, 29 Oct 2012 21:12:59 +0000

Apple announced on Monday a major reorganization of the top leadership of the company that will take SVP of iOS Software Scott Forstall out of the picture. Forstall, once considered an heir apparent to Apple co-founder Steve Jobs, will be leaving Apple next year. Recently hired SVP of Retail Operations John Browett will also depart the company.

As part of the reorganization, other top executives will be expanding their roles at the company. Head of industrial design Jony Ive will become responsible for a new Human Interface group. Eddy Cue, who already oversees all Apple’s online services, will add Siri and Maps to his responsibilities. Craig Federighi, recently promoted to the SVP of Mac Software Engineering, will also now oversee iOS, which was Forstall’s division. Bob Mansfield, who retired then un-retired this year as head of Hardware Engineering, will lead a new Technologies division, which includes chip development.

Browett’s stint at Apple was short. His replacement has not yet been hired, and Apple says it is on the hunt for a new head of retail operations.

In a statement, CEO Tim Cook said: “We are in one of the most prolific periods of innovation and new products in Apple’s history. The amazing products that we’ve introduced in September and October, iPhone 5, iOS 6, iPad mini, iPad, iMac, MacBook Pro, iPod touch, iPod nano and many of our applications, could only have been created at Apple and are the direct result of our relentless focus on tightly integrating world-class hardware, software and services.”

Browett’s departure comes as little surprise. His first big move after joining Apple earlier this year was to cut back on personnel at Apple’s retail stores. The move was met by a cascade of bad publicity, and Apple had him quickly apologize and reverse course.

Forstall’s departure is far more significant. He was responsible for overseeing the development of iOS, the software created to power the original iPhone. The success of iOS has catapulted Apple to the top of the mobile world. But his success has been accompanied by some gaffes that have hurt Apple’s image. Both Siri and Maps, which he oversaw, were released in beta, and it was clear neither were in the shape most customers had come to expect of an Apple finished product.

But the Maps issue is likely what pushed him out the door. Maps was not released with a “beta” tag and caused a huge uproar when released alongside the new iPhone 5 last month. The incident has been embarrassing for Apple, and Cook was forced to make a public apology for the misstep.

There were other issues too that put Forstall at odds with his fellow executives. He was a protege of Steve Jobs, but also known to have clashed with Ive in particular. Some reports from insiders at the company revealed brewing tension on the leadership team surrounding Forstall, who wasn’t known to be a very easy person to work with. Some executives, like Ive, reportedly would not attend meetings where Forstall was present. Forstall was also known as a leading force behind the skeumorphic design philosophy behind iOS. While Jobs was said to have favored it, Ive and other designers reportedly had significant disagreement over Apple’s overall design direction.

Update: Forstall’s departure was definitely related to the Maps fiasco. He was asked to leave the company after he refused to sign his name to the public apology over Maps, according to the Wall Street Journal.

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