Apple + Beats

I wanted to share some thoughts on Apple's recent purchase of Beats.

First, I think the media and a lot of forum commentators on a variety of tech sites (ars, the verge, macrumors, re/code etc.) have really missed the boat on this acquisition. There has been a lot of racial slurs, demographic generalizations, "I don't understand" pieces, and pedantic discussions about the quality of headphones.

Talk about missing the point.

The Beats acquisition has little to do with demographics, streaming services, or even the current headphone business.

The acquisition is an expression of Apple's intent -- future growth in developed countries where iPhone and iPad have reached saturation levels is dependent on the up-sell.

Apple's business model is going to have to undergo a dramatic transformation in order to continue the insane growth that we've witnessed over the past few years. The good news is that Apple already has many pieces of the puzzle in place for this transformation. To give you idea of what I'm talking about, let's take a look at Apple's current assets:

(1) Mall Presence


via Apple Store.

Chances are, there is an Apple Store close to you. Better yet, it's probably in your mall.

What else is in the Mall? Clothing stores, Jewelry stores... stores that celebrate fashion and culture. Apple is expanding its retail presence. There is a reason for this. Apple is laying the groundwork for what comes next.

(2) Aspirational Message


via Aspirational Message

Apple is trying hard to be an aspirational brand. The message is clear -- it's not about the devices that Apple sells, it's about the experience that an Apple device will allow you to have.

Apple is giving you an opportunity to better yourself, to be a better person. This is not the typical message of a technology company. It is the foundation for a different type of business.

(3) Customer Service


via Personalized Customer Service.

Apple's customer service is unparalleled in the technology industry. It is bolstered by Apple's mall presence, and its army of customer support representatives. This type of service is not customary in the technology service because the business model is bifurcated.

When selling to the consumer, technology houses focus almost all of the energy on the upfront sale. OEM's compete for space on retail store shelves, in get the consumers attention. The warranty information is generally the boring back end, sometimes handled by third parties, or possibly even by the retail store itself (looking at you Best Buy and AT&T).

When selling to a business, technology houses focus on long term support contracts. The idea is to provide both hardware and IT support to institutional clients. This is about service, but again, not about the consumer.

Apple, on the other hand, focuses its customer service on the consumer. This focus is an important foundation for the future of Apple.

Now, keeping this in mind, let's talk about the future of Apple. It's all about Wearables.

The Future of Apple is all about Wearables.

Mobile is hot. It has been for some time.

The rise of mobile is is analogous to the rise of personal computers, but there are some key differences:
First, mobile technology is more about fashion then the P.C. industry ever was.

Second, the mobile market is different than the P.C. market. The P.C. is a story about big business, commoditization, IT, and institutions. The consumer market is almost an afterthought for the P.C. I mean,take a look at a cheap windows laptop on sale just a few years ago:


via Generic P.C.

The Samsung pictured above is plastic, cheap looking, and generic. If you took away the logo, could you honestly say that it was a Samsung product? As opposed to an HP, or Lenovo?

This is not to say that the consumer market isn't important to the P.C. Windows 8 is proof that microsoft and the industry deeply cares about appealing to consumers. But for the first 30 or so years of Personal Computers, big business was king. And there is nothing wrong with that.

The rise of mobile has been markedly different. Mobile is first and foremost about the consumer. Big business has taken the back seat.

Not to say that business applications aren't important - it's just that mobile does not cater to the professional world like the P.C. Nothing better demonstrates this reality than the struggles of Blackberry and Microsoft in the mobile market. They failed by trying to put big business first.


via Sad day for Blackberry.

In others words, mobile isn't just about technology.

Mobile is about consumers and fashion.

Apple may be a fashion and consumer focused technology company, but that doesn't make it fashionable. In order to continue growth in the mobile space, Apple is trying to transform from a technologyhouse to a fashion house. This inversion in Apple's business model is key to a successful entry into the wearables market. And no company has nailed this transition better than Beats.

Beats is a fashion brand that happens to make headphones. The headphones themselves are not important. The Fashion is.

If I'm right, and I think I am, then Beats is only the beginning. Apple doesn't want to just sell you the phone. They want to sell you the headphones, the watch, the belt, and purse, the shoes... the whole package. The mall presence, the aspirational message, the customer service... Apple is building itself to be a fashion brand that also sells technology. I mean, look at new head of retail:


via Burberry's former CEO is now Apple's head of Retail.

But what do you think? Is Apple transforming into a fashion house? Let me know in the comments below!