2015, it quietly acquired a voice-AI startup called VocalIQ that is reputedly working on the next-generation Siri, but you can be sure its technology will only find its way into devices when Apple believes it is truly ready. Artificial intelligence is an alluring concept—machines that think for us!—but it also could have unforeseen ramifications. Apple gives its billion customers comfortable doses of AI because, despite the common misconception, it isn’t a company for geeks. “People like things they can do now, not just think about,” Cook says. “I’ve been thinking about The Jetsons since I was a kid. But occasionally you want The Jetsons to come to reality. That’s what Apple is so great at: productising things and bringing them to you, so you can be a part of it.”
•• In the mid-1970s, when reruns of The Jetsons were still a staple of Saturday morning TV, Steve Jobs and Steve Wozniak started Apple Computer with the goal of selling a new kind of machine to an audience they measured in the hundreds. As the company grew, its mission broadened. When Jobs returned in 1997, he would tout the fact that Apple sold an “experience” that could not be matched by other manufacturers. At first, the experience was one of using a single computer in which the company’s software and hardware was seamlessly meshed. Jobs hoped that the excellence of Apple’s personal computers might bring in an additional 1% market share, an increase that would have stabilised Apple’s financial health. By the time Tim Cook became CEO, this concept of an “Apple experience” had grown to mean owning and using a collection of three Apple devices (iPad, iPhone and Mac) networked to one another and the Internet. The experience now being sold by Apple has expanded far beyond that. As Cue says, grinning at the ambition: “We want to be there from when you wake up till when you decide to go to sleep.” Cook himself is only slightly less brash. “Our strategy is to help you in every part of your life that we can,” he says, “whether you’re sitting in the living room, on your desktop, on your phone or in your car.” It’s impossible to understand Apple’s future, and Cook’s challenge, without acknowledging that the experience Apple sells today is not just a collection of devices but a web of hardware, software and services that is itself connected to other webs of apps and services made primarily by other companies. These other webs include everything from the “app economy”, which
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already runs on Apple software and devices, to emerging ones such as the connected home and car as well as wearable computing. To achieve its goal of serving its customers all day long, Apple must do more than ensure its own products work brilliantly—it also must attempt to make them work seamlessly with these many other disparate networks. It must be a notable, reliable player in ecosystems it doesn’t own itself. Apple does an extraordinary job of extracting revenue from the worlds in which it already plays a role, and its future revenues will depend on this even more. Horace Dediu, an influential analyst now working with the Clayton Christensen Institute for Disruptive Innovation in Boston, estimates that Apple customers deliver an astronomical $40 (R555) per month apiece to the company, versus the pennies per month that Facebook and Google collect, and the few dollars a month that Amazon receives. That’s primarily a result of the expensive devices its consumers are buying. But subscription services such as Apple Music and iCloud storage are starting to deliver significant cash. Revenue from services now accounts for 12% of Apple’s total sales, up from 9% the year before. In fact, Apple’s services revenue exceeds Facebook’s total revenue. And Cook says the company has just got started. “Oh, yeah. I expect it to be huge,” he says, smiling. The iPhone’s sales might have dipped for a quarter, but it is far from dead. Its ability to interact with other products is a strategic advantage, and it remains central to what analyst Neil Cybart already calls the “Apple Experience Era”. “Your auto or your home may have dozens of microprocessors in them, but they’re dumb products,” says Dediu. “When the smartphone enters that environment, it gets integrated, and the vehicle [or the home] gets intelligent.” Your iPhone is loaded with your personal preferences, as well as the latest software for managing the world around you, like apps for your thermostat and Philips Hue light bulbs. Think of the way iPhone automatically connects via Bluetooth to your car’s sound system, and you can start to imagine the role it could play as consumers accumulate more sensor-embedded devices. The iPhone will continue to morph, in ways designed to ensure its place as the primary way we interact with and manage our technological experience for the foreseeable future. Apple will sell more devices, but its evolution will also enable it to explore new revenue opportunities. This is how Apple adapts. It expands its portfolio
by building on the foundation laid by earlier products. That steady growth has made it broader and more powerful than any other consumer technology company.
•• It’s entirely possible that Apple will never introduce a product as universally desired as the iPhone. That doesn’t mean it won’t continue to be a great company. “The iPhone entered a market that was the biggest on Earth for electronic devices,” Cooks tells me, as we’re wrapping up our interview. “Why is that? It’s because eventually, everyone in the world will have one. There are not too many things like that.” Then Cook makes another one of his points that can get lost if you don’t understand the care he takes with every word. “It’s hard to imagine a market defined in units—not revenues—that’s that big.” In terms of unit sales, yes, there may never be another iPhone. But in terms of revenue, well, look at the industries that Apple is just now entering, or is rumoured to be pursuing. Media and entertainment is a $550-billion (R7.6-trillion) global market. Global car ownership is a $3.5-trillion (R48.7trillion) business. Annual global health spending is more than $9 trillion (R125 trillion). And while Apple may not currently dominate any of these arenas, remember that analysts once thought Apple would have a hit on its hands if it could garner 1% of the mobile phone business. As we’re saying our goodbyes, Cook and I stumble into discussing healthcare, and he perks up again. “We’ve gotten into the health arena and we started looking at wellness, that took us to pulling a string to thinking about research, pulling that string a little further took us to some patient-care stuff, and that pulled a string that’s taking us into some other stuff,” he says. “When you look at most of the solutions, whether it’s devices, or things coming up out of Big Pharma, first and foremost, they are done to get the reimbursement [from an insurance provider]. Not thinking about what helps the patient. So if you don’t care about reimbursement, which we have the privilege of doing, that may even make the smartphone market look small.” One percent of $9 trillion is $90 billion (R1.25 trillion). Even Apple may call that a pretty good business. Rick Tetzeli is an editor-at-large at Fast Company US and the co-author of Becoming Steve Jobs. firstname.lastname@example.org