Here is Why Apple Has Nothing to Fear
Hi Everyone, This is my follow up post to the this one here. This is the Strength and Opportunities for Apple going forward.
Apple has nothing to fear
In my last piece, I focused the weaknesses and threats to Apple's business in the future. I identified Samsung as the commpany to watch. In this article, I would like to look at Apple's strengths and what opportunities are out there to ensure the Cupertino company remains successful.
We all know Apple's turbulent history, so I'm not going to waste my time going over that. I'm going to focus on Apple 2.0.
The Return of the King.
On his return Steve Jobs did three important things that has set Apple on the path its on today. I believe these three key decisions will ensure Apple's success for many years to come also.
The first thing Steve did was to streamline the many projects the company was working on at the time. He also highlighted that Apple needs to innovate or die. Secondly, he dragged the disillusion Jony Ive from the dungeons and placed him on a pedestal. Finally, he hired Tim Cook - the operations genius. These three decisions has been the launch pads of Apple's current success.
The one quote that truly defines the importance of Tim Cook to Apple is this, "If it weren't for Tim Cook the iPad would cost $5,000." Steve Jobs and Johnny Ive are obsessed with making great products with the most beautiful design. The obvious catch here is that manufacturing these products cost lots of money. If you then add the 'Apple tax' you got your self products that the average man cannot afford.
This is where Tim Cook - the operations genius comes in. The man has outsourced production to cheaper manufactures (more on this later) and closed Apple's factories and warehouses around the world. He also helped to reduce the company's inventory levels and streamline its supply chain. Tim achieved this by working closely with the supply chain to ensure everything is up to Apple's high sandards. He also bought key materials for future products way in advance and at a very good discount. As a result, Apple is now able to sell its product at a very competitive price whilst maintaining great profit margins.
In the Post-PC era, Tim Cook has made Apple's mobile devices truly price competitive. This was not the case in the PC era.
"He is my spiritual partner at Apple." Those are the words of Steve Jobs from his Walter Isaacson’s biography when describing his relationship with Jony Ive. These two guys shared the same passion for design and making great products. They are also both visionary people. When he was alive Steve Jobs has taken the credit for a lot of Apple's creations. By his own admission, Jony believed that he was short changed in this department. I was surprise to find that the only real criticism of Steve from his current lieutenants came from Jony in Steve's biography. Jony Ive felt that Steve did not give him enough credit for many of Apple's creation.
In some ways this is bad news for Apple's competitors. Here we have a guy who is hungry to prove his worth after many years of living in Steve's shadow. In a recent interview Daily Telegraph, Ive was asked which Apple product he's was most proud of. His reply was, "It's a really tough one." He continued by stating, "A lot does seem to come back to the fact that what we're working on now feels like the most important and the best work we've done, and so it would be what we're working on right now, which of course I can't tell you about." In the same interview, this is what Ive had to say about life after Steve Jobs:
We're developing products in exactly the same way that we were two years ago, five years ago, ten years ago.It's not that there are a few of us working in the same way: there is a large group of us working in the same way. We have become rather addicted to learning as a group of people and trying to solve very difficult problems as a team.And we get enormous satisfaction from doing that. Particularly when you're sat on a plane and it appears that the majority of people are using something that you've collectively agonised over. It's a wonderful reward.
Apple's products are loved by consumers
To understand why this is the case, lets look at what Jony Ive had to say in this interview with the Daily Telegraph:
I think subconsciously people are remarkably discerning. I think that they can sense care. One of the concerns was that there would somehow be, inherent with mass production and industrialisation, a godlessness and a lack of care. We’re keenly aware that when we develop and make something and bring it to market that it really does speak to a set of values. And what preoccupies us is that sense of care, and what our products will not speak to is a schedule, what our products will not speak to is trying to respond to some corporate or competitive agenda. We’re very genuinely designing the best products that we can for people.
For those of us who own Apple products, we know exactly what he its talking about in terms of sensing care. On the other hand, this whole notion of loving a brand or product seems absurd. How can someone really love their iPhone?
Here is a quote from an article Martin Lindstrom published in the NYTimes in October 2011:
Earlier this year, I carried out an fMRI experiment to find out whether iPhones were really, truly addictive, no less so than alcohol, cocaine, shopping or video games. In conjunction with the San Diego-based firm MindSign Neuromarketing, I enlisted eight men and eight women between the ages of 18 and 25. Our 16 subjects were exposed separately to audio and to video of a ringing and vibrating iPhone. In each instance, the results showed activation in both the audio and visual cortices of the subjects’ brains. In other words, when they were exposed to the video, our subjects’ brains didn’t just see the vibrating iPhone, they "heard" it, too; and when they were exposed to the audio, they also "saw" it. This powerful cross-sensory phenomenon is known as synesthesia. But most striking of all was the flurry of activation in the insular cortex of the brain, which is associated with feelings of love and compassion. The subjects’ brains responded to the sound of their phones as they would respond to the presence or proximity of a girlfriend, boyfriend or family member. In short, the subjects didn’t demonstrate the classic brain-based signs of addiction. Instead, they loved their iPhones.
I would like to share my personal experience of this to the mix. The list of Apple products I own include: iMac, Macbook, iPhone 4S, 2 Apple TV (2nd gen), iPod Touch (4th Gen), Airport Extreme base station, a Airport Express, iPad (1st gen) and the new iPad. I don't view myself as a 'fanboy', I 'love' Apple products. I don't go around saying iOS is great and Android is rubbish. I believe both systems have their strengths and weaknesses and everyone should chose what suit their needs. However, you wouldn't find me using anything Android, Windows Phone or BlackBerry. I don't possess this kind of loyalty to any of my other gadgets, which include a Sony PS3 and Samsung TV. I'm more than happy to switch to a X-Box or Sony TV in the future.
The point here is that Apple is the only company in the world that can arouse this emotional attachment to its products. It also makes you want to evangelise about how great your Apple product is. I loss count of how many times I've told someone, "you don't need a USB port, you have iCloud." This usually results in the other person saying, "what is iCloud." (rolleyes). I know a lot of Apple fans are watching the latest, 'Sh*t Apple Fanatics Say' and cringed. Why? Because deep down we know its true.
I know I'm contradicting myself base on my last article here. However, the level of loyalty that consumers have for Apple products will stand them in good stead going forward.
Apple vs the world
Apple is now the company to beat. The company is now competing with Google, OEMs of the Android operating system, RIM, Nokia, Microsoft, Amazon - the list goes on. However, one of the three key things I mention earlier still holds true. Apple is a company that is very focus and continues to innovate. The company only ships a handful of products, refusing to diversify into other areas like other companies such as Samsung do. Apple also continues pushed the boundary with new technology. Look at the new Retina display MacBook Pro and you can rest assure that more innovative features will be revealed later this year. I'm predicting a video sharing service as the surprise addition at this year's iPhone 5 event (not entirely innovative, but still).
I've spoken about the threat Apple faces from Samsung at length in the first article. However, Apple has gain another formidable competitor in Amazon. Apple competing with Amazon is going to be very interesting. Amazon is prepared to lose lots of money in the short term for long term gain. The company is also adopting a reverse business model to Apple's. Amazon is giving away their hardwares to sell content whilst Apple is giving away their content to sell hardwares. The only way Apple can win this battle is to launch the iPad mini this year at $249.00. Fight Fire with fire. A favourable ruling in the ebook price fixing lawsuit would also help Apple tremendously against this adversary.
I'm also predicting that the iPhone 3GS will be a pre-paid phone sold for under $300 unlock. This will help Apple secure sales in the lower-end smartphone market, challenging Samsung and others here. I've read somewhere that the iPhone 3GS will be discontinued. I beg to differ here. Why bring iOS 6 to a 3 year old phone if you intend to discontinue it? Doesn't make much sense to me.
What the future holds for Apple
At the moment, the future appears very bright for Apple. I'm very impressed with the way Tim Cook is protecting the public image of the company. The way he dealt with the labour issues in China is a good example of this. Interestingly, similar concerns were raised recently about Samsung. In this case, no one did a monologue and tell lies about child labour. I guess these things only happen when you're Apple and very successful.
Tim Cook also spoke about how Apple manages their finances as if they are a poor company. I like this a lot. Not because you have over 100 billion in the bank you need to buy every startup in the world. Google, I'm looking at you. This money will be use to ensure Apple remains successful for many years to come.
The company is vehemently defending their IPs against copycats. I say Amen to that too. Tim Cook is on record stating, "Apple cannot become the developer of the world." In other words, competitors would have to take risks and out innovate Apple to compete. No more waiting and then coping feature for feature when Apple launches its revolutionary products. I'm looking at you Samsung.
I will conclude by saying, to all of us in the AppleCore and the millions of Apple fans out there, let us continue to THINK DIFFERENT!
"On September 12th, Apple Inc. will introduce iPhone 5. And you'll see why 2012 will almost be like 2007."
Image Credit: Wired.