Why Are We Consistently Wrong About Apple?
Recently, Apple held its Q4 2016 earnings call and by all accounts, the company had its best quarter ever in terms sales and revenue. The company at 1 Infinite Loop has a new growth story and all is right in the world (and on Wall Street). But it wasn’t long ago that tech pundits thought Apple had reached peak growth and that it would begin to decline amid missed guidance on iPhone sales and uncertainty about it future product lines. Apparently, all of that worrying was for not, because as we’ve learned over the years, Apple isn’t your typical technology company. The mistake that tech analysts (myself included) make is that we treat Apple like a technology company like Google and Facebook, the ad-supported software giants. That is fundamental misunderstanding of Apple’s brand and value to consumers.
The World’s #1 Lifestyle Brand
Apple is a lifestyle brand that makes the world’s valuable and beloved products. More than that, it’s a lifestyle brand because its products (specifically, iPhones) are integral to the daily lives of its customers. There’s an emotional resonance to that relationship that Google and Facebook can’t match. Even with the launch of the Pixel smartphone and the face that Android owns a large majority of the smartphone market, Google doesn’t hold a place in culture the way Apple and its brand does. Google doesn’t compete on the same cultural and emotional level as Apple because it is not core to its business model and might actually be antithetical to it: Organize the world’s information.
Facebook is an intermediary between consumers connecting and sharing with each other and the brands and publishers who want to leverage that engagement for clicks and views. Due to its very nature, Facebook is only interested in connecting these parties, while refraining from being a party itself, more than content with selling attention. Facebook doesn’t have a relationship with consumers, by design and involuntarily.
Doing Things That Don’t Scale
In the tech community, we often praise software for its ability to scale with marginal costs moving to zero. Hardware on the other hand, maintains its marginal costs, making it a less desirable cost structure. What is underappreciated is the physical, tactile nature of hardware, smartphones in particular. These devices (iPhones, Airpods and Spectacles) move through the world with consumers. This is probably why Apple CEO Tim Cook isfocusing the company on augmented reality (AR) technology, leveraging and enhancing the real world through devices. These devices have moved from personal computing to trusted personal companions. An as with any relationship, that trust has builds over time.
Take Apple Pay for example. Over the last few years, there have been signs that consumer adoption might not be growing as fast as Apple execs had hoped. The main reason given for the slow growth was that there was no specific consumer need being met by Apple Pay other than speed and convenience at checkout, the same value propositions being offered by swiping a credit or debit card. In hindsight, that belief didn’t take into account that consumer need was trust! Trust that was personal, private, secure and mobile. As companies like Airbnb and Uber have commoditized trust, services like Apple Pay have personalized it. Trust grows over time and as Ben Bajarin put it well, so does spend.
Lessons Learned
Apple has confounded tech observers (myself included) because it it not bounded by conventional business norms, thriving on a deeper, more emotional connection with its customers. Like the old adage: “out of sight, out of mind”, Apple wins by being front and center, daily and hourly. In front of your eyes, in your hands and in your ears. Just like an old friend.
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