On 27 January 2015, Apple made the most significant announcement in their history post-Steve Jobs: they are the most profitable company, EVER!
So how did they do it? And what does it mean for the market?
We have always assumed that when Apple launched a product, it created the market. But, in most cases, the markets already existed.
From the first computer to the iPod and the iPhone, there were a number of start-up companies, and some larger ones, already operating in these segments. Apple’s typical business model is to set out to redefine the segment, regardless. Consequently, through clever marketing and positioning, consumers think that segment has always belonged to Apple. Take the iPod, for example. At the start, household brands such as Sony owned the market for portable music players. For mobile phones, it was Nokia. The portable organiser market was more fragmented with no real leader. Seeing their opportunity, Apple introduced the iPad, securing dominance that would then strengthen their position over the other two markets.
The last 18 months have not been easy for Apple. Samsung have taken the lead in the smartphone segment and various Intellectual Property battles have taken the shine off their offering. But with the launch of the iPhone 6 and iPhone 6 Plus, they’ve set about redefining the large-screen smartphone market and have succeeded in an instant, as highlighted by the staggering results in the first quarter following the product launch.
So what might be in store over the next three years, particularly in the current hot area of wearables and Connected Home?
Before addressing this market, Apple needed a sales boost in their sweet-spot smartphone segment thanks to the iPhone 6; to regain share and show the world that they can and will own the market again when it comes to user experience and apps. This is particularly relevant as tablet and smartphone sales are posting a reduction whereas apps sales are seeing a significant growth and are an increasing source of profit. The iPhone 6 is laying the path for the Apple Watch, which is due for launch in April and will be a significant product for the company. Why? Because it allows Apple to remain close to their users, either in the pocket or now the wrist, and track key user behaviours, but more essentially provide the platform that will allow consumers to make payments and interact with technology, particularly home appliances and cars. They have already launched Apple Pay, a payments method which is now rolling out as more merchants embrace the new technology. On the B2B side, Apple is partnering with IBM, the latter very eager to focus on software around big data, social and mobile whilst at the same time shedding their server hardware business to Lenovo.
But what about the consumer interaction with “Things”?
The Internet Of Things is clearly an arena in which Apple will be a big player in the future amongst other such as Cisco, who are keen to justify their dominance in Networking. They are working on their Connected Home developer kit, HomeKit, which should launch in April, perhaps even at the same time as the Apple Watch. There are already plenty of players in those two segments, both start-ups and very big brands such as Google (via Nest/Revolve) and Samsung (SmartThings), but we should expect Apple to redefine the segments too. If this does not happen from launch, Apple will quickly correct it, making all their profit work towards success.