The Explanation for Apple's New Product Drought

“It shouldn't be easy to be amazing. Then everything would be. It's the things you fight for and struggle with before earning that have the greatest worth." -- Sarah Dessen

Most every publication has expressed dismay over Apple's new product drought. A lack of innovation is often cited. In fact, something very big may be coming, and that takes time to prepare. I'll try to explain.

What would you do if you were the CEO of Apple and had several billion dollars are your disposal for R&D. What if you had the brightest and most experienced engineers on the planet? How would you go about evaluating Apple strengths in the face of new competition?

One of the ideas that I dismiss is that Apple has run out of gas. That the company is too big and stupid to innovate. That CEO Tim Cook doesn't have the Apple DNA.

It's easy to criticize Apple. It makes you look erudite. What's more, publications live and breathe new Apple products. It's how they generate reader excitement. So when publications can't generate excitement with a constant stream of new Apple products, they turn the tables and attract reader attention by claiming there's something wrong with Apple.

It's a very arrogant approach.

Apple's Strategy

Apple's strategy has to involve dealing with competitive threats by evaluating its own strengths. For example, when Microsoft got really rolling with with Windows 95, Apple's hegemony in the GUI + PC world was undermined. Right after Windows 95 was released, Apple got into serious financial trouble. Did Apple fold? They almost did, but Apple finally figured out how to use its strengths to fight back. In a few years, Windows XP was a mess, crippled by security blights and UNIX-based Mac OS X was the darling of the OS world.

To say that Apple isn't smart enough or capable enough to fight Android today with a winning strategy is the Big Lie. It's an idea pushed by people who are not enthusiastic, for not very good reasons, about Apple as a company. Ignorance breeds fear.

Long Term Planning

On of the responses from Tim Cook on Tuesday that struck me was his comment about giving up short term profits for the long term benefit of Apple. What that tells me is that Apple is investing in technologies that are larger in scope than a minor product update every few months to satiate the observers. I believe Apple is working on something that's derived from its strengths as a company, integrating hardware and software, user interfaces, security, and enriching our lives -- not just throwing geekware at us. Sometimes that means we have to wait.

During the earnings call, Mr. Cook was asked about the 30 percent growth rate of the smartphone industry by Toni Sacconaghi of Bernstein Research. Apple doesn't seem to be achieving that number. There seemed like a disconnect between the very attractive products offered and the iPhone sales growth. Mr. Cook said something remarkable (after he addressed iPads):

I take your point, if the [smartphone] market grew by 30 percent .. we grew less than that... this point is not lost, and we do want to grow. We don't view it, however, as the only measure of our health. The things that are very important to us, in addition to market share and unit volumes, include things like customer satisfaction ... customer loyalty and repurchase rates ... the ecosystem for developers .... Three out of four customer [app] dollars are spent on iOS apps.... These other things for us are extremely important because we're all about customer experience and enriching lives."

What that means to me is that while other companies are all about creating products that look like Apple's, playing follow-the-leader, Apple is doing the heavy lifting when it comes to the underlying infrastructure of its products and ecosystem. In a competitive environment, that means more than just throwing out some hardware and putting a pretty, imitative face on it.

Clever Exploitation of Market Understanding

Another thing that struck me from Mr. Cook's remarks were the affirmation of the Macintosh. I addressed the news side and his quote right after the earnings call in: "Tim Cook Argues That Macs Remain Important."

The idea Mr. Cook expressed was, I think, that PCs are failing, by contrast to tablets, not because they are PCs but because of the way PCs work (or don't work) for customers. What that means is that if Apple's PC (a Mac) is friendly, secure, and works well in a tablet environment, geared to the heavy lifters, the creative professionals, then future Macs, while cannibalized by the iPad, will themselves cannibalize the PCs. This is a remarkable observation and tells me that Apple, Tim Cook and his executive team, really understand the market.

You would't know that from reading the various "Apple is doomed" articles that express child-like resentment that Apple isn't on their editorial schedule for product rollouts.

What's Taking So Long?

We think we know what Apple is up to, but many just don't want to assume that Apple will make good on its promises. Let's look at some possibilities.

1. iOS 7. There has been a major shuffle in the iOS leadership. It takes time for new leadership, Jonathan Ive, to conceive and then engineers to implement a new vision. That takes time, and it's one of those long term projects for Apple's future. This is going to take some extra time. Patience is called for. And the same applies to how iOS 7, in turn, relates to OS X 10.9.

2. ARM-based MacBooks. Tim Cook said that Apple would continue to invest in Macs and innovate. What if Apple were able to add virtualization hardware to low-power ARM CPUs in MacBooks and then deliver awesomely thin and beautiful MacBooks with Retina displays and 15 hour battery life?

3. New Product Category. Tim Cook affirmed to Piper Jaffray analyst Gene Munster that there will be a new product category. Do we trust Apple, given its track record, to deliver an awesome new product that works for us, solves a problem and enriches our lives? I do, but I don't think many observers want to trust Apple to deliver that. Nor do they have the technical experience to envision how that might happen -- until after Apple delivers.

4. New services. We strongly suspect that Apple is working on a music streaming service, fingerprint logon to iOS, NFC and mobile payments, with fingerprint authentication, and perhaps services associated with a new HDTV viewing experience. These items, cited just as examples, take some time to fully bake. When a company is investing for the long term, especially to combat the imitators, it's not sufficient to simply throw out a few new features that nobody uses, every few months, just to grab some headlines. As Mr. Cook said above, Apple's motivations run deeper, and that requires real work.

So, from Mr. Cook's public presentations and all his earnings call insights into Apple, I get the feeling that Apple is in fine shape. Some new technologies and fundamentals are taking some time because valuable changes that improve our lives often require the coordination with business partners.

On the other hand, shallow analysis says that Mr. Cook is solely responsible for Apple's stock price, that he has no product vision, and that Apple can't deliver exciting and life-changing new products on schedule anymore. I've seen absolutely no evidence to back that up.

I think it's just frustration, shallow, self-serving analysis, and a lack of a true appreciation of what the real Apple we know is capable of based on what we've already seen. Soon, it will be show-me time. I think Apple will deliver on its own schedule, doing what's best for the company and its customers in the long term.


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