The magical halo that surrounds Apple hasn’t gone — just yet, anyway. Otherwise, it would be hard to explain why chief executives of luxury brands leave their lush and (somewhat) glamorous lives to come work for Apple. First it was Yves Saint Laurent CEO Paul Deneve who left the fashion house to become chief of special projects reporting to Apple CEO Tim Cook. And today, Apple announced that Angela Ahrendts, CEO of Burberry, is joining the company as senior vice president.
By all means, this is an inspired choice for Apple. The Cupertino-based company has been a bit directionless in terms of retail operations since Ron Johnson left to become the CEO of JC Penny (where he was later nudged out.) He was replaced by John Browett, CEO of U.K. retail chain Dixons & Tesco.com. He turned out to be a colossal disaster. He was fired in October 2012 and since then the company has been without a retail chief.
It has started to show in earnings results — average store revenues were down to $10.1 million in Q3 of 2013 (when Apple had 405 stores) versus $11.1 million in Q3 2012 (with 367 stores.) During Q3 2013 overall retail sales were $4.074 billion versus Q3 2012 sales of $4.084 billion. Even scarier is the decline in retail profits: $667 million in Q3 2013 versus $868 million in Q3 2012.
Some of that can be attributed to a lack of new products until the new iPhones were released late in Q3, but still, those are glaring declines and perhaps that is why it is opportune time for a new retail chief. Here is what Cook had to say to his troops in a memo published on 9to5mac:
She will lead both our retail and online teams. I have wanted one person to lead both of these teams for some time because I believe it will better serve our customers, but I had never met anyone whom I felt confident could lead both until I met Angela. We met for the first time last January, and I knew in that meeting that I wanted her to join Apple. We’ve gotten to know each other over the past several months and I’ve left each conversation even more impressed.
She shares our values and our focus on innovation. She places the same strong emphasis as we do on the customer experience. She cares deeply about people and embraces our view that our most important resource and our soul is our people. She believes in enriching the lives of others and she is wicked smart. Angela has shown herself to be an extraordinary leader throughout her career and has a proven track record. She led Burberry through a period of phenomenal growth with a focus on brand, culture, core values and the power of positive energy.
Who is Ahrendts?
Ahrendts seems to be an ideal fit for the job; she has a long history in the retail business. Born in New Palestine, Indiana, she is the third of six children. Her mother was a fashion model, and she fell in love with fashion early. She attended Ball State University and graduated in 1981 with a Bachelor of Arts degree in Merchandising and Marketing. She then started working her way up the retail ladder. She was president of Donna Karan International in 1989, later joining Henri Bendel as executive vice president and joining Liz Clairborne, where she helped nurture startups like Juicy Couture and Lucky Jeans.
“She knows how to balance a collection, taking into account the business needs while always protecting the integrity of the designer.” Donna Karan on Ahrendts in Time magazine
A mother of three, Ahrendts joined Burberry in 2006 and the stock has surged almost 250 percent, with the company becoming a $3 billion a year fashion colossus with 530 stores. Of course, it helped that she caught the luxury goods wave early and rode it to the top. But a slowing global economy has hit Burberry hard. The ruthless expansion of the brand into four corners of the world, plus declining quality, has reduced Burberry’s stature. I personally think (and I might be alone) of it as an overpriced Banana Republic; the exact opposite of luxury concepts.
That said, Ahrendts did one thing that all her peers in the fashion business didn’t do and still have not been able to grok: she embraced technology wholeheartedly. Burberry became an early adopter of whatever new cool thing that came around — it was an early convert to the potential of Instagram, for example. But more importantly, it weaved digital into its entire business processes, making Facebook, Twitter and Google as much a part of its growth strategy as advertising in the glossy magazines.
A few weeks ago I read an interview with her and realized how deep and intrinsic digital was to Burberry’s future. She told the interviewer:
Now, everybody is a digital customer, so doing things digitally is no longer a niche [play]. Doing things digitally is how the entire world communicates. That’s our language today. Digital is not an afterthought. Our design teams design for a landing page and the landing page dictates what the store windows will look like, not the other way round. In creative media, they’re shooting for digital, then we are turning it back to physical. We knew every pound we spent digitally, we could potentially get ten times the reach that we could get physically.
For a few years now I have been talking to friends who worked with or at Burberry and they all shared little details about how the company worked. In fact, I was so impressed with what I heard that I tried to find a way to get Ahrendts to speak at our RoadMap Conference, but navigating fashion company PR offices is a blood-pressure raising exercise. That’s probably not going to happen anytime soon now that she is gone into the great Apple abyss, where executives are not allowed to talk to media or appear at conferences.
The Good of Ahrendts
When I started to think about what she brings to the table for Apple, I came up with the following list:
- Ahrendts understands the luxury and upmarket retail intuitively and will be able to find new ways to revitalize and rejuvenate Apple stores.
- She understands the concept of “experience” shopping better than anyone else out there (and is available for hiring.)
- She can balance operational efficiency with art in a retail experience.
- She will help Apple expand in China, where she has a lot of experience as Burberry CEO: they were the first ones to drive Burberry into the lesser known Chinese cities.
- She knows online retail and importance of digital quite intimately.
And now for the bad news
As great as she might be, can she succeed at Apple amid its somewhat unusual culture? More importantly, will she be allowed to win at Apple by being herself, the very reason she has been successful so far? Here is why I ask that question:
- While it is easy to go from a few hundred million dollars in sales to $3 billion (like she did at Burberry), growing a $21 billion+ a year business with 405 stores isn’t easy.
- Unlike Burberry, Apple stores serve a diverse set of customers who buy a diverse set of products and have a diverse set of expectations from the brand and customer service.
- It is fashionable to think that CEOs are superheros who come up with all winning strategies, but the fact is that CEOs make decisions and you need a team to provide you the smart and eclectic inputs to act upon. How will Ahrendts do without the digital team at Burberry?
- I have said it before and I will say it again: Apple doesn’t really have the internet gene, and it shows up time and again in how its products intersect with the internet and online services. A lot of that has to do with Apple’s culture. Apple is a company that is notoriously closed and insular in terms of ideas, both adopting and adapting to them; just look at Apple’s presence on social. Burberry under Ahrendts seemed the exact opposite.
- Apple products and retail stores are about creating a customer experience that keeps customers loyal to the Apple brand at a time when the company is under incessant attack from the Androids. Maintaining that loyalty and experience — turning that brand into a customer’s digital destiny — and yet keeping the profitability growing is a challenge.
The rise of intimate computing
Ahrendts comes to Apple at a unique moment in time. While the world is focused on the transition from old fashioned personal computers to pocketable internet devices and tablets, the real shift is going to come in next three to five years. We are going to see the rise of what is going to be called “intimate computing,” where devices on our bodies will be held together wirelessly by a smartphone, thus creating a computing fabric.
As the early experiments have shown, these intimate machines have to be a lot more human than, say, Google Glass. My dear friend Christian Lindholm, who worked for a long time on user interfaces for Nokia and later as the chief innovation officer of design agency Fjord, believes that intimate computing is a world of fashion and personality and personal flair. He currently is CEO & co-Founder of KoruLab, a wearable operating software platform company. One of the main reasons why we have not seen any devices become popular on the scale of the iPod or iPhone is because they lack that fashionability.
This transition to computing jewelry is going to be made possible by emergence of curved screens (recently announced by both Samsung and LG) and new magical materials. Apple spends a lot of time researching those two areas and it wouldn’t surprise me to see them craft new intimate computing devices, especially now that they have hired Ben Shaffer, a designer who worked on Nike’s wearable devices.
This new intimate computing era means that Apple has to stop thinking like a computer company and more like a fashion accessory maker whose stock in trade is not just great design but aspirational experience. And it has to do that at price points that are not quite luxury, which is going to be the challenge. The fact that Cook brought in YSL’s Paul Deneve tells me that the company is already thinking about the intimate computing future.
I look at the future and can’t but help think that Ahrendts could be the inheritor to the CEO throne. She has operational experience, she understands fashion and fashionability and is a classic combination of left-and-right brain that Apple seems to adore.
So what’s the problem?
That said, I think the biggest challenge and perhaps one that could prove to be her Achilles heel has less to do with her capabilities and more to do with how Apple works.
First, she is not Ron Johnson. And she is definitely not John Browett
Brownett. She is Angela Ahrendts, and she is a rock star.
She hobnobs with rock stars, hangs out with models and graces the covers of magazines. She is the personification of a media celebrity CEO. She is a woman who seems to have it all. She is used to being the center of attention and being able to access reporters and give interviews. She is not the nameless, faceless functionary that Apple loves and makes sure that they remain anonymous.
The time she will spend at Apple will tell a lot about the company. The post-Steve Jobs Apple, despite Tim Cook’s assurances, still works like Apple in Steve Jobs’ day: secretive, controlling and making sure that the message of the company is airbrushed. How will she deal with playing second fiddle to working for Cook and Jony Ive, the only two people from Apple who are deemed to be stars representing Apple?
Can Apple change its culture to adapt to Ahrendts or will Ahrendts change to become Apple’s functionary? That is the real question. If Apple changes, then you are looking at the next Apple chief executive, one who can take the company in a different direction.
And that’s why she is an inspired choice: one that could help change Apple itself.
And now a personal message: I am hosting GigaOM RoadMap, an experience design conference with Katie Fehrenbacher on November 5th and 6th in San Francisco. I would love for you to join the two of us and we’ll have experts like Jack Dorsey (of Square and Twitter) and Kevin Systrom along with many more speakers tell us the role of design in our increasingly digital society. For details, visit the conference website.