Apple's Decline Isn't So Surprising After All
Firm's huge quarterly losses are another indicator that success comes to those who set the standard
ST. LOUIS — The long decline of Apple Computer fits a pattern so familiar most people don't notice.
A new technology arrives, companies try several designs, then for a time consumers tend to settle on a single implementation. Call it the herd mentality of technology markets. That's why cars have the brake and accelerator in the same place, why telephone plugs always fit wherever you are in the United States, why all clocks run clockwise.
A decade ago, Apple had a legitimate shot at making its Macintosh the standard for desktop computing. It failed - and the announcement yesterday of another huge quarterly loss and the departure last week of Apple's third chief executive in four years highlight the computermaker's continuing woes. But the drive to standardize has created many such losers in history.
"That sort of thing has been going on since the Industrial Revolution," says Billy Joe Peyton of the Institute for the History of Technology and Industrial Archaeology at West Virginia University in Morgantown.
Standardization makes sense. "It isn't a surprise that we move toward it because users would just go nuts" otherwise, says Carroll Pursell, a history professor at Case Western Reserve University in Cleveland and the author of several books on the history of technology. People don't want to have to learn a new position for the brake pedal in every car they drive or contend with nonstandard screw threads on bolts at the hardware store, he says.
Somewhere along the way, standards evolve to make manufacturing and marketing simpler, he adds. "It's sort of a miracle that we've gotten used to."
STANDARDS emerge in various ways. Often, industry players come together and reach a compromise. Sometimes the federal government steps in, as it did with the standards for black-and-white and color TV. At other times, companies fight it out in the marketplace.
That's what happened with Apple. In the mid-1980s, the Cupertino, Calif., company had a technology lead that most companies only dream about. While the leading competitor - IBM's personal computer, or PC - relied on arcane text commands, Apple's computers were easy to use and picture-based. It heralded the future of desktop computing.
But the company made a decision not to license its operating software to other computer makers, as IBM was doing. The result: Computer manufacturers flocked to the IBM standard, increasing competition, lowering costs, and building a huge base in corporate America.
Apple's go-it-alone strategy meant fat profits for awhile, but its more expensive machines didn't attract nearly as many customers and it lost market share over time. Analysts estimate the company's share of the personal-computer market has shrunk to a paltry 3 percent, but the company remains strong in education, graphic design, and desktop publishing markets.
Apple "had plenty of opportunities to own the market or at the very least own a part of it," says Paul Saffo, director of the Institute for the Future in Menlo Park, Calif. Now, "it's teetering on the edge of being completely marginalized."
Ironically, the company that won the standards war in desktop computing was not IBM, which invented the winning machine, but Microsoft Corp., which with IBM's blessing marketed the key operating software that runs it. As sometimes happens with companies that control a key standard, Microsoft became a huge winner in the marketplace.
"If you're savvy enough to identify the situation where you can control the de facto standard, that's a very lucrative place to be," says Barry Jaruzelski, a strategy consultant for computer and electronics companies for Booz-Allen & Hamilton Consulting, based in New York.
Standards don't guarantee that the best technology wins. Apple's Macintosh computers arguably are still more technically elegant than IBM-compatible machines. Many analysts consider today's videocassette recorder technically inferior to Sony's Beta system, which flopped in the marketplace.
If there is any good news for Apple, it is that standards don't last forever and can change for unpredictable reasons, says John Staudenmaier, a history professor at the University of Detroit Mercy and editor of the scholarly quarterly Technology and Culture. Jet engines took over from propeller technology until a rise in fuel costs during the '70s caused a temporary resurgence in propeller research, he says.
He muses: "Suppose Apple makes a couple of smart design decisions...."