Apple hit a new market cap record this month. Valued at over 732 billion dollars, it’s the most valuable company in the known universe. So you’d be forgiven for thinking the future of Apple is bright. But unless big changes are made, Apple’s past will shine brighter than its future.
Look, I’m no anti-Apple boy. I am writing this on a MacBook Air, while my iPhone 7 sits nearby. I lost too many iPads to keep track of, and frankly haven’t bothered to replace the last one. I’ve even been paid by Apple.
Yet the signs are all too clear that Apple is no longer the innovation powerhouse and meticulous perfectionist it was under Steve Jobs.
First, their software is incredibly buggy. I mean unusably buggy. I can’t listen to voicemail on my iPhone 7 because of multiple bugs. I can’t find contacts to call on my iPhone 7 because of multiple bugs Apple Geniuses have been unable to fix. I stopped using Apple Mail because of bugs. The iPhone native email client is so bad at searching that many people have switched it out with Gmail altogether. I long ago switched from Safari to Chrome. My Mac restarted spontaneously in the middle of my work last night. No company can stay for long at the top with that kind of quality.
Second, they stopped launching useful innovations and replaced them with wasteful profit centers that take the user experience back a notch instead of forward. The iPhone 7 made my list of the worst products of 2016. If my iPhone 6 had not become unbearably slow due to Apple bugs, I would go back to it. Specifically, the iPhone 7 got rid of the two most useful parts of the iPhone: the button and the earphone jack. The button got replaced with an electronic sensor that feels nowhere as pleasant and is not nearly as accurate as the good old-fashioned button it replaced. For no visible benefit whatsoever. Change for the sake of change. The earphone jack disappeared, and now you can’t charge it while you connect an earphone without a cumbersome adapter, nor can you connect it to almost anything in the known universe without one. Sure, the future may be Bluetooth, but I don’t like to have to remember to charge those wireless earphones. In the meantime, other than raw speed, the iPhone 7 has no useful improvement over its predecessor –unless you happen to throw it into a pool. And what’s the last major product launch you’ve seen from Apple?
Third, their computers are years behind the times. Macs now accounts for less than 10% of Apple’s revenues, with less than 7% market share. They should have launched a touchscreen MacBook years ago, as I suggested years before Microsoft released theirs. Perhaps they didn’t because they thought that would cannibalize their iPad sales. Again, profits driving decisions rather than the user experience.
Fourth, they have lost their customers’ trust. Unsubscribing from an iPhone subscription is a nightmare. One has to assume that was done on purpose, just as iPhone updates yield older iPhones that worked just fine unbearingly slow, screaming for an upgrade. Search for subscriptions in iPhone ‘s settings will yield nothing. You have to go to Settings -> iTunes & App stores, click on Apple ID (of course, why would they make it intuitive?), wait while it connects, enter your password, scroll to *below the fold*, and finally click on subscriptions. The Apple empire may be profitable, but it sure isn’t winning over its customers’ hearts.
Fifth, they have the wrong business model. The world has moved to subscription services. Software as a Service, Infrastructure as a Service, Entertainment as a Service. Anywhere you look, subscribers are more valuable than one-time customers. Recurring revenues are more valuable than non-recurring ones. But it’s not just that it’s more profitable to keep your customers paying you. It’s also a crucial alignment of interests. Apple only makes money from you if your old iPhone or Mac turns obsolete. So they have every incentive to make sure it does. Ever wondered why those pesky update notifications are so persistent? The updates are optimized for the new models, not the old one you have. But that doesn’t stop Apple from persisting in trying to update your old one, too. Bugs in your phone? Why fix it, when they have already made all the money they will make from you for that one. In contrast, XaaS companies have every incentive to keep their customers happy…so they stay subscribers. In their defense, Apple appears to be shifting toward that mindframe. But a lot remains to be done.
Sixth, they have contracted Not Invented Here syndrome. When they deployed Qless, my company’s wait management platform, a few years ago, allowing Apple customers the convenience of not having to wait in line, the results were nothing short of extraordinary. “I am so excited. You guys nailed it. You guys have such a kick ass product.”, wrote our main point of contact there. Sales went up because people were able to shop while they waited, no-shows went down, customer satisfaction soared, and engagement skyrocketed. Yet, despite those results, Qless’ nearly 100% client retention rate and the fact that Qless was crowned the Best Computer Services Company in America for the last four years in a row, Apple corporate IT killed the project to replace it with a half-baked home-brewed solution that, years later, still leaves much to be desired, lacking interactivity, with wildly inaccurate wait forecasts, and lacking the ability for customer to join a virtual line on their own, creating the irony of standing in line to get out of line. Never mind the fact that we gave a roomful of Apple engineers trade secrets for hours under NDA –the fact that at least in some years, Apple’s legal spending tops its R&D investment is a whole separate problem. Perhaps the more fundamental problem here is Apple is missing out on hundreds of millions of additional profits a year because they refused to focus on their core competence and missed out on the state of the art they would have attained had they partnered with the market leader.
Seventh, they are losing the youth. When my thirteen-year-old asked for a new laptop this week, he asked for a PC. And that’s after having used a Mac for the last three years. And the youth is the future.
So how does Apple get out of this rut? First, it must dramatically increase its investment in R&D. It is inconceivable that a tech company sitting on almost a quarter of a trillion dollars in cash and securities is investing less than twelve billion dollars a year in R&D. If they have run out of ideas, they should start a venture fund integrated with their distribution pipeline. Second, Apple must fully embrace the XaaS economy. Third, they must regain their relentless focus on quality –back to the days when Steve Jobs would make sure that even the inside of computers looked good. Fourth, they need to focus on their customers, and rebuild their trust. Fifth, they have to embrace partnerships –we live in a highly interconnected world. Finally, they have to refocus on the youth.
Apple has launched a number of category-defining products in the past, and I hope they course-correct to go back to those days of glory. But unless they do, like Newton’s proverbial namesake, there is nowhere for Apple to go but down from where it’s sitting today.