What are Apple’s Strategic Choices – A galore of innovation or change in business model?
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Apple has seen the first ever decline in revenue since 2001 with slip in iPhone revenue leveling off, which contributed close to two thirds of its revenue. Many experts might conclude that it’s a natural phase encountered by market leader in their business life cycle coupled with organisation complacency on its future vision or jaded effort in product innovation? Many would wonder, what could be the next blockbuster product for Apple, after its introduction of less exciting iPhone 7 and 7Pluse. How will it mitigate this revenue decline due to commoditization of smartphone? Given the past track record and its drive for innovation, these worries can be completely written-off. But devices can only be enhanced to an extend around its form factor or use cases limits.
And now today, Boom! Popped-up one of the surprise from Tim Cook’s a couple of announcements laying Apple’s intent very clear backed by its innovation DNA in form of the new MacBook Pro with Retina Touch Bar and Apple’s TV App for Unified TV Experience for tvOS and iOS. It’s a well know phenomenon that Apple takes time to land it better products with utmost perfection rather than inferior products and solutions. However, in today’s time it’s quite important to be fast and first instead of taking all the time to refine and fine tune the best possible product, solutions and services.
It just matter of time for competition to also catch with these feature and capabilities like Retina Touch Bar. While Apple can take pride in reminding world of personal computer and gadget users that they have been the innovators and introduced pointing device in Power Book keyboard 25 years back. Today, again it gives us this Retina Touch Bar making most of us lazier with its introduction in the latest Apple MacBook Pro; when most of us thought only a bit of improvisation around volume of real estate on system, size, memory, performance, ports and speed would be the new hero.
We always felt and expected, it’s only the matter of time before Apple could really bring more innovation out. Why? Because, it has a stronger ecosystem, with base of more than 1 billion devices with an over-head hanging sword of commoditized market. It’s the time to pull the favorable levers and mitigate its risk of declining iPhone revenues, and avoid history repeating of product commoditization. However, it’s time for Apple to think beyond devices and give more push to other strategic levers like platforms and services of iOS ecosystems adopters. These may be smaller in its revenue contribution but it will have higher growth rates and will mitigate the decline of major revenue contributing category.
With Apple TV App, it has stated its intention clear of announcing new battleground like TV/video and bringing an integrated content of (music, sports, movie/TV) and services play. What is Apple doing with its cash pile of $147 billion? Can it deploy the cash to buy Netflix and give complete push to its content/services business and take Amazon Prime to laundry? May be or may not be but these are the aggressive business decision Tim Cook need to take along with its right blend of innovative and creative legacy culture of Apple.
CMR believes Apple has two strategic choices a) it can continue to work on incremental improvisation on new devices and face the current challenges today PC industry and players are facing or b) invest aggressively to become an integrated-content player with right partnership. It has all the right levers and enabling environment to pull this strategy and play the big boys game of 3A’s (Apple, Amazon and Alphabet).
It’s the later option, which Apple might be considering to bite-on. Apple’s future forecast of lower margins does hints they might do huge investments around integrated services play (Apple TV Unified Experience is one of the step forward) or acquiring complementing businesses.