Apple's iPhone Strategy: Selling Shovels to Miners

When Steve Jobs unveiled the iPhone in 2007, few expected the camera would become one of the device's most popular features, positioning photo as a primary communication medium. While social networks have embraced the growing popularity of taking and sharing photos, and a cottage industry of camera accessories have thrived, Apple is positioned to benefit from the current photo renaissance by selling the software and hardware tools needed to sustain the movement. In essence, Apple is the hardware store selling shovels to gold miners in 1849 dazzled by the prospect of striking it rich. Apple's best strategy continues to be utilizing its hardware and software capabilities to introduce tools that allow users to push the envelope on new forms of communication including photo, video, and eventually haptics.

People use a camera to accomplish different tasks. While some like to capture moments spent with family and friends, others use a camera to take and share class notes, or accomplish daily chores like making a shopping list. Technology writer Om Malik wrote an essay on how the photograph represents a new visual language for the web, making it easier to consume content by removing language barriers and appealing to our senses. We like photos and are able to share and consume images much easier and quicker than text.

Most people now freely send and receive photos using messaging apps, like WhatsApp and iMessage, and social networks to communicate with others. Instagram's 300 million users sending 70 million photos and videos a day serves as the poster child of this movement. Meanwhile, Snapchat is quickly gaining popularity and relevancy in how media and content are distributed through photos and videos, while Pinterest adds a bit of an enterprise angle to the mix. 

Apple is positioned quite well in terms of benefitting from this photo renaissance. In many ways, Apple helped kickstart the movement as the iPhone was the first mass-market phone to include adequate cameras capable of taking pictures worthy of sharing, while larger mobile data plans and faster data speeds made photo sharing possible. Even though the first front-facing phone camera was unveiled years before the iPhone was introduced, when two cameras were included in the iPhone 4, millions of people began to take photos of themselves without turning the phone around. A few years later the selfie was born, which I suspect will go down as a movement within the much bigger photograph renaissance. Selfie sticks are becoming popular across the world, and new ways of taking selfies are being introduced, such as the Donut Selfie, which I classified as "selfie innovation." GoPro represents yet another offshoot from the trend of technology changing the way we communicate and record the world. 

I like using the current photo renaissance as a easy to understand case study on how Apple should approach M&A. While some want Apple to use its cash to buy a few of the larger social networks, the changing dynamics behind what guides a social network's popularity is often ignored. Facebook correctly bought Instagram, despite having the means to build its own photo-focused social network. Meanwhile, Twitter has seen success with short Vine video clips, but in terms of embracing photos, the solution has not been as smooth as Instagram. If a different form of communication takes off,  all of these social networks will need to adapt once again either by buying smaller start-ups or building a organic solution. For Apple, a company with a maniacal goal on staying focused and placing very few big bets, this scenario doesn't seem to fit with the company's mission statement. Instead, a more appropriate strategy for Apple is to sell the tools needed to support and encourage new communication standards and mediums, such as embracing touch and haptics in Apple Watch. As another example, by selling both the hardware camera components, as well as the software, Apple is able to stand out from the crowd in terms of its mobile camera solutions, which helps iPhone and iPad unit sales.

Like a gold rush, while few will strike it rich with photos, like Snapchat and Instagram, many will flop or miss out on the significant upside. Meanwhile, the shop selling the tools (software and hardware camera solutions) will make out like a bandit.