Apple at 40: slowing down but still strong

Apple has reached middle age - the prime of life for some, perhaps, but often a time when the joints start to get stiff and the reflexes might not be quite as quick as they used to be.

I don’t think the Watch is the ‘next big thing’; it is a part of the iPhone ecosystem and a bit-player in that game

Apple is undoubtedly still top of its game, with more than 1bn Apple devices now in use across the world (the global population is estimated at around 7bn), and a top brand by multiple measures.

The statistics around its success are mind-boggling, but perhaps the most pertinent indicator of Apple's achievements is how few of its rivals have managed to weather the technology market.

IBM is still a tech giant, but has retreated from the consumer market. Microsoft remains one of the big five tech firms, but has struggled to cope in a post-PC world with minimal presence on mobile. HP and Dell don’t compete with the iPhone and Commodore died more than a decade ago. Apple stands tall among the detritus of 1980s computing, even though some of its flagship 1980s products, like the Lisa, were considered something of a joke.

Andy Cunningham, founder of the Cunningham Collective, is a strategic marketing expert who worked with Steve Jobs during his early days at Apple and at his subsequent venture after being booted out, NeXT.

For her, Apple has had a kernel of its current magic since its status as the underdog in the 1970s.

She told Marketing: "I felt it was a magical tech company when Woz [Apple co-founder Steve Wozniak] and Steve Jobs introduced the first Apple II. That was magic right from the get-go.

"I came to Silicon Valley primarily because of the Apple II; I came to work with Steve Jobs, to help him launch the Macintosh. That was all on the heels of the revolution with the Apple II."

Apple after Steve Jobs

As so much of Apple’s brand mythology centres on Jobs, naysayers have suggested that, after his death, the company can’t innovate at the same pace.

That’s borne out by an examination of its latest hardware. In the space of a decade, Apple released the iPod, produced the iPhone, pioneered apps and unveiled the iPad.

In the past five years, its only significant new devices have been the Apple Watch and the Apple TV. And alarmingly, in Q4 last year iPhone sales declined for the first time, according to Gartner.

This may say more about the state of the tech industry than about Apple – in its early years, the business was up against a handful of Silicon Valley competitors. Now it competes with Samsung, Huawei, Lenovo, Xiaomi and Dell on the hardware side, and everyone from Spotify to Google on the software side.

"It’s definitely not the same rate of innovation," says Peter Dolukhanov, group chief technology officer at Karmarama and managing director of Nice Agency. "[Earlier] it almost felt like the Wild West, and it was a pioneer. There weren’t that many companies out there, and you couldn’t just Kickstart one.

"Now it’s inexpensive and easy to build products."

Opinion is divided as to whether the end of the "one more thing" era means the end of Apple’s growth as we have known it.

As Harvard Business Review notes, chief executives can take a good company and make it better, but it’s tough to take a great company and make it better. Current Apple CEO Tim Cook has strong internal support at the company, but undoubtedly lacks the public charisma and single-minded vision of Jobs.

Apple’s customer service innovation

Apple hasn’t just innovated in hardware, of course. Before becoming chief executive, Cook was responsible for transforming the company’s supply chain, leaving competitors struggling to ship devices at the same speed. This might sound unsexy, but it plays an integral role in creating Apple’s customer-service magic, with the company able to ship devices when it says it will.

(A counter-example might be the Apple Watch launch debâcle.)

Similarly, the company disrupted the traditional computer-retail model, selling direct to consumers rather than through a dealer. That allows the company to own the customer relationship, and upsell other devices in the Apple ecosystem.

Apple also invented the Genius Bar concept, modelling the fix-it service on the concierge service at The Four Seasons hotel chain.

Byron Sharp, professor of marketing science at the University of South Australia, says: "Apple is in an enviable position where it can economically and sustainably provide a high level of customer service.

"Each customer represents a decent amount of revenue, or potential revenue – because it sells so many products at the profitable end of the market."

Sharp adds that every customer in the Apple store is a prospect for a Mac, iPad, iPhone and Apple Watch – as well as an online prospect for iTunes. "So Apple can afford to offer serious, helpful customer service."

By contrast, the average high-street dealer makes such low margins on PC sales that training staff to offer a higher level of customer service isn’t worth it.

Beyond the Apple Watch

How Apple maintains its lead isn’t clear. For now, the company seems to be coasting, making incremental updates to the iPhone, with the cheaper iPhone SE going on sale this week, and offering a wider range of iPads. There’s no sign of an Apple Watch II yet, and the company won’t reveal sales figures, though research firm YouGov suggests it’s the best-selling smartwatch in the UK.

"It’s less obvious [where Apple goes next]," says Cunningham. "I don’t think the Watch is the ‘next big thing’; it is a part of the iPhone ecosystem and a bit-player in that game."

She adds that the internet of things could prove an interesting market for Apple, which has dabbled in the area with its HomeKit service, a way for multiple connected devices to talk to each other.

"The internet of things could bring about a whole set of appliances Apple could deliver to the market, based on an interface consumers know and love," says Cunningham.

"Steve Jobs always said he wanted to build appliances. He didn’t like the term computers, he called them appliances. Now we see that vision as a potentiality with the internet of things."

Dolukhanov is more sceptical, suggesting we’re unlikely to see the iToaster any time soon. Both he and Cunningham cautiously predict that Apple’s next big innovation could be a car.

"It’s a complete departure from what it has done previously, and it would take five to 10 years at least," he says. "But it’s not unfathomable it would go down that route."

Dolukhanov points to CarPlay, Apple’s way of bringing iOS to cars. "It could standardise how we interact with cars. I could see them working closely with each manufacturer."

A further challenge is cleaning up its product portfolio. The arrival of the iPhone SE and two new iPads this month mean Apple’s consumers have more choice than ever – a tricky path for a brand that traditionally prides itself on simplicity.

"If you look at the current line of the Apple Watch, tablets and phones, it’s quite a confusing range," says Dolukhanov. "It’s in need of simplification, and it needs to work out how many screen sizes you really need. It might be time to put the brakes on."

Apple’s continued success may come from a return to simplicity and an avoidance of diversification.

That the company is reportedly dabbling in virtual reality, wearable technology and AI – all predicted to be major tech frontiers – is a little troubling. In a crowded and confused tech market, Apple’s future will depend as much on what it chooses not to make as on what it does.

As its 2013 ad campaign, ‘Our Signature’, asked: "Does it deserve to exist?"

Not always.