Jan 16

IN THE NEWS: Yet Another Sign that Apple has Peaked on the PLC

Another day, yet another article about how Apple is losing its grip on Wall Street. This won’t bode well for the future; I have a feeling that 2013 and 2014 are going to be years that show a real transition for Apple, and we’re going to see a rapid acceleration of product announcements and market entries as Apple tries to recapture the magic that’s currently slipping through its fingers.

Contrary to what my iPhone-owning colleagues might think, I’m not an Apple fan or a detractor; I’m simply a skeptic. For as long as I’ve casually used Apple products (going all the way back to the black and white Macintosh computers in my school’s computer lab), I’ve admired Apple’s sense of simple style but disliked how Apple products force me, as a consumer, to bend my will to the “accepted” way of doing things. (Windows PCs and Android phones, by contrast, offer me almost too many ways to do what I need to do, but for someone like myself who enjoys customization and power using my devices, that’s important.)

At the same time, I understand Apple’s mass appeal. In this era of rapid technological change, people who aren’t tech-savvy need simple, easy-to-use devices that allow them to do cool things without having to learn a lot of ins and outs for software. Apple’s very good at delivering on that promise, and there’s no question that the iPhone changed the course of history by popularizing the movement to take computers off desks and laps and putting them into peoples’ pockets. (The iPad is really just a brand extension of that.) Apple’s strength is not in products, but in marketing; their competitors run circles around them trying to outdo Apple on features or specs, always failing to understand that Apple approaches things not from an engineering perspective, but from the user experience.

But as I’ve said before on this blog, a lot of what Apple has accomplished over the last decade was due to the presence of an uncompromising visionary who put his legacy ahead of his shareholders. This paid huge dividends, of course; Apple went from being a brand on life support to the tech giant in the world, eclipsing all of its competition (including the hegemony of Microsoft) by finding a new market space and exploiting it. But at the same time, I think many people recognized that the death of Steve Jobs also spelled the beginning of the end for what Apple has accomplished. They’ve peaked, and the next decade is going to be the beginning of the end for their rise to prominence.

This doesn’t surprise me a bit, because Apple, much like any product manufacturer, is following the product life cycle. Because they only really make a few products, it’s very easy to see the progression for each of their product lines. In my estimation, the iPod, the iPhone/iPad and the MacBooks are really the three pillars of what Apple’s got to offer, and two of these three product lines have entered into the maturity plateau while the third (the iPhone/iPad) is nearing it.

Let’s step back for a moment and examine the product life cycle, because it’s quite clear where Apple’s iPhone fits into it. The first section of the product life cycle is the early adoption phase. Apple enjoyed this phase like few tech giants do, because the iPhone received massive attention as it ramped up for launch in 2008 and sold out almost immediately thanks to the hordes of early adopters who didn’t mind waiting in line. The iPhone was initially hard to get and restricted to a single carrier in the US; you had to work to get one. All of the hype created massive demand for the device, leading to an extraordinary introduction and a massive growth phase.

Because the iPhone is a device that receives constant upgrades and because smartphones as a category have a built-in “trade up” mentality every two years, Apple has able to release new versions of the iPhone every year and sell even more phones. And because other mobile carriers wanted a piece of the action, Apple was able to get the phone into more and more sales channels, to the point that consumers could even buy an iPhone at Walmart. At the same time, the competition began to get closer and closer to replicating Apple’s product through the Android operating system, and though that market has been highly fragmented, it has proven to be a viable alternative for consumers who are not interested in Apple products for one reason or another.

All of these events follow the product life cycle precisely. And at the same time, the two consumer pools who tend to be affected by this segment of the life cycle (innovators/early adopters, who make up around 16% of the total consumer base over a product’s life, and the early majority, which makes up another 34%) bought lots and lots of iPhones.

But as of 2013, we can see that things are changing. For one thing, the iPhone’s really losing its grip on the culture. It’s become an ubiquitous device, and having one isn’t quite so cool anymore as it used to be. I see exasperated moms handing them to their kids in the grocery store to play with; I see senior citizens carrying them around; I see people unironically wearing past decades’ fashions pulling them out and using them to snap pictures. These are all indications that the iPhone is now being purchased by the late majority (another 34% of the consumer pool), which is made up of people who tend to get in on the back ends of trends when prices come down and products are widely available.

Apple knows this, and they’re panicking, because being at this stage in the product life cycle is bad if you’ve got investors who want you to keep making money for them. That’s precisely why Apple’s rumored to be working on a lower cost iPhone and why they’re rushing to get an iPhone 6 to market. The iPhone 5 was their bestselling edition of the iPhone to date, but a lot of that had to do with upgrades and sales to the late majority. In other words, the product is demonstrating that it’s now in the maturity phase, and that can only mean two things: revenues will level off as unit price falls and demand begins to plateau, and eventually, Apple’s going to see the product enter the decline phase, where the only group of people left to serve are the consumer pool known as the laggards (16%) who come at the tail end of a trend.

In the meantime, the iPad is going through much the same process. Many of the people who wanted tablet computers now have them, and the marketplace for tablets has begun to quicken and mature because of all of the competition brought by eReaders that evolved into tablets (such as the Nook and the Kindle) in opposition to the iPad. The fact that Apple released an iPad Mini in 2012 to compete with the market rather than to lead it is a sign of market maturity. People will still buy iPads, but the plateau is here.

So, what does that mean for Apple? My guess is that over the next several years, we’re going to see them desperately trying to hold on to their relevance and that they’ll probably try to enter a new market space and recapture the magic of the iPhone. Some have suggested that they’re heading into the living room to revolutionize TV, while others have suggested that Apple’s going to try to revolutionize higher education. I suspect they’re going to flounder a bit looking for the right opportunity and ultimately follow the path of Microsoft, creating an unending line of product upgrades while slowly losing their customer base to competitors who are able to move past broad appeal and target niches.

Yes, the day is coming when Apple isn’t going to be cool anymore. They’ve been there before. But this time, unfortunately, they won’t be able to bring back Steve Jobs to revitalize the brand.