The Succession of Tim Cook (I): This Is the Legacy He’ll Leave Behind as Apple’s CEO

At Xataka On, we’re going to publish a series of weekly articles on Tim Cook’s upcoming succession as CEO of Apple. This transition, expected to occur before the end of this decade, will mark a significant moment in the history of technology.

Cook has hinted at his retirement in recent years, and his age–he’ll turn 64 in November–suggests that this change is nearing.

While it’s unclear if his departure will happen this year, next year, or the year after, he said in 2021 that he wouldn’t remain at the helm of Apple for another ten years: “Ten more years? Probably not. I can tell you that I feel great right now. And the date’s not in sight. But 10 more years is a long time, and probably not 10 more years.”

When the time comes, it’ll signify the end of an era. Cook will step down, leaving behind an indelible mark on Apple, which has become the most valuable company in the world, surpassing a $3 trillion market capitalization under his leadership.

His successor will inherit a transformed technology giant, facing numerous challenges in a much-changed landscape at the same time. The successor will need to maintain the delicate balance between innovation and stability that defines Apple’s success.

🧭 Some context. When Cook became Apple’s CEO in the summer of 2011, the company faced a very different situation:

• Its market value was approximately $350 billion.
• The company relied heavily on the iPhone and the Mac.
• Apple was perceived as a niche hardware manufacturer.

By contrast, today, Apple is:

• The world’s most valuable company, being the first to exceed a $3 trillion valuation.
• A diversified ecosystem that includes hardware, software, and services.
• A leading player in several technology sectors.

The company’s growth prompts a significant question: Can the next CEO sustain this upward trajectory?

🗃️ Cook’s legacy. Cook’s tenure is characterized by:

Unprecedented financial growth:

• Revenues nearing $400 billion annually.
• Profits approaching $100 billion annually.
• A market capitalization of nearly $3.5 trillion.

Diversified business:

• Introduction of new product categories, such as the Apple Watch, AirPods, HomePod, and Vision Pro.
• Aggressive expansion of services, including Apple Music, TV+, Fitness+, Arcade, iCloud+, and the introduction of a credit card.
• Significant increase of offerings in both products and services.

Sustained innovation:

• Transition to Apple Silicon chips in Macs.
• Development of industry-leading privacy technologies.
• Major investment in augmented reality, culminating in the launch of Vision Pro.

Social and environmental responsibility:

• Commitment to carbon neutrality by 2030.
• Firm stance on user privacy.

Effective crisis management:

• Successfully addressed supply chain issues resulting from the pandemic.
• Navigated geopolitical tensions, particularly with China and Russia.
• Managed regulatory challenges, especially within the European Union.

Bottom line:

Strengths:

✅ Exceptional financial growth.

✅ Successful business diversification.

✅ Improved operating efficiency.

✅ Strong focus on privacy and environmental initiatives.

Weaknesses:

🔴 Lack of “revolutionary” products like the iPhone.

🔴 Continued reliance on China for manufacturing.

🔴 Criticism regarding anti-competitive practices in the App Store.

☔ Challenges for the successor. They include:

Saturation of the smartphone market:

• The iPhone still accounts for around 50% of Apple’s revenue.
• However, growth is slowing, and it even fell year-over-year in 2023.

Increasing regulatory pressure:

• Apple is facing antitrust investigations in the U.S. and the EU.
• Recent European regulations are forcing Apple to open up its operating system and alter its business model to accommodate developers.
• A similar scenario may unfold in the U.S.
• Additionally, Google’s monopolistic practices could jeopardize an agreement that constitutes one-fifth of Apple’s annual profit.

Intensified competition in services:

• Competing with Netflix, Amazon, and Spotify poses significant challenges for Apple’s two flagship services: Apple Music and Apple TV+.
• To thrive in this saturated market, Apple must differentiate its offerings.

Managing expectations:

• Apple is still looking for its next big launch after the iPhone. While the Apple Watch and AirPods are strong products, they alone aren’t enough to drive significant growth. Vision Pro remains in its early development stage and requires a more accessible price point to reach the mass market.
• Moreover, Apple needs to carefully manage expectations regarding Vision Pro’s success and any future developments in augmented, virtual, and mixed reality.

Geopolitics and supply chain:

• Tensions between the U.S. and China remain unresolved.
• Diversifying production away from China remains essential. While Apple has taken some steps in this direction, further action is necessary.

AI integrations and machine learning:

• Competition is fierce, particularly from Google, Microsoft, and OpenAI in generative AI.
• Apple Intelligence’s initial launch showed promise and prioritized user privacy. However, the overall experience still falls short compared to its competitors.
• Striking a balance between advancements in AI and user privacy is a complex challenge.

Talent retention:

• The landscape has changed significantly over the past decade. Other companies, such as OpenAI in AI and Tesla in mobility, may now offer greater cutting-edge incentives than Apple.
• Moreover, maintaining a culture of innovation within a growing company is becoming increasingly difficult.

🫡 The obligations of the successor:

• Margins. Maintaining the profit margins that Apple has achieved is crucial and explains its current market position. With an average gross margin of around 45%–lower for hardware and higher for services–this task isn’t easy.
• Growth. As the iPhone reaches its peak and sustaining growth becomes increasingly challenging, finding alternative revenue sources is vital. Vision Pro is a promising start, but its full potential remains uncertain.
• Regulations. Navigating the pressures from both sides of the Atlantic while preserving revenue is another complex challenge for the next CEO.
• Transitions. To maintain its current momentum, Apple will also need to continue leading the industry into new areas, such as AI and augmented reality.

Finally, ensuring stable and lasting leadership is especially sensitive. Apple’s leadership team largely consists of individuals over 60, similar in age to Cook, who became CEO at 50. There aren’t many candidates of that age, and even fewer with profiles that seem suitable for succession.

🔮 Vision for the future. Cook’s successor will face a significant dilemma: Should they maintain the highly profitable status quo or take risks by pursuing more aggressive innovations? In the first scenario, success will depend on how far competitors advance. In the second case, success will rely on the successor’s own capabilities.

These are the potential scenarios:

1. Consolidation. Focus on optimizing the existing ecosystem.
2. Disruption. Strongly invest in creating new product categories (such as the recently canceled autonomous car).
3. Expansion. Pursue aggressive acquisitions in new markets.
4. Transformation. Solidify the transition to services and software as a major driver for Apple’s revenue.

The individual appointed won’t only shape the future of the company but also influence a significant portion of the technology industry.

🪪 The names. Several candidates are being considered for Cook’s successor. Over the next few weeks, you’ll find posts on each of them on Xataka On. Stay tuned.

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