It started with computers and then moved to mobile devices: Does Apple have a third act?
Having transformed computing, music, phones, cameras, and now watches, what will the next products from the world’s most valuable company be? Center Director Jeffrey Cole examines Apple’s field of potential innovations.
By Jeffrey Cole
When talking about Apple, you quickly run out of superlatives. Its performance and story require new words, not yet developed, to describe the company that sits atop the throne of the technological revolution.
Apple was founded in 1976 and is now the grandfather of all the other tech companies. But the journey has been rocky. One of the co-founders, Steve Wozniak, left the company after nine years in 1985 to pursue his own interests. The other co-founder, Steve Jobs, also left in 1985, after losing a board struggle to John Sculley, the Pepsi executive brought in to manage Apple.
At the time, neither founder took out a lot of money by today’s standards. Even with the phenomenal rise of the company, neither accumulated anywhere near the kind of wealth of other tech founders such as Bill Gates, Jeff Bezos, Larry Page, Sergei Brin, or Mark Zuckerberg.
Apple floundered until the company brought Jobs back in 1997. That led to one of the greatest waves of innovation ever and the most spectacular business success story in history. The newly re-designed iMac was followed by the iPod and iTunes (2003), the iPhone (2007), and the iPad (2010).
Jobs also re-imagined what a product launch could be. On stage at the Moscone Center in San Francisco in his signature jeans and black turtle-neck sweater, Jobs would come near the end of the presentation and coyly add, “One more thing.” That’s when he introduced products that changed the world. Fans would re-arrange their schedules to watch the launches on television. A lucky few would do whatever it took to be there in person. It was like watching Picasso create a painting or Toscanini conduct an orchestra: a genius at his prime in his element.
It all worked beyond anything ever seen before. The identities of Apple and Steve Jobs became forever merged and today, 10 years after his death, he remains the symbol of the company.
In 2018, Apple became the world’s first trillion-dollar company. Although it took 42 years to get there, it only took two more years (2020) for it to reach $2 trillion. Today its market cap is $2.34 trillion. Apple is valued more than the GDP of all but seven of the world’s countries: it is bigger than Italy, Canada, or Brazil.
But can Apple continue to innovate?
Tim Cook, Jobs’ successor as CEO, faced with the impossible task of filling Jobs’ shoes, has done a remarkable job of leading the company to extraordinary growth.
Yet, in 2021 Apple is stuck in neutral. Today’s revenues are secure, but the future is uncertain.
Apple fan(atic)s expect to see a constant barrage of innovative products that (to paraphrase Jobs) they didn’t even know they wanted. Every year welcomes a better iPhone, but the new models represent incremental improvement. Raised on Jobs and “one more thing,” Apple’s most passionate customers want game changers.
Apple has only introduced one new product category since Jobs passed away: The Apple Watch (not the iWatch). It is the best smart watch anywhere, but it is not a game changer, and its sales have been disappointing compared to other Apple products.
Apple is at a crossroads. It has mastered the phone and tablet business (no longer the PC world). What will be its new direction? Will the company innovate in a way that will keep it on the throne as the world’s biggest and most loved company?
Apple keeps everything a secret and has gone to law enforcement and court to stop early prototypes getting out. It may be on the verge of the greatest third act ever seen or there may be nothing up its sleeve. I lean strongly to the former and expect to see major innovations and a bigger and brighter future.
There are four areas that Apple has already or has been rumored to be interested in:
1. Television — In his definitive biography of Jobs, Walter Isaacson reports that, near the end of his life, the Apple founder told him, “I finally cracked television.” It was a cryptic message with no elaboration. Many fans thought an iTelevision (just a big iPhone) might be on the horizon, and that Apple would compete with Sony and Samsung. Some were ready to make down payments.
Time passed. Nothing happened. Eventually, Apple introduced Apple TV that gave smart features to television sets, but that hardly counts as “cracking television.” Did Apple try and fail? Was it never anything serious? Or is it still to come?
2. Entertainment — Like everyone else, Apple was dazzled by the rise of Netflix and watched as the studios started their own streaming services. Apple decided to join them. It could easily (far more than anyone else except Amazon) hire the best executives and creative talent.
One week before the launch of Disney+, Apple introduced AppleTV+ at a low cost of $4.99 a month. With effectively unlimited budgets, it created the most expensive television programming ever (to that point) with “The Morning Show” at $15 million an episode.
But Apple’s heart has never seemed to be in the entertainment business. It was dabbling. During the pandemic, Apple had a thin catalogue of programming and has done little to beef it up. It is not a good value compared to Netflix or Disney. Shortly after launching, Apple made its streaming service free for a year with the purchase of a phone, computer, or tablet.
Today, Apple has two choices, keep TV+ a boutique service mainly for people who buy their hardware or make a significant investment in entertainment. Considering AT&T spent 40% of its market cap on Time-Warner (not a good model to follow), the same investment from Apple would be $800 billion. With a war chest like that, Apple could buy anything, including Disney and Netflix (regulatory issues aside) and still have $90 billion left over (based on the market caps of those two companies today). It’s time for Apple to make a decision.
3. Automobiles — Apple has been rumored to be working on an iCar for several years. There have been leaked stories of possible alliances with several car companies, while some analysts say Apple will go it alone. The company is up to something, and clearly it is interested in self-driving.
There is no one who would not take a serious look at an Apple car, and success in this area could dwarf anything in the computer and mobile phone businesses. Hardware, monthly subscriptions, display innovations, automation: these are all things that Apple is great at doing and would reinvent transportation. Rumors say it will happen in 2024.
4. Healthcare — When bank robber Willie Sutton was arrested and asked why he robbed banks, he allegedly replied, “Because that’s where the money is.” Healthcare is where the money really is. The market is predicted to rise to $662 billion by 2026.
As with cars, Apple has been repeatedly rumored to be eyeing health care. Some say that the ultimate success of the Apple Watch will be if it becomes a health-care device sharing valuable data between patients, health companies, and doctors. It is a market that needs a major player that consumers trust. Amazon is also a strong contender in healthcare (and everything else).
Apple has only introduced one new product category since Jobs passed away: The Apple Watch (not the iWatch). It is the best smart watch anywhere, but it is not a game changer, and its sales have been disappointing compared to other Apple products. Apple is at a crossroads. It has mastered the phone and tablet business (no longer the PC world). What will be its new direction? Will the company innovate in a way that will keep it on the throne as the world’s biggest and most loved company?
While Apple could continue to grow within its existing business, if it does not move into new areas its close competitors (Amazon or Google) or new technology companies will surpass it.
It is exceedingly unlikely that Tim Cook is willing to let the company rest on its past laurels.
Apple has the reputation, talent, loyalty, and resources to do just about anything it wants. Success in automobiles (mobile computers really) or health-care would propel it to a new and even greater level. Success in both could make past successes seem like rounding errors.
Apple could easily become a $10 trillion company. We are all waiting for the company’s next move.
Jeffrey Cole is the founder and director of The Center for the Digital Future at USC Annenberg.
See all columns from the center.
July 7, 2021