Sunday, November 22, 2015

Can Apple Survive on Hardware Alone?

No one disputes that Apple makes amazing hardware. Whether a phone, watch, laptop or desktop Apple makes beautiful hardware that is often lusted after by consumers and copied by competitors. The sleek lines and rounded corners evoke something out of a scifi novel and the way Apple markets their products they have a more incommon with artisanal goods that mass produced consumer products. Yet to own piece of the future is not cheap. Apple products are typically more expensive than similar products in their category while also being less modifiable and accessible at a hardware level. This higher expense has meant that Apple has great margins on their products and has largely stayed away from the race to the bottom seen across the consumer electronics market. However, the market Apple has chosen to target is limited by its nature and eventually Apple will reach saturation so the questions remains what is the next step for the house that Jobs built?


Here are what I think about some potential next moves for the company that are being bandied about the Internet (plus some of my own):


1) Double-Down: This is the most straight forward option. The company continues to produce phones, desktops, tablets and other hardware along the same format that has lead to their current success. I think the Beats acquisition was in part an effort to expand their current market strategy (i.e. high margin hardware) with the Apple Watch being a different play entirely (see next bullet).


2) Tech as Fashion: This is a popular opinion by many pundits as Apple has been pushing the Apple Watch and building their presence in the high end fashion retail market. The high end fashion has similar margins as Apple and fashion designers have similar aspiration qualities present in their products as Apple leverages their products. As consumer technology is more mainstream this could be a good move though will still require some cultural shift. Though if the smart watch can become as ubiquitous as the smart phone then that could be another product stream that fits into Apples current market.


3) Apple as Service Provider: Apple Music launched this summer to much fanfare into a crowded streaming service market while Apple has within the last year revamped their iCloud storage options and pushed hard to be the service to store your photos. Focusing on software and services would be a major shift for Apple and also any area where they are generally weaker. Though while history has shown that Apple doesn’t understand software (i.e. Ping, Mobile Me) Apple does have great marketplace experience with the iTunes and App stores, which does give it mindshare in payee information.


4) Apple as Content Provider: Apple already puts on the iTunes Music festival every year so their is nothing stopping them from producing original content (like Netflix or Amazon) or partnering with establishing movie or music studios for executive content deals that would only be availiable on iOS and Mac OS X devices (this could be considered the next evolution in the HBO Now deal).


5) Apple as Infrastructure: Rumors have circulated that Apple is working on a car though there could be greater oppurunity for Apple rollout their own cellular network or even fiber network. Apple has always been particular about how customers interact with their products and controlling the full experience through services would be next evolution in that development.


References:
The Monthlification of Apple by Jan Dawson (http://recode.net/2015/10/23/the-monthlification-of-apple/) Published on: 10.23.2015 and Accessed on: 11.17.2015


Why the Legacy Car Makers Can’t Compete with Apple or Tesla by Matt Asay (http://readwrite.com/2015/10/15/tesla-apple-connected-car-makers) Published on: 10.15.2015 and Accessed on: 10.18.2015


9 Features Apple Music Needs to Win Over Power Users by Travis Bernard (http://techcrunch.com/2015/08/22/please-fix-apple-music/) Published on: 8.22.2015 and Accessed on: 8.26.2015.


Apple is Acquiring New Photo Recognition Start-up by Russell Brandon (http://www.theverge.com/2015/10/6/9466613/apple-perceptio-acquire-photo-recognition-startup-siri) Published on: 10.06.2015 and Accessed on: 11.23.2015