There is much debate and intrigue regarding how Apple's expanding product line fits together. The addition of an entirely new product category with Apple Watch and new models such as iPad Pro have led some to wonder if Apple is losing focus or is unsure as to where the technology puck is headed. However, in a somewhat unpublicized interview for the new iMacs this past October, Phil Schiller, Apple SVP of Marketing, described a new theory for Apple's product line, which I am calling "The Grand Unified Theory of Apple Products." This theory provides a glimpse into how Apple looks at the world and more importantly, some clues as to where Apple product categories are likely headed over the next few years.
Product Line Expansion
One theme that has come to represent the Tim Cook era is product line expansion. Over the past four years, Apple has doubled its product lineup from 12 distinct models to more than 24, including a new product category. On a SKU basis, the growth is even more noticeable when taking into account additional finish options and various iPhone models geared toward specific mobile carriers. The ability to not just ship hundreds of millions of iOS devices each year, but to do so while offering so many SKUs, says a lot about Apple's supply chain prowess.
Much of this product expansion has come in the form of additional models reaching lower price ranges. Apple followed a similar method with the iPod in the early and mid-2000s. The difference now is we are seeing this occur with multiple product categories at the same time. Apple's expanded product line has contributed to total revenues more than doubling to $234 billion in FY2015 from $108 billion in FY2011.
Explaining Apple's Product Line
One question that has been raised by Apple's continued product expansion is how do all of these products fit together to produce one cohesive platform and encourage a broader ecosystem? The lines between product categories have become somewhat blurry. Upon closer examination, Apple's methodology of explaining its product line has matured over the years from talking about the iPad and a product's unique role to including the Apple Watch on a single product spectrum where personal choice is required to decide which products to buy.
Unique Roles. When Apple announced the iPad in 2010, there was much attention and resources dedicated to explaining why a multi-touch tablet with a 9.7-inch screen should exist in a world with 3.5-inch screen iPhones and 13-inch MacBooks. The implied message was that the iPad would fit in most consumers' lives as it was a device that could do a list of things better than both an iPhone and a Mac. The iPad was given a very specific role to play. The now infamous slide Steve Jobs used to introduce the iPad (included below) is considered one of Apple's best marketing slides. It includes iPhone on one side, Mac on the other, and space in the middle with a list of various activities that can be done better by a new type of device.
The intriguing aspect of the slide was that it was geared toward consumers more so than analysts and technology pundits. Apple made it very clear as to why someone should buy an iPad. Judging from the early sales success, Apple's clear messaging worked. However, the broader implication from this marketing was that each Apple product had a particular role to play in our lives. Since Apple sold a handful of products, it wasn't much of a stretch for a consumer to buy every product category as each had its own unique role. Fast forward five years, and the product dynamic has changed to such a degree that the iPad seems like a redundant device to many people. The space between an iPhone and Mac continues to shrink, and iPad sales are declining. Apple's previous strategy of selling the idea that there was room in our lives for every Apple product category was beginning to come undone. Apple needed a new way of explaining its product line.
A Spectrum. At the Apple Watch introduction keynote, Apple changed its tune when explaining its product line. Instead of positioning product categories in such a way that each product played a specific role in our lives, Apple began moving down the path of consumers picking and choosing the devices that made the most sense for them. The now classic, "product profile" slide made its debut (pictured below). All of Apple's primary products fit on one spectrum.
The message behind the slide was simple: each distinct product category possesses a different ratio of personal technology and power. The smaller the device, the more personal the technology. Meanwhile, the large iMac is positioned as the ultimate computing machine. The best choice as to what to buy or use is dependent on the individual. All of a sudden, Apple had a way to explain iPad's declining sales momentum (cannibalization by other Apple products), while also planting the seed that not every one will want an Apple Watch in the near-term. Instead, it's all about personal preference. It seemed that Apple under Tim Cook was moving towards a company tasked with selling a range of computing devices to allow the average consumer to choose what makes the most sense for him or her.
While this message may seem to answer most lingering questions regarding Apple's product strategy, it still contains a number of drawbacks and questions. From a customer viewpoint, there is still confusion as to how all of these products come together. Look no further than the tricky iPad versus Mac debate. In addition, the descriptions used for each device concerning powerful technology on our wrist, in our pocket, or in hand are still somewhat vague and open to interpretation. From an analyst viewpoint, Apple's desire to look at its products on a spectrum has resulted in a rather wide range of opinions, including many pessimistic views on Apple's broader product strategy.
The Grand Unified Theory of Apple Products
This past October, Phil Schiller, in a rare interview with Steven Levy, talked about the new iMac. He took the opportunity to discuss a new way of thinking about the Apple product line, and I found it to be most revealing from a strategic perspective. Instead of describing how each product has a new unique role in our lives or simply placing Apple's entire product category on the same spectrum with an Apple Watch on one end and an iMac on the other, Schiller gave each product a job: make consumers feel like they don't need a larger, more powerful, Apple device in their lives.
Schiller's theory is best viewed by taking his comments to Steven Levy and breaking them out by product category.
- Apple Watch: "The job of the watch is to do more and more things on your wrist so that you don't need to pick up your phone as often."
- iPhone: "The job of the phone is to do more and more things such that maybe you don't need your iPad, and it should be always trying and striving to do that."
- iPad: "The job of the iPad should be to be so powerful and capable that you never need a notebook. Like, Why do I need a notebook? I can add a keyboard! I can do all these things!"
- MacBook: "The job of the notebook is to make it so you never need a desktop, right? It's been doing this for a decade. So that leaves the poor desktop at the end of the line, What's its job?..."
- iMac: "It's job is to challenge what we think a computer can do and do things that no computer has ever done before, be more and more powerful and capable so that we need a desktop because of its capabilities. Because if all it's doing is competing with the notebook and being thinner and lighter, then it doesn't need to be."
The first thing to notice about Schiller's new product theory is that it is actually a series of goals that also serve a dual purpose: help describe the product. What is the Apple Watch? It is a device that is supposed to handle a growing number of tasks once given to your iPhone. What is the iPhone? It is a device that is supposed to handle a growing number of tasks once given to your iPad. The argument can be made that all of this is just theory and that reality is not exactly keeping up with this vision, but that is exactly why it is called "The Grand Unified Theory of Apple Products." Upon closer examination, there is quite a bit of evidence to suggest that this theory actually does a good job of describing Apple's product line. In fact, Schiller's message provides the clearest clue yet as to how Apple management views its product lineup, even more so than the previous product theories put forth with the iPad and Apple Watch introductions.
There are three major takeaways from Schiller's new product theory:
1) The Apple Watch is a classic Apple bet. The very fundamental underpinning to Schiller's new product theory is that Apple Watch holds the most potential for making technology more personal. When looking at Apple's strategy over the years, the one overarching theme that transcends everything is the desire to make technology more personal, removing the barriers and allowing consumers to develop new and engaging relationships with technology. I continue to think the Apple Watch is being underestimated as elevated expectations for the product were reset over the past few months. The mistake many people continue to make when thinking of Apple Watch is looking at it as an inadequate iPhone replacement. Instead, Schiller's comments about Apple Watch denote a subtle distinction - the Apple Watch's role is to handle a growing number of tasks formerly given to the iPhone. For now, those tasks may be just simple notifications and things like checking time, but similar to how Apple handles product development, the Watch will soon handle more in the way of finance, health, identity, and communication. In many ways, the Apple Watch is setting up a classic Apple bet that a simpler device will eventually be able to handle many of the tasks currently given to larger and more powerful devices.
2) Greater iPhone differentiation is coming. While the recent debate has been stuck on whether the iPad can replace PCs, the real discussion that we should be having is how iPhones are replacing PCs. The iPhone is nothing more a smaller iPad. Of course, that subtle distinction ends up being the difference between a product selling 50 million units a year and 250 million units a year. The iPhone's form factor gives it the secret to success: mobility. Similar to how computing needs vary with the Mac and iPad, this same variability will come to the device being positioned to replace them. The writing is on the wall: expect the iPhone line to see greater diversification with a Plus model standing out from other models. So far, that diversification has primarily taken the form of screen size, but over time I would expect new ways for the Plus model to stand out from its iPhone siblings.
3) Don't expect an iPad/Mac hybrid. Apple will not follow Microsoft down the iPad/Mac hybrid path. While it is easy to focus on the iPhone and Apple Watch as the future, it is crucial to note the role the Mac plays in Schiller's product theory. The Mac is the device that pushes everything forward. It may sound extreme, but Apple looks at a future Apple Watch as one day being just as useful as a current iMac. However, that goal is only possible if the iMac continues to receive the attention and resources to see what is possible at the upper limits of personal computing. A iPad/Mac hybrid would run against this trend as such a device is an explicit acknowledgement that the Mac is flawed as a product category. Instead, there is still much that can be done to push the Mac forward.
A Roadmap, Not Destination
Schiller's grand product theory serves as a roadmap for where Apple wants to bring its current product line over the next few years, but it is important to not think of it as a destination. In a few years, the work from Apple's Project Titan will represent a new direction for Apple. While an electric car may not seem to fit in with a portfolio of watches, smartphones, tablets, laptops, and desktops, it is important to not get caught up by form factors but instead to look at what all of these products have in common: creating a experience. The simple fact that a device is used on a desk, held in hand, worn on the wrist, or sat in, doesn't change Apple's fundamental goal: make technology more personal.
For us to even be in a position to say that a 5-inch piece of glass held in our hand can replace a MacBook or iMac should help show that personal technology is about taking complicated tasks and breaking them down into more granular tasks, which are then able to be accomplished by smaller and simpler devices. This process will continue until we find ourselves in a position to begin looking up from our Apple Watches and iPhone screens but still feel connected to the world. The connected room era will have officially begun and Apple thinks those connected rooms will have four wheels.
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