Last month when the Dow Jones Industrial Average passed its 2007 high of 14,165, ending up at 14,254, you couldn’t help but notice that Apple on that very day dropped by -0.5%, down to $429 per share, off 39% from year before.
The stock wizards have been absolutely baffled by Apple’s drop from its lofty peak of $700 a share. In fact, on the day the Dow passed its 2007 high and Apple continued its free fall, stock analysts were still positive on buying Apple. Of the analysts who follow Apple, 29 were “strong buys,” four were “buys”, and six recommended a hold.
The problem with the financial analysts is that they look at all the data and only the data. The fact is, great financials are not the only ingredient in a stock price. The critical ingredient, besides great financials, is a genuine belief that there is visionary leadership that will lead to a continuing flow of leading edge products and services.
At Apple, Steve Jobs was the ultimate visionary leader. He earned his credentials starting with the iPod and then following with the incredibly successful launches of the iPhone and the iPad. The public just knew that this guy was great on products and would lead the company to yet higher levels. Another person like this in the technology industry, in my estimation, is Paul Jacobs, of Qualcomm. That company continues to generate leading-edge chips that are critical to the growing capabilities of smartphones.
Such a leader does not have to be a technology wizard. Consider Lou Gerstner. When he launched his simple but powerful strategy of “IBM will help solve the IT-related business challenges of our customers,” it was big news that IBM was going to focus primarily on services. The company went at it with tremendous gusto and was very successful. Lou was followed by Sam Palmisano, a fairly low-profile guy who not only continued the push into services but launched a very successful major effort to increase software as an important component of IBM’s business. Back in the late 1980s, who would have guessed that in 2013 IBM would be the vibrant giant it is today?
What is the learning from all of this? I think it is fairly clear:
1. Needed: a visionary leader, not an administrator. The leader needs to be paranoid about making the core offerings of the organization more exciting and more impactful with its customers. That sounds simple, but doing it with clarity and speed is absolutely necessary. You must avoid any kind of bureaucracy that can water down the impact of your efforts or slow it to a snail’s pace.
2. Deep personal involvement is necessary. The leader needs to personally get involved with the details. The vision and the distinctiveness may be based on hard-core scientific technology or can be related to improving the customer experience. Lou Gerstner exemplifies such personal involvement. He spent most of his first three months with the company simply talking to customers about their information-technology challenges, but by the time he was finished and had launched his services vision, his employees knew and the outside public knew that this guy knew customers and was determined to help them. Likewise Steve Jobs personally led the conceptualization and development of the easy-to-use leading-edge products that enabled him to be so massively successful.
3. You must have the guts to lead. The leader has to get out in front and take a stand and truly lead the troops as well as the outside followers and customers. Paul Jacobs of Qualcomm does a good job of this. If you follow him closely you realize he not only is a technology wizard but has nerves of steel and knows what he wants to accomplish. He is not a high-profile, charismatic type; he’s simply a strong person who oozes self-confidence and has a proven track record.
Apple could surprise us in the next six to nine months by emerging with yet another big new idea. On the other hand, I think the stock market is telling us that the public is beginning to believe that Apple really doesn’t have strong visionary leadership. Apple will be a solid technology company but the Apple era may be on its way out.
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