Business 620 - Apple

Running head: APPLE

Apple

Jonathan Powell

Business 620

Dr. Murad Abel

February 20th 2016

Apple

For the last 15 years, Apple Inc., a Cupertino, California based hardware and software conglomerate, has innovated products that are visually appealing, cool, easy to use, practical and convenient all which have contributed to improving our lives. From the iPod, a digital music player, in 2001, then iTunes, an application that enables users to purchase digital music and movies or TV shows, the iPad, a portable handheld tablet device that Tim Cook, current CEO, believes will replace the home computer (Heath, 2015) and the iPhone, Apple has given the world products that people across the globe have desired and embraced and has changed the landscape for any competitor in the same space.

In the recent past however, some questions have surfaced about Apple’s ability to innovate. This fear and doubt has led the stock price to retreat by a whopping 35%. But is this fear justified? Do the analysts on Wall Street know something the rest of the populous does not? Why do they believe that Apple’s best days are in Apple’s rear view mirror? To answer these questions, we must understand how Apple has innovated historically.

Consider their first major innovation – the iPod. Before 2001, several versions of digital music players existed. However, none of these ever included an element of coolness. With Apple’s entry into the market, customers were suddenly presented with a cool, new gadget that combined style and function. The iPod used a 5GB hard drive and boasted storage of a 1,000 songs and had a price tag of $399 (International Business Times, 2011). The iPod’s biggest advantage over other erstwhile digital music players was that a user was not limited to lending portability to a tiny sliver of their music collection, but rather a massive 1,000 songs. Apple essentially carefully surveyed the portable digital music player market, made strategic observations about what customers wanted, what customers needed and developed a product that redid what already existed, but only significantly improving on it. So despite the higher price tag, customers were willing to pay for the Apple device over other cheaper, digital music players.

Then came the iPhone in 2007. Prior to the launch of the iPhone, other smart phones did exist. Blackberry dominated the smartphone market with their signature “QWERTY” smart phones, which included the keys of a computer keyboard enabling a deft keyboard user to quickly type up a message using the QWERTY keys. However, the launch of the iPhone in 2007 completely changed the smartphone market. The iPhone was essentially a computer in the palm of its user’s hand. This iPhone revolutionized mobile device usage by including a web browser into the device. This move introduced the dawn of internet access on the go. No longer did internet users need to turn on their computers to browse the web; they held that ability in the palm of their hands! A few years later in January 2011, Apple launched the App store (Kane, 2011). With the App store, came a development platform that enabled developers to create apps that ran on iOS, Apple’s operating system. Here we see another instance of Apple taking what already existed and significantly improving on it. Apple was one of two companies that took over the smartphone market and led to the decimation of Blackberry (Samsung was the other).

We have seen time and again, that Apple has the ability to develop on an already existing idea or technology, significantly improve on it and completely dominating the market space with their version of that technology. They have the uncanny ability to do this repeatedly. Some argue that it was Steve Job’s vision that enabled him to look into the future and figure out what customers want and need. But surely, one man could not have possibly been responsible for all of these innovations single handedly! Apple’s magic may have been injected into the company by Steve Jobs but it is all still there despite Steve Job’s demise. It is woven into their fabric. It is part of their DNA. The company culture to innovate, invent, imagine, create and deliver marvelous products again and again and again will continue to exist. Apple did it with the iPhone 6 and iPhone 6+ long after Steve Job’s death in 2011. The iPhone 6 and 6+ were Apple’s bestselling smartphones. This by itself is testimony that innovation is still alive and kicking at Apple. With Tim Cook at the helm, there is no reason to believe that Apple’s ingenuity will grind to a sudden halt.  

For the last few years, Wall street analysts have been lamenting that Apple has not developed any new products that are making a significant contribution towards its bottom line. However, they fail to recognize that the Apple Watch is still in its infancy. As pointed out by Carr, it took a few years for the iPod to reach its peak. It was not until 2005, four years after its initial launch, that the iPod started to sell by the millions (2015). There is no reason for Wall street analysts to dismiss the possibility that the same success could happen for the Apple Watch. We have no visibility into where Apple wants to take the Apple Watch and how they plan to use the iPhone to increase sales of their Watch. But with Apple’s faithful following and top-of-mind awareness (Finch, 2012) and if history is any indication, their success they enjoyed with the iPod will continue with the Apple Watch.