In a blog post that recently went viral, Marco Arment argued that Apple may be the next Blackberry. He pointed out that, while other tech companies like Amazon, Facebook and Google are advancing in key artificial intelligence technologies, Apple is falling behind.
Clearly, he’s right about the second point. Apple’s Siri service is noticeably weaker than competitors and these types of AI services do seem to be key to the digital future. What I think he misses is that Apple has never competed in fundamental technologies. Rather, it has been especially adept at molding existing technologies into products that are “insanely great.”
The truth is that Apple is not really a technology company and never has been. Yet, it remains what is perhaps the world’s best design and engineering company. It has also built a first rate supply chain that gives it an additional advantage over competitors. The truth is that Apple isn’t like Blackberry at all. If anything, in the years to come Apple will be the next Toyota.
The Genius of Steve Jobs
Take even a cursory at the career of Steve Jobs and it immediately becomes clear that he was a marketing genius, who had an almost supernatural sense for what the consumer wanted. He would look at a particular product category, decide that it “sucked” and reimagine its form and function.
So while there were many companies making personal computers in the late 1970’s, the Apple II—and later the Macintosh— stood out not because it had greater capabilities than others, but because it was easier and more fun to use. In much the same way, while the iPod was launched into a crowded market for music players, no one could match the experience. The iPhone wasn’t the first smartphone, but it was the best one and still is.
Yet despite the incredible success of all of these products, none of them introduced fundamentally new technology. In fact, in recent years, Apple has been noticeably slower than Samsung to add new functionality to its phones. Rather, it used existing technology—most of it coming out of government programs— to create product experiences that were distinctive in their form and outstanding in their function.
For the past decade or so, Apple’s strategy made for an incredibly profitable business model. Because the company was using basic technologies, it was able to spend much less on R&D than its competitors and was still able to charge a premium price. That, together the incredibly efficient supply chain that Tim Cook built, generated incredible profits.
A Strategy of Integration
Another factor in Apple’s success has been its integrated strategy. While other firms specialized in hardware or software, Apple created products that combined both seamlessly. That allowed the company to control every aspect of the experience and avoid the bugginess that plagued rival platforms.
In the PC era, this proved to be a disadvantage, because Intel based manufacturers combined with Microsoft Windows and Office could offer far greater variety and lower price points. Sure, that created some problems, but for most customers, especially enterprises, lower prices trumped the relatively minor conveniences.
In the mobile era, however, Apple’s ability to integrate functionality across multiple devices, along with the millions of applications available in its App Store, made for an unbeatable proposition. Now, rather than just selling products, Apple was marketing an entire ecosystem that was so easy to plug into, even non-techies could unlock amazing functionality.
That’s what led to Apple’s decade of dominance. People could simply go to an Apple store, get some help setting up and didn’t have to worry about the technology contained within it. As long as you stayed inside the Apple ecosystem, everything was so easy that many simply refused to buy a product from another company.
For most of Apple’s existence, technology progressed along a well known paradigm. Processing power, storage and bandwidth improved by predictable rates, unlocking new functionality every few years. So Apple was able to continually create new experiences for its customers while maintaining its integrated architecture.
Yet the cloud loosened Apple’s grip over functionality. Rather than being able to control every aspect of the experience, customers could download much of their devices’ functionality from the App Store. Increasingly, applications such as maps and voice search are driven by cutting edge artificial intelligence technologies in which Apple has little comparative expertise.
In the years to come, as Moore’s law comes to an end, we’ll see completely new paradigms, such as quantum computing and neuromorphic chips take over. Our devices will become mere gateways to functionality in the cloud that only a few companies, such as Google and IBM, have the capability to deliver.
Some may argue that, with over $200 billion in cash and marketable securities, Apple could easily just acquire the technology it needs, but it’s not that simple. These technologies take decades to develop and there are relatively few people on the planet who understand them well. What’s more, Apple’s culture is ill suited to researching cutting edge technologies.
The Future of Apple
To be clear, I’m not arguing that Apple is a once-great company in decline, but rather that it is a still-great company that will face conditions over the next decade that will be far less favorable than in the past. A design and engineering company cannot simply wake up one day and decide to be a technology pioneer.
Take Apple’s famous policy of absolute secrecy. That makes perfect sense for a design and engineering company developing products. Even a small glimpse of an iPhone can tell Apple’s competitors a lot and reduce its advantage. Researching technologies, however, is highly collaborative and requires a more open approach.
That doesn’t mean that the company doesn’t have options. For example, it recently forged an alliance with IBM to design applications based on advanced technologies like Watson. I’m sure we can expect more such alliances to come and possibly even a breakthrough product or two. As Toyota has shown, being able to engineer superior products is still worth something.
Still, Apple’s decade of dominance is most likely over. The bulk of the profit over the next ten years or so will mostly go to companies that can develop unique technologies with unique possibilities. That just isn’t Apple.
image credit: zdnet.com
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Greg Satell is a US based business consultant. You can find his blog at Digital Tonto and you can follow him on Twitter.