New Apple CEO John Ternus faces an old problem: the innovator’s dilemma
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Good morning. John Ternus steps up as CEO of Apple today in one of the most public and well-chronicled succession handoffs in recent memory. My colleague Sebastian Herrera has written a great analysis of whether this low-key engineer can lead Apple to victory in the AI race. That’s a key question to track for Apple and other companies at this pivotal moment. And there are other questions to keep on the radar:
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Will Apple now have two centers of power? Tim Cook wrote an emotional memo to staff yesterday, in which he thanked colleagues for bringing out the best in him and praised the “brilliant and wonderful and capable” Ternus as the perfect person to lead Apple. But Cook isn’t going away. As executive chairman, he’ll not only continue to mentor his successor but also engage with policymakers and other external stakeholders on Apple’s behalf. That’s not unusual—or even undesirable—in these tricky political times. But it can add a layer of complication for the new guy, as Bob Chapek discovered when taking over from Bob Iger at Disney in 2020. (Iger remained as executive chairman and returned to the CEO role after Chapek was ousted in 2022.) Other CEOs have privately complained to me that leading a company can be awkward when their former boss sticks around. The onus for getting that balance right will fall largely on Cook.
What problem does Apple have to fix? As Sebastian writes, “The job description for the chief executive at Apple—and the standards by which success is measured—have often been defined by the person in the role.” With the CEO title moving from a master operator (Cook’s background was in logistics and supply chain) to a master engineer with a quarter-century of experience working on Apple’s iconic devices, one might assume that Apple’s chief challenge is to reinvent its products for the AI era. But maybe the bigger challenge is to reinvent its ecosystem, and even its culture, in radical ways. Of course, expertise in one area doesn’t preclude developing or hiring expertise in another. Along with setting the vision and strategy for the company, a CEO’s main job is to create the leadership team to execute on it. Keep a close eye on who Ternus promotes or hires in key roles.
How will Ternus handle the innovator’s dilemma? Apple controls a fifth of the global smartphone market and closer to two-thirds in the premium category of devices, those that cost more than $600. As noted by Clay Christensen, the late Harvard Business School professor and coiner of the term “innovator’s dilemma,” successful companies are incentivized to focus on improving their most profitable products to the point where they often ignore or try to fight innovations that threaten to disrupt their core business. That tendency could be disastrous for Apple, which has struggled to find its footing in the AI era. Last I checked, the most popular AI assistants were owned by Google, OpenAI, and platforms other than Apple. Yes, the iPhone is still ubiquitous. BlackBerry was also a fantastic hardware maker. (I still miss that Qwerty keyboard.) Enough said.
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