INTRO: Over the past several years, Apple has dominated
the top of the fortune 500.
From being the first company to reach a $1 trillion valuation to being the first company
to reach a $3 trillion valuation.
Much of this success is often credited to Steve Jobs which makes sense given that he
was the visionary who gave Apple some of its most iconic ideas and attributes.
With that being said though, Tim Cook has now been the CEO of Apple for over 10 years,
and during that time period, he’s had some of the best execution and least drama of any
silicon valley executive.
From overseeing Apple foray’s into services to leading new product launches such as the
Apple Watch, Airpods, the M1 chip, and potentially soon the Apple Car and Apple Glasses.
There’s no doubt that Apple wouldn’t be what they are today without Tim Cook, but
it seems like Cook’s journey at the top is nearly coming to an end.
Rumors suggest that Cook is looking into a succession plan and that he’ll retire after
he oversees the launch of one more major product category.
Considering this, I thought it would be a great time to look back at Cook’s past and
analyze how he became the CEO of Apple.
PRE APPLE: Taking a look back, Tim’s story dates back
to November 1, 1960 to a small town in Alabama called Mobile.
He grew up with two brothers named Gerald and Michael in a pretty average American household.
Tim’s father, Donald, worked at a shipyard while his mother, Geraldine, worked at a pharmacy.
It seems that his parents were strong Christians as Tim would be baptized as a kid.
Anyway, Tim would end up attending Robertsdale High School where he quickly became a star
student.
He graduated rank 2 in his class and he would enroll in a local state college called Auburn
University.
While Tim always wanted to work at a computer company, it doesn’t seem like he wanted
to be a programmer or a tech person per se.
It seems like he was always more interested in the operations side of companies, and appropriately,
he majored in industrial engineering.
One of his first jobs after graduation was at IBM where he mainly worked on their supply
chain.
While working at IBM, Tim also secured an MBA from Duke University in 1988.
This allowed him to climb the corporate ladder even quicker, and Tim soon became the North
American fulfillment director at IBM.
Despite this rapid progress though, Tim decided to leave IBM after 12 years at the company.
In 1994, Tim was hired as the COO of a small computer retailer named Intelligent Electronics.
He worked here for the next 3 years before jumping over to Compaq Computer Corporation
as vice president.
Around this time, Apple was doing extremely bad.
Revenue was diving off a cliff and the company was on the verge of bankruptcy.
Meanwhile, Steve Jobs had been away from the company for over a decade.
It wasn’t until Apple agreed to acquire NEXT Software that Steve would return to Apple.
Originally, Steve was just supposed to be a temporary CEO, but it quickly became clear
that no one else was better for the role especially given the circumstances.
As Steve assembled a new executive team to hopefully revive Apple, one of the people
he invited to join the company was of course Tim Cook.
At first, Tim wasn’t sure if he was actually going to join Apple, but one thing he was
sure of was that he would at least meet with Steve Jobs.
Like many of us, Tim himself was a massive fan of Steve who he thought was a creative
genius.
But, at the meeting, Steve talked to Tim about his vision for what would eventually become
the iMac.
And after hearing Steve describe his vision, Tim knew that he was gonna do it.
When Tim shared this news with his friends and family, they all thought that he was crazy.
To give up an executive role at an established computer company in order to join one that
was nearly extinct was completely irrational.
Tim admits that there’s no way to logically justify his actions.
But, with that being said, Tim also knew that working with Steve was a once in a lifetime
opportunity.
So, Tim listened to his gut and joined Apple in 1998.
SUPPLY CHAIN WIZARD: Despite joining a company that’s known for
their beautiful products and UI, Tim never really worked on either of these aspects.
He knew that his expertise was within the supply chain, and that’s where he focused
his efforts as senior vice president of worldwide operations.
Tim’s first order of business was purging Apple’s existing supply chain to reduce
complexity.
Tim slashed the number of supply chain vendors from over a 100 down to just 24.
He also reduced the number of warehouses by half, and he started shifting Apple towards
contract manufacturing.
Contract manufacturing is basically when you hire third party companies to handle various
parts of the production and assembly process like TSMC and Foxconn.
These companies also work with dozens of other tech companies which allows them to reach
extraordinary economies of scale.
Aside from cleaning up the supply chain, Tim spent a lot of his effort on inventory management.
One of the crown jewels of Apple’s supply chain is just in time or JIT manufacturing,
and its roots can be traced back to Tim.
JIT manufacturing is the idea of eliminating inventory.
In an ideal JIT implementation, stores would carry absolutely no inventory.
This isn’t to say that you can’t go to the store and buy the given product.
If you were to go to the store, the product should ideally arrive at the store seconds
before you buy it.
Obviously, this isn’t very realistic, but Tim was able to leverage JIT to reduce Apple’s
inventory from weeks of inventory to less than 5 days worth of inventory.
This might not sound like a big deal, but if you’ve ever run a business, and especially
a small business, you know that storing and managing inventory is extremely expensive.
Take the iPhone for example.
Apple stopped releasing unit sales numbers for the iPhone years ago, but let’s just
assume that it's 100 million units per year.
And let’s also assume that each iPhone costs Apple $500 from their end.
If Apple were to store 5 weeks worth of inventory, they would have to sink $5 billion into inventory.
If they only had to store 5 days worth of inventory though, they would only have to
sink $685 million into inventory.
Again, this doesn’t really matter that much today as they have plenty of cash.
But, back in the early 2000s, this was crucial to cutting costs.
And with the help of contract and JIT manufacturing which reduced costs and the help of the iMac
and the iPod which increased revenue, Apple was finally able to regain profitability.
This allowed Steve to focus on the iPhone which was of course a massive success, but
all was not good.
Steve was diagnosed with pancreatic cancer which made it rather difficult for him to
juggle Apple and his personal health.
At one point, Steve actually needed a liver transplant, and some sources suggest that
Tim offered to donate a portion of his liver, but Steve declined the offer.
While Steve declined Tim’s offer, as Steve’s health continued to decline, he delegated
more and more tasks to Tim until Tim was eventually made interim CEO in 2009.
Steve would come back later that year, but in early 2011, he would take another medical
leave of absence before he eventually resigned in August of 2011 which made Tim Cook the
permanent CEO.
TIM’S LEGACY: The first few years of Tim’s leadership
were rather easy given that iPhone adoption was still yet to peak.
There were also plenty of new obvious features to introduce like touch ID and a larger screen.
But, iPhone sales would eventually not only peak but start to decline, and this is when
Tim’s skills as a CEO would really be put to the test.
Tim addressed this decline with a two fold solution with the first part being making
Apple a lifestyle company.
While Apple products have always been expensive, it wasn’t till the last couple of years
that iPhones started getting a reputation for being overpriced.
Now don’t get me wrong here, people have criticized the price of the iPhone since the
day that it was launched, but I think the price argument has shifted substantially.
Initially, the argument had less to do with the device itself being overpriced and more
to do with it being too expensive for the average person to buy.
Today, the argument has shifted more towards the device itself being overpriced.
But ironically, entry level iPhones are actually cheaper than ever before.
Apple keeps around older generations for longer than ever before and the iPhone SE starts
at $429 which is cheaper than the original iPhone.
I think this is all part of Tim’s strategy to maintain Apple’s exclusive image.
If Apple’s presentations focused on how their entry level phones are cheaper than
ever before, that would likely degrade Apple’s image.
However, by focusing on the pro and pro max versions that cost over $1000, Tim is brilliantly
able to get the media to paint Apple’s products as exclusive and desirable.
I believe other overpriced products like the Apple wheels and the Pro stand serve the same
purpose.
These products simply define Apple’s image while Apple’s real revenue drivers are their
cheaper products.
Aside from crafting this genius balance between brand image and practical products, Tim also
reduced Apple’s dependence on the iPhone by embracing services.
iCloud, Apple Music, and Apple TV have all been massive hits for Apple.
As of October 2020, Apple literally had 585 million paid subscribers.
Even if each of these subscribers only pay Apple $5 per month, we’re talking about
nearly $3 billion in revenue per month and $35 billion in revenue per year.
Considering this, it’s not surprising that Apple’s revenue figures are higher than
ever before even though iPhone sales peaked 7 years ago.
Aside from these services providing Apple with a great source of revenue, these services
also strengthen the Apple ecosystem and make it harder and harder for users to leave.
And I think these three factors are what will become Tim's legacy at Apple.
He defined Apple’s brand image, he significantly reduced their dependence on iPhone sales,
and he crafted the Apple ecosystem.
TIM’S FINAL PRODUCT: Looking forward, it looks like Tim is excited
to release one more product which is likely either the Apple Glasses or the Apple Car.
The glasses would be a major step into the AR market while the Apple Car would be a major
step into the EV and autonomy industries.
Either product could be a great sendoff product for Tim, but if the final product is the car,
then Tim will likely have to stick around for a lot longer.
After all, scaling EV production is no easy task.
And given that Tim has publicly announced that he probably won't be CEO in 10 years,
I’m inclined to believe that the last product is likely the AR glasses.
Launching an EV vehicle would simply be a much longer commitment.
Also, the AR glasses are much more aligned with Apple’s other products.
A car is completely out of left field, and Apple really has no prior experience in even
building a car.
They’ve already experienced several delays and hurdles along the way, and I wouldn’t
be surprised if this project was scrapped altogether.
So, the most likely scenario is that we see Apple Glasses roll out in 2025 or 2026 followed
by Tim Cook resigning near the end of the decade.
In terms of a successor, the fan favorite seems to be Craig Federighi which is not surprising
given his charisma and stage presence.
But, experts feel that Craig is better suited to continue leading software development as
opposed to becoming CEO.
I gotta say though, if Craig did become CEO, Apple’s presentations would be quite fun,
almost like Steve Job’s presentations.
But, we’ll just have to wait and see.
In the meantime, Apple stock has already grown 10x under Tim’s leadership, so at this point,
for Tim, it’s just a matter of wrapping up his journey with a bow and saying farewell.
When do you guys think Tim will retire and who do you think will replace him?
Comment that down below.
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