At its Core, Apple Is No Longer Innovative – Forbes
Apple (NYSE: AAPL) has built its success upon a steady consumer appetite for buying every iteration of the company’s latest and greatest products – i.e. iPhones mostly. However, with iPhone sales falling, the iconic company is starting to resemble others in the retail industry whose complacency has pushed them to the wrong side of the demand curve.
It’s no secret that I’ve been down on Apple for a while. In January, I predicted that increasing prices on devices void of big innovation was not a sustainable way to continue to grow the business. We have seen very little variation from this trend, in fact, quite the opposite. Just this week at Apple’s much touted WWDC 2019, the company unveiled – you guessed it – more mundane updates to its iOS software for iPhone and iPad, promoting a new (hardly exciting) “dark mode”, as well as new apps for the phone and watch as it tries its hand as a “service” company to make up for tepid phone sales.
As I mentioned in January, what we are experiencing is the slow and steady decline of Apple. The current situation was actually predicted by Steve Jobs himself early in his career, when he foresaw Apple would likely follow in the footsteps of Xerox and IBM if the company “got away from the innovation that made them so successful in the first place.”
Yes, some things may be out of the company’s hands when it comes to phone sales, specifically the impact of regulation. Tim Cook noted in a letter to investors in January that sales were low because of slow growth in developing markets, and he specifically called out trade tensions caused by the current U.S administration. But the letter also references developed markets in which “iPhone upgrades also were not as strong as we thought they would be.”
The truth of the matter is that at its core, Apple’s woes go far beyond their ability to sell their flagship smartphones. The company’s challenges surround one simple fact: Apple is not innovative anymore across any category. Apple is failing to bring anything new to the table in smartphones, apps, smart devices, or even their retail stores. And until they find a way to do so, we will continue to watch this company unravel.
Here’s a look at a few of the most visible places Apple is falling down:
The Folding Phone
The company is falling woefully behind rivals in several categories, including hardware. Earlier this year, Samsung and Huawei unveiled the first folding phones, with the new Galaxy Fold on sale in April. And while Apple still promises a folding iPhone, and did put forth a “concept image,” Steve Wozniak himself said during an interview with Bloomberg he is concerned about Samsung’s two-year lead. “[Apple] is not the leader in things like the folding phone and that worries me because I really do want a folding phone. You know, it’s one of those new technologies that does catch my attention,” Wozniak said. Goldman Sachs agrees, and recently described the Galaxy Fold as “the main potential challenge” for Apple.
AI and Smart Technology
Even as consumers become more reliant upon voice-commanded smart technology, according to this recent piece, Siri still doesn’t match up to the assistants from Google and Amazon. Michael R. Levin, co-founder of market research firm Consumer Intelligence Research Partners, agreed, pointing to the tiny share of the smart speaker market Apple’s HomePod has carved out. “Apple is not in danger of falling behind. They have already fallen way behind.”
Apple’s recent retail fumble was their announcement that the head of its retail division, Angela Ahrendts, was leaving for an undisclosed reason. While nobody is directly saying whether she was fired, it has been implied by those in the industry that a change was needed. “It was clear that Apple needed new strategies and a potential change on this front to catalyze demand in and outside the all-important retail stores for Apple,” Wedbush analyst Daniel Ives said after the news was announced.
Angela Ahrendts was hired to take Apple stores “to the next level” and have a greater impact on surrounding communities, according to this piece. Ahrendts says she felt her tenure at Apple was incredibly successful, attempting to position redesigned stores to be more like town squares and gathering places, and redrafting roles and new zones in stores for education on Apple programs. But it may not have been enough. In light of slowing sales and fewer customers, her departure could be a sign that Tim Cook may be moving to change up or cut costs in retail stores, whether it’s closing stores and/or cutting headcount, as this Venturebeat article predicts.
The Apple Watch
Apple is still the undisputed leader in digital wearables, shipping 12.8 million Apple Watches out of almost 50 million wearables in the first quarter of this year according to a CNET story. However, Huawei is hot on Apple’s tail. While the company shipped 5 million wearables in the first quarter of the year (well less than half the number of Apple Watches), that was 282.2 percent more wearables than the same quarter a year ago, according to market researcher IDC. In comparison, Apple’s year-on-year growth was 49.5 percent as reported by IDC. Apple is clearly trying to hang onto its leadership position by launching a dedicated app store for Apple Watch apps this week at WWDC. Time will tell, no pun intended, but the eventuality of Huawei catching up cannot be ignored.
Apple as a Service
Much is being said about Apple’s clear 180-degree shift on its business strategy – dismantling its iTunes store and morphing into more of a service-based structure by streaming music, movies and podcasts through three separate apps. “This is a pivotal shift for Apple and in our opinion the biggest strategic move since the iPhone was unveiled in 2007,” Dan Ives, an analyst at Wedbush Securities told Bloomberg. “There is massive pressure on Cook and Apple to deliver on services, with streaming content a potential linchpin of growth.”
To me this feels like yet another example of Apple being disorganized and late to the game. While they already have a following for these services, to be successful, they’ll need to carve away market share from other established technology leaders (think Spotify, Pandora, Amazon Music and Netflix), and that requires real innovation.
For Apple to continue to maintain its leadership and reputation as a technology innovator, it’s going to take more than tweaks and upgrades, me-too products and recategorizing of existing services. Apple will need to introduce and own an entirely new product category nobody knew they could live without — and fast. While it’s likely that many die-hard Apple supporters will hang on for a little while longer, Apple is the house that innovation built. Without innovation, there will be no more Apple.