Apple Event: Apple Is Transitioning Into a Solutions Company

By Rob Enderle March 21, 2016

As I’m watching today’s Apple event it suddenly hit me, we were looking at a company that is again making a huge pivot from a product company with cool gadgets into a solutions company that might actually be even more interesting.  Instead of opening with new products at the event they instead started with discussions on privacy, sustainability, and a renewed focus on health data access.

Let’s talk about the new Apple and why this is important.

The Problem with Product Companies

You only have to look at Sony to recognize how far that company has failed to recognize there is a problem with product companies in the consumer space.  Even GE, one of the great consumer product companies off all time, is struggling to maintain a position in this segment and they are, at least when it comes to technology, another one of the founders. 

The issue with products is that there tends to be a lot of competition, a lot of copying, and a general lack of long term consumer loyalty.   This means that even a company like Apple, known for the strongest customer loyalty in the segment, has a risk that at some future point, their customers will find something new that they'd rather have. And particularly troubling for Apple, is that prices tend to trend downward and margins collapse in the segment over time. 

What you need long term is a deeper relationship with customers and the ability to move beyond products to something greater. 

Moving To Solutions

This is hardly a new thing.  iTunes, which formed the strongest part of the iPod, was basically a solution of which the iPod was only a part.  But iTunes was eventually copied and, some might argue improved upon, by companies like Amazon and Google - suggesting that Apple needed to go farther.  The strongest example is the deeper commitment to Apple Research Kit and especially Apple Car Kit.   Positioning these as part of an ever more aggressive tool to better enable Apple customers to work closely with their healthcare providers and have better access to the health information they need.

This kind of implementation is not only uniquely attractive - particularly given Apple’s older demographic - but it is incredibly sticky.  If you are managing your health on Apple’s products it could actually be seen as life threatening to move platforms. Potentially locking in large parts of Apple’s base to Apple platform product and, potentially, massively reducing their willingness to move to any other platform. 

In addition, seeing others have an easier path to the critical information they need and the likely relation to family members or other care givers could drive Appel products more broadly into the market. So this isn’t just a retention strategy, but a capture strategy as well and health is one of the most powerful.

Now given healthcare has a huge privacy component, this likely explains why Tim Cook is making such a big deal about keeping the phones secure.  If the phones are seen as unsecure much of what they want to do might be blocked due to privacy compliance issues.  

His comments on sustainable energy suggests another area where apps and related developer focus might be pushed in the future or it may simply be to make Apple appear to be a more environmentally aware company, we’ll see. 

Phone Lines

Apple also launched a new phone - the SE.  This is as similar to the entry cars from companies like BMW and Mercedes Benz.  Still premium- but with prices that are more affordable for folks that can’t afford the premier phones (6S).   This is always a very difficult dance.  Priced too high and folks won’t buy them, priced too low and it cheapens the line and could drive people away from the brand.   Just under $400 suggests they are making sure that if they made a mistake, it is the former and not the latter which shows excellent judgement. 

Long term, they may eventually need to figure out a dual brand strategy like Toyota has with Lexus but that is likely years into the future.  

Other Stuff

Lower price on the Apple watch, smaller iPad Pro, minor improvements to Apple TV, and some interesting improvements to iOS with 9.3.  On this last point, the ability to automatically switch off blue light at night is likely the most underrated and the most important.  Amazon introduced this feature some weeks back and I’ve been using it along with bedroom lights that do the same thing.  I’m sleeping a lot better as a result but, I expect, most won’t yet see how big this potentially is.  

The new iPad Pro is being positioned as the one you have to get.  Tablet sales have been dropping off a cliff of late so I can understand the need to push the new product.  Phil Schiller pitched the offering which is nicely improved but really showcases that if you want to get people to buy a new version of something Phil is no Steve Jobs.  Phil is pitching the tech, not the magic for the most part.  Still, if I used an iPad, I’d be tempted by this one. 

Wrapping Up:

Apple is changing into a firm more focused on solutions which should allow them to dovetail better with both IBM and Cisco as they flesh out those partnerships.  But I think the thing to watch is what Apple eventually does in Healthcare and business because this will reflect the growth markets for the company and the hardware, while still important, will increasingly become just another part of the solution not the main focus of the company.  

Overall, I think this is a positive step for the company - though one that will take some time to fully mature.  Until then, check out the new iPad Pro, it is sure a pretty thing.  




Edited by Stefania Viscusi

President and Principal Analyst, Enderle Group

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