As the post cited above describes, Apple says it is having its “most innovative year ever”, and it is poised to launch a slew of new products in the Fall of 2013: 1) an iPhone 5S, 2) an iWatch, 3) a TV (???), 4) the new streaming music service, 5) a low cost iPhone, 6) an iPhone 6, and 7) iOS 7, the most significant redesign of the iOS to date, which also includes new features like iBeacons (to drive contextual computing), support for third party game controllers, and motion detection.
My question: is this mainly incremental innovation (extending and polishing the great innovations of the past), or is there something here that will take Apple and its stock price to the next level? It’s early to know, of course, but it’s worthwhile to think about it.
Let’s parse the list a bit. Items 1), 5), and 7) are clearly incremental: a speed bump, a lower-cost design, and a nice refresh of the look and feel of iOS (iOS 7 has been previewed now).
The new streaming music service and the iPhone 6 are harder to judge. I’ve not seen much ab0ut the details. But, streaming music has been around for a long time and there are Pandora and other good companies out there. iPhones 3, 4, and 5 have been significant steps, but still evolutionary improvements on the original iPhone. So, Apple has a big challenge seeking to hit the ball out of the park here: they need to reinvent these products in ways that unlock new consumer value that several really good competitors (and many others) toiling in these vineyards have not been able to find.
Then there is the long-rumored Apple TV, about which Haydn is skeptical. I’m skeptical too. I think about a TV as hardware plus services. The hardware aspect of Apple TV would be cool, no doubt, but does Apple have much opportunity to make it fundamentally better? Making flat panel displays is a hugely capital and scale-intensive business. The global leader is Samsung, one of Apple’s main competitors. Apple would need to buy displays. The hardware for an Apple TV would probably amount to a high end TV in a lovely package with tight integration to iOS, iTunes, and your Apple ID (Apple’s service offerings). However, Apple already sells a nice $100 device (called “Apple TV”) that delivers the same service integration value prop. I don’t see a big opportunity here, and this may be why Apple itself has (presumably) struggled with the idea of offering a TV for several years.
That leaves the iWatch. Apple is the icon of the millennial generation, and ironically, many millennials don’t wear watches. When I ask why, they say: why wear a watch when you have a smart phone that displays the time on the lock screen? That argument is off a bit, as it’s much easier to glance at an analog watch than haul a smart phone out of your pocket and hit the wake-up button. I think there is an identity thing here: millennials identify with keeping life in the smart phone, and maybe obsessing about time is not part of their meme.
Despite the above, I see potential in the watch. Watches are functional jewelry, which is an Apple core competence. I’d love to have a watch that never needs to be set and changes to the correct time zone when the airplane lands. An iWatch together with an iPhone could bring the alert and ambient information functions of the phone (time, app alerts, weather, phone status) onto the wrist where it is easily visible. An iWatch with a powerful voice interface could do a lot: phone calls, Siri, simple actions (although we will end up looking like secret agents, talking to our sleeves all the time). There are no doubt other clever value props that the people at Apple have developed to delight us when the product launches.
But, the iWatch seems to have limited sales potential: a platform extension for Apple, marketed mainly to iPhone users, perhaps disrupting the high-end watch market which is much smaller than the cell phone or laptop markets.
Will Apple’s next products move the needle? It’s going to be hard. From my perspective, most of what they are planning is good but incremental innovation. The fully integrated Apple TV idea is dubious. The iWatch is a good opportunity, but probably not as big as the iPhone and iPad were in their time. But wait, one more thing … there’s always the possibility of a breakthrough idea that analytical types like me have not seen. I’d be very pleased if they beat my expectations.