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The business might have been shaky in the last year or so. The recovery is tentative, yes, I’ve heard that. Your clients are not ordering… that’s understandable. You have to cut cost and offshore your operations, or die. It is next to impossible to hire qualified people… of course.

I guess Apple is not aware of these pearls of wisdom, since they have just had their most profitable quarter ever. Ever!

Apple reported net income of $3.4 billion, or $3.67 per share, in the latest quarter ending Dec. 26. In the same period of 2008, it had income of $2.3 billion, or $2.50 per share (adjusted due to changes in accounting policies).

You can read more about the numbers some place else but here is the point I want to make. If you have a great product strategy and you execute well, you don’t have to listen to all the wisdom being spewed out by th numerous prognosticators. You don’t have to count pennies and compete on price. You can always hire great people.

Most importantly, you don’t have to play by the others’ rules. You set your own.

Few (if any) individuals and organizations are successful all of the time. Apple III was a massive flop, while the preceding Apple II (about 6 million sold). Jack Welch’s a remarkable manager but Kidder Peabody acquisition was a serious mistake. Also, GE was implicated in a number of bribing scandals during his time at the helm.

Anyone can make a mistake, suffer a setback, fail. What seems to distinguish a longterm success from all others is the abiilty to shake off the dust and recover, often reinventing completely itself.

If you or your organization is to suffer a setback, will you be able to recover? If you are a leader, will you be able to instigate the rebirth?

Today, after one of the worst financial crises in decades, many organizations find themselves beaten up, exhausted and standing near the abyss. The best will regroup and go on. Others won’t.

Success is not forever.

In my post about Sun Microsystems from yesterday, I alluded to a decade-long trend of commodization of hardware, pointing out that Sun failed to reposition itself away from the narrow hardware focus.

Today, we are learning that Apple is beefing up its hardware capabilities, looking to start designing its own chips.  Today, they are supplied by a third party.

Why would they? Don’t they know that hardware is a commodity?

This is a classic decision point of buy/make or outsource/insource. Here is why the chosen direction makes sense for Apple:

  • microprocessors are not the Apple’s final product, so commodization does not matter at all;
  • the potentially higher price of a chip will be eclipsed many times over by the revenue generated by new device functionality made possible by precise customization;
  • there is a potential for shortening the time to market metric,  due to improved communication between the hardware group and other functions (software, sourcing, design, etc);
  • reduced “seepage” of ideas and innovation to rivals;
  • continuos improvement of chipsets becomes possible because, unlike with vendors, there is no meter running. Tinkering is inherently important to technological innovation;
  • and finally, strategically, hardware is important to Apple because all of its products are unique in their own way.

So, based on my experience in consulting on strategic decisions, I think it makes sense for Apple.

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