When Apple's reach exceeds its grasp

The huge success of the iPod and the incredible media hoopla surrounding the iPhone have transformed the way the world looks at Apple. In five years, it has gone from being the company that makes weird non-Windows computers to the company that makes all kinds of cool products—including great, non-Windows computers. The public perception of Apple is that it's a technology juggernaut with immense power at its disposal as it steamrolls over everyone else in the technology industry while creating one industry-busting product after another.

There’s just one problem with that image: It’s not true. In the past year, we’ve seen numerous examples of how Apple’s reach can dramatically exceed its grasp.

Size is relative

Obviously, Apple is no longer the little two-guys-in-a-garage operation that started out in 1976. These days it regularly generates more than $7 billion in revenue every quarter; in its last quarter, it reported a $1.1 billion profit. Clearly, Apple’s board of directors isn’t rifling through the company’s couch cushions searching for spare change.

But compare Apple to Microsoft and you’ll see just how relatively small Apple still is. Between April and June of 2008, Microsoft turned a $4.3 billion profit on $15.8 billion in revenue—that's more than twice as much revenue as Apple and nearly four times as much profit. And Microsoft employs 91,000 people worldwide, compared to Apple’s 21,000.

Apple takes pride in hiring employees very carefully. As Steve Jobs told Fortune recently, “Recruiting is hard. It’s just finding the needles in the haystack.” The result, by all accounts, is a remarkably talented and qualified work force. But it’s still not a huge one.

Too much, too fast?

We’ve seen plenty of signs recently that while Apple has lots of of good ideas, it also has a limited pool of people to implement them.

The most obvious example is the launch of Leopard, which was delayed for months because Apple had to focus on finishing the first version of the iPhone.

When the iPhone first shipped, developers immediately began clamoring for a system that would allow them to write programs for it. Apple had no doubt been planning for such a system from the earliest days of iPhone development. But the company didn’t unveil it until March 2008.

Even when the App Store finally arrived in July, the company was still scrambling to put the pieces together. Developers had scores of questions about the store, the rules of iPhone development, you name it, and Apple had a hard time keeping up.

I don’t think this is a case of people at Apple slacking off. On the contrary, I think the company and its employees are pedaling as fast as they can. It’s just not fast enough for the company to fulfill its ambitious plans and schedules while also meeting its exacting quality standards.

Play within yourself

Which brings us to MobileMe, Apple’s successor to .Mac. MobileMe’s launch was fraught with problems, including long periods of downtime, an extended e-mail outage, sync failures, and deletion of data. MobileMe arrived on July 11, the same day that Apple released the iPhone 3G and the iPhone 2.0 software—which were themselves plagued by lengthy activation delays.

It makes you wonder: why did Apple decide to launch a brand-new phone, a major software update, the iPhone App Store, and a new Web service, all on the same day? I suppose the company thought it would make a big splash, and it did—but it was caused by a belly flop.

Apple has admitted as much. “It was a mistake to launch MobileMe at the same time as iPhone 3G, iPhone 2.0 software and the App Store,” Jobs wrote in a memo to Apple employees in August. “We all had more than enough to do, and MobileMe could have been delayed without consequence.”

There’s a sports cliché that fits here: "playing within yourself." It means knowing your limitations and acting accordingly. In the case of MobileMe, and of July 11 in general, the company definitely wasn't playing within itself.

So the question is, what does Apple do now? There are a couple general paths it could choose to go down. It could aggressively step up its growth and recruitment efforts, so that it has enough people to implement all of its great ideas (a plan that risks diluting Apple’s carefully selected pool of talent). It could stay the size it is now, more or less, and execute well on somewhat less ambitious plans.

I’m not really sure what path Apple should take from here. It's a huge challenge for Apple's senior executives, and not one with an easy answer. I only hope, for the sake of the company’s future success and the sake of its users, that it solves the problems that led to what happened on July 11.

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