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Apple’s recent quarterly earnings demonstrated insane success. As a result, failing companies like Sony and J.C. Penny have suddenly reorganized their missions to copy Apple.

Unfortunately, they will fail, because they don’t understand why Apple succeeds. 

Why Apple Succeeds 

Apple earned $46.3 billion dollars in the last quarter of 2011. And of that $13.1 billion was profit.

Big numbers like those are meaningless without comparison. For example, Apple’s profits in the 4^th quarter were greater than Google’s revenues.

MG Siegler pointed out an interesting fact this week, which is that Apples revenue from iPhone alone is more than all Microsoft’s revenue.

These facts illuminate the new reality of the consumer technology industry, which is not that Apple is in the same league as supergiants like Google and Microsoft but that Apple is in a league of its own.

Apple is so ridiculously successful, that many businesses have given up on their old strategies and have embraced a new strategy of just copying Apple.

They want that secret Applesauce, and are hoping that imitating Apple will bring them some measure of Apple-like business success.

That would be a great strategy, if they really understood why Apple was successful and really embraced it. But they don’t understand, so they won’t succeed.

What the Imitators are Imitating

Apple co-founder Steve Jobs once looked up to Sony as a model for how to run a company. Now Sony looks up to Apple.

And no wonder. Contrast Apple’s $13.1 billion profit to Sony’s $1.2 billion loss for the same quarter.

It’s no wonder that Sony’s new President and CEO,  Kazuo Hirai, says he wants to embrace Apple’s strategy of “centralized top-down decision-making on products and a focus on software and service combined with hardware.”

Hirai created a user interface Gestapo called the Integrated UX (the UX stands for user experience), which now has authority over product managers across the company — a kind of Japanese group decision-making version of Apple’s Jonathan Ive, who lords over user experience and industrial design at Apple.

As an example of why this is important, one Sony executive said that before the Integrated UX group was formed, four separate product groups were each working independently on Sony’s iPad killer tablet.

He’s also said that, like Apple does, Sony must focus on “user experience” instead of just making great hardware.

Another company that has transformed its strategy into “just copy Apple” is — are you sitting down? — J.C. Penny.

The department store chain hired former Apple executive Ron Johnson in November to head the company as CEO.

Johnson was instrumental in developing Apple retail stores and the Genius Bar. J.C. Penny is hoping that by putting Johnson in charge, he’ll sprinkle magic Apple pixie dust all over the company and drive it to profitability and growth.

And, in fact, Johnson is doing for J.C. Penny something akin to what he did for Apple: Transform the shopping experience.

J.C. Penny stores will be completely redesigned within four years, according to Johnson’s plan. Each store will be divided into 100 or so “boutiques,” with a “town square” at the center of every store.

Johnson has already announced that he’s simplifying the chain’s promotions down to three types (everyday, monthly and clearance). Last year the company ran an incredible 590 unique promotions.

These moves by Sony and J.C. Penny sound like good ones. However, they’re unlikely to turn either company into anything remotely like Apple in terms of market share, revenue or profit performance.

Why Apple Succeeds

Both companies are simplifying to reduced costs and customer confusion. Both are focusing less on the product and more on the experience. Both are focusing on innovation.

All these are Applesque ideas, and all perfectly fine as far as they go. However, these are not the attributes that make Apple successful.

To illustrate my point, I need only point to Apple’s own history. When Apple was far, far less successful, the company still demonstrated focus on simplification, user experience and innovation.

Apple’s current monster success results from a plan put in place by Steve Jobs in the late 1990s. The plan has the following attributes:

1. Identify a broad product category that has the attributes of massive future growth, massive scalability and massive profit potential. (In Apple’s case: content.)
2. Identify the subcategories of this category where users are being frustrated by bad user experience. (In Apple’s case, music, movies, web content, TV, books, magazines and newspapers, etc.)
3. Develop integrated solutions to control everything from production to consumption in order to create an overall user experience that’s vastly superior to anything else available. (In Apple’s case hardware, ultra-simple-to-use software and online services.) Ignore all the rules, and just create the best experience no matter what.
4. Time entry into each subcategory based on available hardware technologies and “cultural readiness.” (In Apple’s case, music players in 2001, smart phones in 2007, tablets in 2010 and, next, TVs.)

So you can see that Sony and J.C. Penny are cherry picking minor attributes of Apple’s strategy that are non-revolutionary. But that’s the opposite of Apple’s approach.

Apple’s approach is total, top-to-bottom revolution and control in all areas of business. It also depends upon a willingness to forgo everything that lies outside the mission.

Apple’s secret is totality instead of superficiality.

When Steve Jobs famously quoted Picasso by saying that “good artists copy, great artists steal,” he meant that great artists (or companies) don’t look to be only superficially influenced by the greatness of others, but instead they take those great attributes in their totality and make it their own.

It’s telling that after quoting Picasso, Jobs expanded on the thought by saying that: “part of what made the Macintosh great was that the people working on it were musicians and poets and artists and zoologists and historians who also happened to be the best computer scientists in the world.” Apple didn’t hire computer people and tell them to borrow from musicians and poets. They hired musicians and poets.

Of course, this is classic Reality Distortion Field hypnotics. But it reveals an idea Jobs had about embracing influences totally, rather than superficially.

At best, Sony’s and J.C. Penny’s new CEOs are good artists. But they’re not great artists. They’re borrowing ideas from Apple, not stealing them.

So Apple’s imitators are not making Apple’s true source of success their own. And as a result, they will not succeed like Apple does.

 

Picture of J.C. Penny CEO Ron Johnson courtesy of WireImage.

 

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Adam Lashinsky is a veteran Silicon Valley journalist and Senior Editor at Large for Fortune. Lashinsky wrote a riveting feature last year on the inner workings of Apple’s secretive culture that prompted him to publish Inside Apple: How America’s Most Admired–and Secretive–Company Really Works in January of 2012.

Inside Apple is a short read (about 180 pages) that provides several peeks behind the thick veil of secrecy Apple keeps between itself and the outside world. After reading Lashinsky’s portrayal of the company, you should have a better understanding of how Apple works and what makes it tick. Your perception of the world’s most valuable technology company should be challenged with fascinating stories from inside the walls of Cupertino.

The most obvious takeaway I got from Lashinsky’s book is that Apple is not a fun place to work. Apple employees are focused, ideal-driven workers that don’t slave under an iron fist for an ego trip or fat paycheck. The internal culture of Apple is one of perfectionism where the product is elevated as the first and foremost priority in every aspect of business. Apple isn’t your typical Silicon Valley company, in fact, it’s unlike any other company on earth.

[Warning: This review contains spoilers.]

While much of Inside Apple is Lashinsky’s informed retelling of Apple’s history and how it will function post-Steve Jobs, there are little nuggets of information that Apple fanatics will undoubtedly appreciate.

“The easiest way to get something done was to write an email with STEVE REQUEST in the subject line,” said a former employee. “If you saw an email with a STEVE REQUEST at the top that would definitely get your attention.” The result was a company that marched in lockstep with the perceived beat of a charismatic leader who was omnipresent.

Steve Jobs’ profound influence on Apple cannot be understated. Everything was for Steve and ultimately credited to Steve. Employees had a bigger-than-life boss that drove them to achieve excellence. “But they believed that whatever they were working on would be seen, eventually, by “Steve.” For all flowed up to him, and his fingertips were on everything important that Apple did.”

While reading Inside Apple, I noticed how Lashinsky consistently focused on Steve Jobs throughout the entire book. Certain chapters do pertain to Tim Cook and other Apple execs, but Steve Jobs was always the backbone of the company. While not quite as biographical in nature as Walter Isaacson in Steve Jobs, Lashinsky uses Jobs as the catalyst for most of his specific anecdotes and overall narrative.

There are several parts of Inside Apple that have already been highlighted by the press, like the lockdown rooms, employee dummy positions and packaging room, but the book contains many other interesting factoids.

The most obvious takeaway is that Apple is based on secrets:

Another Valley engineer plays in a regular poker game with a team of Apple employees. The understanding is that if Apple comes up at the card table, the subject will be changed. Being fired for blabbing is a well-founded concern. For example, people working on launch events will be given watermarked paper copies of a booklet called Rules of the Road that details every milestone leading up to launch day. In the booklet is a legal statement whose message is clear: If this copy ends up in the wrong hands, the responsible party will be fired.

Visitors are allowed at Apple offices, but they are kept under tight wraps. Some report being shocked at the unwillingness of employees to leave their guests unattended for even a few moments in the cafeteria. A tech-industry executive visiting a friend in mid-2011 was asked not to post anything to Twitter about the visit or to “check in” at the popular website Foursquare, which publishes a user’s location. In Apple’s view of the world, simply revealing that someone visited Apple on undisclosed business could lead to divulging something about Apple’s agenda.

Apple created an elaborate and unnerving system to enforce internal secrecy. It revolves around the concept of disclosure. To discuss a topic at a meeting, one must be sure everyone in the room is “disclosed” on the topic, meaning they have been made privy to certain secrets. “You can’t talk about any secret until you’re sure everyone is disclosed on it,” said an ex-employee. As a result, Apple employees and their projects are pieces of a puzzle. The snapshot of the completed puzzle is known only at the highest reaches of the organization. It calls to mind the cells a resistance organization plants behind enemy lines, whose members aren’t given information that could incriminate a comrade.

You’ll find out more about Apple’s internal workings while reading Inside Apple, like the small group of engineers that carry the title of DEST (distinguished engineer/scientist, technologist). The industrial designers are “untouchable” on campus, and responsibility is always delegated to the DRI (Directly Responsible Individual) for a certain project.

Lashinsky also details the Apple New Product Process, or ANPP. This playbook automates “the science part so you can focus on the art.” Every Apple product follows the ANPP. Once a certain product is ready to leave the design labs, an engineering program manager (EPM) and global supply manager (GSM) take the reigns. Tim Cook built a robust operations process in China that the EPM and GSM are directly involved in from start to finish. The system is a well-oiled, proven one that gives Apple the ultimate level of control over its supply chain activity overseas.

Apple’s executives are described as “talented rich kids” by Lashinsky. They have access to nearly infinite resources and money isn’t a factor for pursuing product ideas and getting things just right. Jonathan Ive famously requested that the Italian marble for Apple’s first Manhattan store be flown to Cupertino for him to personally inspect. The executive team meets every Monday to discuss products. While he was running operations, Tim Cook used to prep his employees for Monday’s meeting over telephone on Sunday night. Commitment is an essential trait within Apple’s corporate culture.

Inside Apple addresses the company’s new CEO in detail. Tim Cook is described as a man with a “prodigious memory and command of the facts.” Cook is the kind of executive that relies on spreadsheets; he is a very detail-orientated leader. Cook is intimately familiar with Apple’s products and operational affairs. While he possesses an incredible work ethic, he enjoys hiking in Yosemite National Park and cycling.

Lashinsky gives details about Scott Forstall (the most Steve Jobs-like executive at Apple), Eddy Cue, and the unsung heroes of our favorite fruit company. Most don’t know that a young executive by the name of Hiroki Asai is responsible for all of Apple’s promotional materials and global branding. Described as a “silent force” that knows how to “channel Steve,” Asai looks like he could still be a design student in college. Instead of taking classes, he’s leading the creative marketing for one of the most powerful brands in the world.

You’ll learn a lot while reading Inside Apple. Steve Jobs hated Fox News. Katie Cotton runs Apple’s notoriously tight-lipped PR department. Only five executives were authorized to talk publicly about the iPhone when it launched in 2007. Steve Jobs met with Lytro to talk about revolutionizing mobile photography before he died. Siri means “beautiful woman who leads you to victory” in Norwegian.

Apple is a treasure trove of secrets, and Lashinsky attempts to shed light on the dark and mysterious world of Cupertino. He also looks ahead at what it will take for Apple to continue succeeding (noting that “”the competition still will not have Steve Jobs”), and how other businesses can learn and apply Apple’s outlook on business. Lashinsky quotes many other journalists and authors, including our very own Leander Kahney, and his book will be appreciated by the business sector and Apple cultists alike.

Inside Apple is a must-read for any self-professed Apple fan. The book is available on Amazon, at your local Barnes and Noble, and the iBookstore.

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Apple is doing a better job auditing its suppliers than it’s competitors, says a China labor activist.

Labor activist Li Qiang says Apple is doing a much better job of monitoring factory conditions than Dell, Hewlett-Packard, Nokia and many others.

“I compared Apple with other cell phone companies, such as Nokia. And the conditions in those factories are worse than the ones of Apple,” he said.

However, Qiang says that conditions in the supply chain are not the responsibility of the suppliers themselves or the Chinese government. Apple ultimately bears responsibility, and the company should spend some of its record profits in improving conditions.

Qiang is the founder of China Labor Watch, the leading advocacy group that helped the New York Times investigate conditions in Chinese electronics factories, which has helped re-ignite the debate about conditions.

“Although I know that the iPhone 4 is made at sweat shop factories in China, I still think that this is the only choice, because Apple is actually one of the best,” Qing told Laptop magazine.

Qiang praised Apple for disclosing the problems it has uncovered at it suppliers, especially because Apple’s reports are so serious and disturbing. He noted that competitors like HP and Dell haven’t been anywhere near as forthcoming.

He said Foxconn, which is infamous because of employee suicides, is actually one of the best places to work in the supply chain. Foxconn is a hard place to work, with long hours, grueling deadlines and abusive management. But pay and benefits are higher, Foxconn workers receive health and safety training, are properly equipped, and the plants are checked daily for safety compliance, according to a China Labor Watch report (“Tragedies of Globalization: The Truth Behind Electronics Sweatshops”)

“Foxconn is not good,” Qiang told the New York Times. “But if we compare all industries, electronics, textile, toys, Foxconn is one of the best.”

Qiang compared Foxconn to Compal Electronics, which has much poorer safety practices.

At Compal Electronics, a huge supplier that manufactures notebooks for Dell, HP, Lenovo and Toshiba, workers reported that the company does not provide face masks or ear plugs, despite loud noises. Apparently, there was not even a first-aid kit available. “In the event of an injury,” Labor Watch writes, “the workshop manager will give the injured worker some cotton to cover up their injury.”

But even though Apple does more than it competitors, it is ultimately responsible for the conditions at suppliers’ factories, Qiang argues.

Reading about the abusive managers, poor safety conditions, filthy living accommodations, long hours, and low wages, it’s tempting to blame the suppliers who run the factories or government authorities who are charged with enforcing China’s 2008 Labor Law. According to Li, China’s Bureau of Labor is limited in its abilities by local governments that receive tax revenue from the factories, but don’t have to provide benefits to what they classify migrant workers. The suppliers, he says, are also limited, because of price and production pressures from Apple and the other OEMs.

“If Apple still lowers their prices and doesn’t give enough profits to the factories, then the factories don’t have money to improve the labor conditions,” he said. “So it’s always the problem of Apple and not the problem of factories. We can see that Apple is trying to put all the responsibility on the factories by releasing the supplier factory list and trying to put the factories into the focus of the immediate public, but we think that Apple should do more to make a positive change in the whole system.”

Though he believes that Apple has done a better job of inspecting its factories than others, Li maintains that the public is right to put more pressure on Tim Cook’s company than its competitors who have the same problems. Because Apple makes the most profit, he reasons, it also bears the most responsibility for fixing a broken system. He maintains that it wouldn’t take more than 2-percent of Apple’s profits to dramatically improve workers’ lives in China while companies such as Dell and HP would have to spend more.

“Although we think Apple is among the best in terms of auditing, we still think that Apple can do more because it is the most profitable company in the world,” he said. “As soon as Apple is willing to give a small percentage of its profits, the workers can benefit a lot. But Apple is not willing to do that.”

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You know that so-called “permanent injunction” Motorola got against Apple that resulted in Apple pulling all iPhones and iPads short of the iPhone 4S off their online store earlier today? Already overruled, and Germans can once again get their iPhone and iPad on.

Slashgear reports:

Apple has been granted a suspension of the German injunction against 3G-enabled iOS devices, with the iPad WiFi + 3G, iPhone 4 and other gadgets back on sale through the company’s online store. ”All iPad and iPhone models will be back on sale through Apple’s online store in Germany shortly” the company told us in a statement. “Apple appealed this ruling because Motorola repeatedly refuses to license this patent to Apple on reasonable terms, despite having declared it an industry standard patent seven years ago.”

So that didn’t last long: Germans went without being able to buy an iPhone or iPad online for a little under 12 hours. Just goes to show how ridiculously insignificant and short-sighted a lot of this patent maneuvering really is for the average consumer: what’s really at stake here are higher patent licensing fees, not products going off the market.

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As part of the Mac OS X 10.7.3 update released earlier this week, Security Update 2012-001 [release notes] for Snow Leopard broke compatibility with several Rosetta Power PC programs. The issue, as described on Tidbits, MacInTouch and on Apple Support Communities threads (here, here and here), causes some third-party programs to crash unexpectedly under Snow Leopard. This includes popular applications such as Quicken, Filemaker 7, Adobe Photoshop and Microsoft Office 2004 and X. There is a workaround solution that helps alleviate the issue, at least until Apple addresses it with another update, explained right after the break.

The problems appear to stem from Rosetta, a lightweight and dynamic binary translator (discontinued in Lion) that lets Intel-based Macs run programs written for PowerPC machines. Printing from programs that rely on Rosetta are no longer working and Excel 2004 also freezes when accessing the File > Open menu command. A partial fix includes the RosettaFix reversioner that replaces the files updated by Security Update 2012-001 with previous versions. The 10.7.3 update is not exactly a walk in the park for some Lion users, who reported numerous app crashes adorned by the CUI graphics. Apple acknowledged the problem and said it is working towards resolving it. Until a fix arrives, there are several solutions to tackle the problem, as 9to5Mac explained yesterday.

Update: 8PM ET: Apple has updated the store and all 3G devices are again available.

Just this morning Apple was dealt a patent blow by a German court that ruled Apple’s 3G products outside of the iPhone 4S were in violation of Motorola patents. The “Fair, Reasonable, and Non-Discriminatory” (FRAND) nature of the patents means Apple should be able to purchase licensing rights to those patents at market rates (i.e. what Nokia, Samsung, and others pay). According to Apple, Motorola has not offered those types of terms.

Fast forward to a few minutes ago: Apple stated the 3G devices in question would be back on sale “shortly”…

Slashgear reported:

Apple has been granted a suspension of the German injunction against 3G-enabled iOS devices, with the iPad WiFi + 3G, iPhone 4 and other gadgets back on sale through the company’s online store. ”All iPad and iPhone models will be back on sale through Apple’s online store in Germany shortly” the company told us in a statement. “Apple appealed this ruling because Motorola repeatedly refuses to license this patent to Apple on reasonable terms, despite having declared it an industry standard patent seven years ago.”

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From 9to5Toys.com:

MacMall is offering 9to5 readers an additional 3% off of their already lowest prices on Mac Minis and iMacs this month yielding the lowest prices you’ll find anywhere (by as much as $50) with free shipping via this link.  The 3% is deducted at checkout and MacMall doesn’t charge tax in most states.

All discounts, including higher end models listed below:

.

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Update: Apple had these videos taken offline.  We will make an effort to see if they exist somewhere else. Help us out in the comments if you find them.

Former Apple marketing executive Bob Borchers, who was part of the original iPhone team and helped lead the Nike+iPod partnership and third-party iPod integration with car manufacturers, recently gave a talk at a school in California to discuss his experiences at Apple (part 2 below). In case you are unfamiliar, you might remember Borchers from several “guided tour” videos for iPhone and other Apple products a few years back. He has also been a source for many of the interesting stories coming from Adam Lashinsky’s new book “Inside Apple.”

At the starting of his talk to students, Borchers surveys the crowd to find out the ratio of Android users to iPhone users, leading him to joke: “Alright that’s good. I’ll keep my Apple stock.” As a former marketing executive, Borchers showed and talked about a few ads, but also discussed the AT&T partnership, as he noted, “We broke rules in terms of how we worked with folks like AT&T”:

“AT&T as a company… they buy the cellphones and then they sell them to you and I… we said, ‘no we don’t want to do that’. We want to be able to sell the iPhone. We want to be able to talk directly to the customer. That was a big, big change for the industry.” 

Other than telling some recent stories that have debuted in “Inside Apple,” Borchers also talked about Steve Jobs’ initial mission to create the iPhone, describing the late CEO as wanting to create “the first phone people would fall in love with.” He also discussed how important the multitouch display and having the full “Internet in your pocket” was to the original concept. Before wrapping up his speech, Borchers talked about how the iPhone was developed from his point of view on the product marketing/product management team and the importance of Apple packaging:

“Our job was really to establish what the iPhone was going to be, and to work with all the engineers and everybody else to create that product… when we decided we wanted to do touch technology, i would then go work with the design team [etc]… If you think of an orchestra… our job was to be the conductor.”

Borchers discussed Apple’s obsession with attention to detail and gives the example of iPhone packaging: “One of the things that Apple is absolutely passionate about… and we spend too much time on… but as consumers I think you recognize it as being really important… you spend time doing even the silly stuff… like making sure the packaging is perfect… so when you open up an Apple product… you’ll see that it’s beautifully designed… that’s the attention to detail Steve was famous for.”

As for the Gizmodo iPhone “nightmare”:

“It’s like losing your keys only a hundred times worse cause Steve Jobs is going to come running after you. It was a big deal… but it’s a human process… occasionally people make mistakes… the iPhone has been ok.”

These days Borchers is a partner at Opus Capital, investing in startups after the iPhone business grew so much that, “it wasn’t as much innovation as it was just kind of keeping things moving forward.” He wanted to “go back to small again.” You can check out part two of the Borchers talk below.

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Remember that impressive Liquipel waterproof coating for smartphones and mobile devices that was being shown off at CES? Well, according to a previously reliable source, it’ll soon be a feature present on Apple’s long-awaited iPhone 5, and Samsung’s upcoming Galaxy S III.

The source, for Today’s iPhone, is said to be “well-placed” within one of the U.K.’s top independent phone retailers, and reportedly provided the correct release dates for the iPhone 4 and the iPhone 4S before their launch. However, he provides the “latest whisperings with a side of caution,” the report notes.

He claims that Apple’s next-generation iPhone, widely believed to be called the iPhone 5, will be water repellant thanks to the incredibly impressive Liquipel coating that was on show at CES back in January. But it may not be the first device to get it. Samsung’s next flagship smartphone, the Galaxy S III, will also feature the same technology, he claims.

But the feature isn’t just another selling point, according to the source: “Both will have had Liquipel treatment as they’ll be altering the working on the insurance.” Though he did know know what these changes would be exactly.

You may be quick to dismiss the claims because they come from a U.K. retailer and not the CEO of Liquipel, but there could well be some truth in the rumor. After all, liquid damage is one of the top causes of insurance claims, and manufacturers would undoubtedly like to rule it out.

What’s more, we already know that HzO, another company that provides a waterproof coating for mobile devices, was in talks with smartphones manufacturers — namely Apple and Samsung — to get their technology onto the latest devices. In fact, Samsung was reportedly “very excited” by the product.

When we first saw how impressive these waterproof coating from both Liquipel and HzO are, we immediately envisioned future smartphones shipping with this technology as standard. However, I must admit, I wasn’t expecting to see it so soon.

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Apple has always been a company that stresses the details. Everything down to the tiniest pixel is highly scrutinized to perfection. That’s why it doesn’t come as a total surprise that Apple is going after developers for using the wrong type of iPhone mockup to promote third-party apps on the web.

Cupertino doesn’t like the idea of developers using white iPhones to show off their work in marketing materials. It’s a black iPhone or the highway.

TechCrunch founder Mike Arrington reports for Pando Daily:

The private written communications I’ve seen from Apple, though, are quite clear on the restriction. In verbal communications they’ve said that they’re reserving use of the white iPhone for their own marketing materials.

Apple clearly outlines the type of iOS promotional materials third-party developers can use, and the mockup examples show black iPhones only. Does that mean white iPhones are off limits?

While this type of restriction is not at all against Apple’s personality, it seems that many other developers have not run into this issue yet. Apps that have been featured in the App Store, like Path and Flipboard, still use white iPhone promotional materials on the web. It’s unclear as to whether Pando Daily’s interaction with an unnamed startup is an isolated incident. Apple reportedly approached said startup and requested that its white iPhone promotional materials be taken down from the web.

Developers, have you run into this issue with Apple?

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