​Kagan: Is Apple as Good as We Think They Are?​

Jeff Kagan  |

Image via Andy/Flickr CC

Apple (AAPL) may have grown to be the number one company in the country by many accounts, however staying there is another challenge. Research group Gartner says, smartphone sales are softening for the first time ever. That means iPhone, Android and every other smartphone. And the iPhone is the center of the Apple universe. So, they are facing a real threat.

What is Apple really known for? What is the secret of their success? It’s the iPhone. Sure, there are other technologies like iPad, MacBook, Siri, AI and other subscription based online services and now the HomePod, but mostly Apple growth and strength comes from the iPhone.

So, if smartphone growth is slowing, the core of their universe, that would seem to be a threat to Apple. Don’t be surprised. Every winning company faces the same threat from time to time. Going forward, some win, others lose.

The Inescapable Apple iPhone Growth Wave

If companies are lucky enough to develop and market a successful service or product, that only lasts so long. There is a growth wave or growth curve, which I often talk about where successful products grow, top off, then fall. This growth curve is inescapable.

There are only a few ways to escape this reality. One is to continue to upgrade and enhance new versions of the same product in order to extend the growth curve. The Apple strategy has been to update the iPhone and extend its growth curve. Keep the familiar device and enhance it with innovation. This has worked for them over the last decade.

The only other option is to create the next growth wave with a new product or service. That’s what Apple has tried to do with several other products like iPad and existing products like MacBook to a lesser level of success. Next, they are releasing their new HomePod which will compete against the Amazon (AMZN) Alexa and Google (GOOGL) Home AI devices already in the market.

HomePod is Next New Apple Product

This is the same challenge other companies like Blackberry (BBRY), Nokia (NOK) and Motorola have faced. They failed to reignite their growth engines. Apple seems to be avoiding this pothole, and that’s the good news, for now.

The move to reinvent the category with the iPhone X may not be the success story Apple hoped for. They are trying to reinvent the space with this new design. They want to re-invigorate sales of new devices and reward shareholders.

After all, if shareholders are not rewarded, they will invest elsewhere. That’s the pressure success brings to companies like Apple. Sure, it’s hard climbing to the top, but it’s even harder staying there.

Reason iPhone X Not Selling as Well as Apple Hoped

The iPhone X is liked by many users, but many others don’t like it. Think about the market like slices of a pie. One slice likes the new design while another does not.

Why? The reason is simple. A decade ago when Apple started the iPhone growth wave, there was no other super-smartphone in the marketplace. Sure, there was Blackberry, but that was mostly a business device and there were only a few hundred apps.

When the first iPhone hit the marketplace, users had to learn something new and did it with gusto. Over time we saw apps explode to over a million. That’s the magic Apple wants to re-create. That level of excitement. I think this effort will be rewarded, but only with some iPhone customers.

The others don’t want to have to invest more time learning a new design for no added benefit. Not when every new feature could be integrated into the iPhone 8 design. Customers don’t like being forced to do different things just to make Apple happy.

Apple Must Innovate on New and Existing iPhone Design

And that’s why iPhone X is not selling as fast as they hoped. Apple must understand that things have changed. The marketplace has matured. Increasingly, users are not happy being followers. Being led. Doing things that they don’t want to do. Especially with no added benefit. Today, users want to control their own experiences.

I’m not telling Apple not to innovate. On the contrary… innovate like crazy. But innovate on both designs, new and existing. Don’t force users to change the way they use the device if they don’t want to. Many users don’t want to invest more time learning a new way to use the iPhone, especially with no added benefit for the effort.

So, bottom line, I think Apple should innovate like crazy. Innovation is the best way to grow. However, don’t make all customers jump through hoops to learn a new way of using their device, when it’s not necessary. Remember, some customers like to do this. Others don’t. Don’t ignore your customer.

Don’t force them to do things just to reward the company. Especially when there is no benefit to the user. This is the secret sauce that Apple does not seem to understand yet. They still think they rule the roost like they did a decade ago. Users do like the Apple iPhone, Macbook, iPad and hopefully the HomePod too. However, this is a lesson Apple needs to learn quickly, before their growth wave crests and falls.

Jeff Kagan is an Equities.com columnist. Kagan is a Wireless Analyst, Telecom Analyst, Industry Analyst, speaker and consultant. He follows wireless, wire line, telecom, Internet, cable TV, IPTV, Cloud, Mobile Pay, FinTech and communications technology. Email him at jeff@jeffKAGAN.com. His web site is www.jeffKAGAN.com. Follow him on Twitter @jeffkagan.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not necessarily represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer.

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