By Jason Snell
January 31, 2019 2:50 PM PT
Next big thing
I held off writing anything for this issue of the Six Colors Magazine because I wanted to wait for Apple to disclose its most recent financial results. I know that for a lot of people, the financial results of a huge company are a bit of a snooze—and as someone who can’t and won’t invest in technology stocks, I get it.
But Apple is such a tight-lipped company that I find it intriguing whenever the company says anything in public, even if it’s a disclosure that’s more or less mandated by federal law. This quarter Apple has reduced what it discloses, by eliminating unit sales figures, but in exchange we all got to witness an awful lot of sturm und drang about falling iPhone sales. (If you were sleeping in early January, you may have missed Apple’s disclosure that the holiday quarter was worse for iPhone sales than it had anticipated.)
I have been writing about Apple since I was an intern at MacUser magazine in the summer of 1993. At no point in that time—not when it was about to go out of business, not when iPod sales were through the roof, not when the iPhone and iPad were announced, not when it became the first tech company to break a trillion dollars in valuation, and not now as it records some of the biggest quarters of revenue and profit in the history of capitalism—have there not been people actively wondering when gravity is going to kick in and bring this impossible company back to earth.
There are lots of reasons for that mindset. Here’s the cocktail-napkin summary: Despite its successes, almost no company is anything like Apple. Its competitors aren’t comparable. Tech, business, and financial journalism (as well as the investment world in general) are even more fanatical about conformity than our society at large. Why can’t Apple just be more like IBM, or Microsoft, or Dell, or Google, or Amazon, or Samsung? Things would be so much easier if it were, but it isn’t, and never has been.
What’s a force that’s even stronger than the world’s refusal to understand the rules by which Apple plays? Boredom. And boredom might be Apple’s biggest enemy right now. Not a week goes by when I don’t see someone’s facile analysis of Apple’s business that discusses its desperate need to find the “next iPhone.” Why does Apple need the next iPhone, and soon? (It doesn’t.) What are the real consequences of its failure to conceive of the next iPhone in the next year or two? (Boredom, because there won’t be anything new to write or talk about.)
Will there be a “next iPhone”, in the sense of a technological product category that goes from being nowhere to being in the possession of most humans on the planet in a decade? (And more to the point, a product category that creates a market with only a few major players and is extremely profitable?) On an infinite time scale, of course there will—never bet on the end of history, because if history really ends there won’t be anyone with opposable thumbs left to place bets. History just keeps on going. The smartphone will eventually seem outmoded.
But will that innovation happen in the next few years? And will it come from Apple? Almost certainly not. As someone who got his hands on a computer for the first time in the 1970s, and who started his career writing about computers, not technology, it’s a tough admission, but it’s impossible not to see the entire PC industry as just a precursor to the smartphone. The smartphone, with its power, ease of use, and connection to a fast digital data network, is among the most revolutionary product categories invented in the last century. These things don’t come into existence very often.
However, Apple’s lead in the smartphone world has paid off, giving it a large segment of a market that (while no longer growing) is profitable and will continue to sell in large numbers for years to come. The iPhone isn’t a growth engine on its own anymore, but it’s an annuity that puts cash in Apple’s pockets and creates customers to whom Apple can sell other stuff.
I’m not saying that Apple should stop inventing new stuff. It needs to keep pushing in all sorts of new areas, and it is. It’s been unafraid to take a run at expanding into unfamiliar territory such as services, it’s launched successful new hardware product categories (the Apple Watch is a hit product, despite it not being the next iPhone), and in theory it’s spending a lot of money investigating future product directions like augmented reality and autonomous vehicle systems.
Does today’s Apple have issues? It sure does, but failing to release the Next Big Thing in order to break industry observers out of their boredom is not one of them. As I compiled our recent Apple Report Card feature, it struck me that Apple is powerfully positioned in terms of hardware design, is lagging behind in terms of its software organization, and is perhaps stretched too thin in some areas where its desire for control outweighs its capabilities to provide meaningful value.
Today’s Apple is, in a way, a victim of its own success. Tim Cook’s biggest challenge as CEO is figuring out how to reinvent the way Apple works at a scale that is far beyond anything Steve Jobs ever saw—while not losing its status as a company that frustrates observers by refusing to behave like everyone else.