Umair Hague on Apple’s “real Achilles Heel”

Umair Hague

Here is an excerpt from an article written by Umair Hague for the Harvard Business Review blog. To read the complete article, check out other articles and resources, and/or sign up for a free subscription to Harvard Business Review’s Daily Alerts, please click here.

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Herewith, the second in a series of posts discussing a new agenda for capitalism. To get the most out of it, a gentle suggestion: please read last week’s first [click here], if you haven’t already. Enjoy!!

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So, does your iPhone 4 work? Its antenna issue, some say, including Consumer Reports [click here], points to Apple’s various weaknesses: arrogance, bad PR, poor testing, out of touch management.

So is this a great turning point for Apple? Well, yes and no. Apple does have an Achilles heel. But it’s bigger — and more enduring — than any or all of the above. It’s the second bullet point in what you might call an agenda for 21st century capitalism: building a high-impact organization. Apple’s great weakness is that it isn’t one — yet.

Here’s a suggestion. Apple, when you think about it, is a microcosm of the global economy; a tiny but striking representation of both its strengths and its weaknesses. Apple mass produces “product” (with a smattering of services on top), mega-markets it (across mass media), and sells it in your
local mall, mostly to developed-world “consumers.”

Here are just a few of the downsides: The raw materials Apple uses are toxic to the environment; Apple’s Chinese subcontractors have endured a spate of recent suicides; Apple takes advantage of a questionable Chinese exchange rate regime that effectively exports unemployment to the developed world (and subverts the very notion of “free trade”). And it does all this at a lightspeed pace of “innovation,” which results in spirals of obsolescence; last year’s junk heads, often, to the landfill. Finally, it’s questionable whether Apple’s products, as beautiful as they are, offer meaningful benefits to people. Are they just the technological equivalent of Jimmy Choos, the kind of stuff that underpins the consumption addiction at the heart of the global economic crisis in the first place?

Apple, to its great credit, strives mightily to minimize each and every one of these downsides. Yet, that it must do so is the very point. How different, as a linchpin of the economy, is Apple from the Ford of 1930, the GM of 1950, the P&G of 1980, or the GE of 1990? In economic terms, not so much: all are built on the same set of institutions: mass production, mega-marketing, “profit,” hierarchy, opacity, “innovation.” You know the score — and by now, you might just ask yourself: “isn’t it time to move past the industrial age already?”

The hallmark of a 21st century business is having built a radically more fruitful set of economics, so a company, organization, or country doesn’t have the downsides above in the first place. Hard as it might be, think of an Apple that can create awesome iStuff without a single one of the negative effects above — and then expand that vision to include carmakers, pharmaceutical companies, and banks — and you’re beginning to picture a 21st century economy [click here].

So Apple’s Achilles heel is this: It’s part and parcel of what you might call a global Ponziconomy. That’s one where businesses do better by doing bad. There, companies compete to make some people better off by making others worse off. Like Bernie Madoff’s returns to investors were largely illusory, so the benefits offered by a Ponziconomy are often simply fictional — as we’ve discovered the hard way over the last couple of years or so.

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Umair Haque is Director of the Havas Media Lab. He also founded Bubblegeneration, an agenda-setting advisory boutique that shaped strategies across media and consumer industries.