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What Apple Can Learn from Legendary GM President Alfred P. Sloan

Steve Jobs, I have some advice for you!
Alfred P. Sloan, who was President and CEO of General Motors (GM) during its mid-20th century heyday, is often credited with creating the modern corporation. In a sense, he did, but he also created a GM that could dominate the auto industry for decades -- much as Apple (AAPL) dominates its markets now. Apple is similar to the old GM in some respects, but not so similar that it couldn't also learn a few things from Master Sloan.

Sloan's phrase, a "car for every purse and purpose," summarized his concept of market segmentation. Rather than forcing consumers to adapt to a limited range of products -- the Ford (F) strategy -- Sloan engineered GM to build for variety and constantly changing consumer taste. In this way Sloan moved GM away from pure vertically integrated manufacturing and developed semi-autonomous divisions that could respond to market demand.

Apple's narrow focus
Apple has essentially four product lines: computers (laptops and desktops), iPods, iPhones, and iPads, plus a software business that really exists to control the user experience within the hardware. The user experience across products isn't unified, but it's characterized by a philosophy of interface design that stresses simplicity.

On the product-design side, the goal is to refine away imperfection, so that consumers develop a fetish-like relationship to the equipment. There's no way that Apple devices will ever become commoditized. The company reinforces this by controlling customer relations via its brick-and-mortar (or white-walls-and-glass, if you will) stores.

However, this approach eliminates choice. For example, if you don't like virtual keyboards, Apple doesn't care. If you think iPad is too big, tough. Likewise if you think the iPhone has a screen that's too small. iPods have been offered in a wide array of colors, but your choices with other gadgets are typically silvery aluminum and glossy white.

There are always the abundant accessories, but they're kind of like hanging dice from the review.

How long can Apple make assumptions?
Before people knew they could get a car at a bunch of different price points and with a diverse set of amenities and features (organized in Sloan's framework as Chevys, Pontiacs, Buicks, Oldsmobiles, Cadillacs, and so on), they accepted fewer options because no one had seriously catered to their desire for choice.

Apple's devoted customers have some options, to be sure. They can buy products preconfigured with more memory or faster processors. But fans of prolific variety in functionality, style, and price are enabling Android phones to pick up market share at a healthy clip.

Obviously, there's a tough call awaiting Apple in the future. Diluting the design purity of its devices simply isn't in its DNA, which is Steve Jobs' DNA. But over the next decade, everybody and his brother is going to introduce smartphones and tablets that do everything the iPhone and iPad do, but with far more market segmentation, a la Sloan.

What would Alfred do?
It's horrifying for Cupertino to contemplate, but if Sloan were to look at Apple today, he'd probably suggest streamlining the company into truly separate business units. Sloan would be forced to solve an immediate problem, namely, What to do about the legacy computer business? And the answer might be, Let it go and rely on the evolution of cloud systems and wireless to grow the iPod, iPhone, and iPad markets.

He'd then argue for more versions of devices within the "divisions." To its credit, Apple is tentatively moving in this direction with skunkworks designs for iPads of different sizes. Where Apple would truly resist Sloanism is in pricing: nothing Apple sells is particularly cheap -- you enter at the high end of the market.

For Sloan, this would be like expecting everyone to pony up for a Buick or Cadillac, leaving a vast swath of the market open for entry level and budget-conscious drivers.

Taking the pressure off
Apple doesn't have to adopt Sloanism wholesale. However, as the iPhone and iPad mature, the pressure will once again be on the company to radically refine another type of consumer experience. Apple TV didn't work out so great. An Apple game console wouldn't have much of an identity as a design object.

Milking a bit more out of the current lineup would go a long way toward relieving the incessant pressure to make consumer electronics shockingly new. I can see progress: the redesigned MacBook Air is essentially an iPad with a keyboard -- now all it needs is touchscreen functionality.

Cars aren't computers. But consumer will be consumers until the end of time. And what Sloan did at GM could help Apple avoid the precipitous downturns the company has endured when it's exhausted an exhilarating innovation cycle.


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