Tuesday, February 12, 2013

Is Post-Jobs Apple Out Of Ideas??

About a year ago, I opined that Apple was flirting with old ideas and possibly stunting their culture of innovation. Now we hear more troubling news that Apple is going ahead with products of questionable utility: a bigger iPhone and an iWatch.

The argument for a bigger iPhone boils down to this-- competitors have offered bigger smartphones, so Apple should follow suit to take back lost market share. This makes a very big assumption-- that people buy larger smartphones because of their size. It's an assumption based primarily on the sales of one phone-- Samsung's Galaxy Note II, which runs the Android operating system. But I have yet to see conclusive evidence that a larger screen is the difference that influences most smartphone buyers. I have no doubt that Apple will be able to sell a version of their most popular device with a differently sized screen-- they've done it with the iPad mini. The problem is, the iPad mini cannibalized sales of the full-size iPad, a more profitable product. Whatever market share it grabbed from Amazon's Kindle and Barnes and Noble's Nook, it's been a dubious boost to Apple's fortunes, and a likely reason for that stock slide.

As for the iWatch... I don't believe there is an argument that can be made for it. Even the slickest-looking iWatch will fail because of a watch's inherent limitations. You've got to develop wireless headphones because no one wants a wire running down their arm. You're got to convince people that your design will compliment whatever style they're wearing (something you have to consider whenever something is worn, rather than pocketed). Even overcoming those hurdles, you've still got to deal with the fact that you've just prevented a usable hand from operating the device, and you've got to develop an interface that's useful within such tiny confines. If they're just making the iPod nano with a wrist strap, how is that different from what's already available for a lot cheaper?

Neither of these ideas creates an entirely new revenue stream. What they do is segment an existing revenue stream into smaller, less profitable chunks. I'm not sure how that's a recipe for success. Simply putting a product out there as an alternative to your competitors is not a growth strategy, it's a holding pattern. It's as if Apple is at the gates of El Dorado, and instead of just going inside and grabbing the gold, they're going after the guys selling cheap souvenirs by the side of the road.

Google, on the other hand, seems to have their gaze fixed firmly on the future. Take out the Android operating system, and the online advertising, and you don't have much currently in terms of money-makers. But they've created the most comprehensive map, directory, and database of the world--necessary framework for their future products, such as real-time augmented reality (Google Glasses) and self-driving cars. They've also begun introducing Google Fiber--free, fast internet--to cities around the country, part of an infrastructure that can increase the usefulness and reliability of Google Glasses and Android phones, as well as make in-development ideas like "Smart" homes (and even "Smart" neighborhoods) a real possibility. Apple users found out how far ahead Google's data is after the Apple Maps debacle. While Apple's been sitting on cash it doesn't know what to do with, Google has spent millions on R&D building a support network for the interconnected world we all know we're headed towards.

Maybe Apple can wake up and recognize their (shrinking) lead in online content distribution, and turn Apple TV from a niche set-top accessory into a more comprehensive experience (i.e. an Apple flat-screen TV). But we haven't heard about that good idea for a while. Only the uninspired ones.

Imagine the future, and it's not a bunch of people staring down at their wristwatches. Changing a screen size doesn't change anything else. Google understands this--so they're building the foundations of the future, and they're offering a glimpse of the products that will take advantage of it.

If Tim Cook wants to keep Apple on top, he should take note of that.

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