What are Apple’s strategic choices for a bounce-back?

Thomas George

The darling of the tech world-Apple has seen the first ever decline in revenues since 2001, with iPhone sales leveling off that contributed close to two-thirds of its revenue.

Many experts might conclude that it’s a natural phase encountered by market leaders in their business life cycle, coupled with organization complacency on their future vision or jaded effort in product innovation. Simultaneously, many would wonder, what could be the next blockbuster product from Apple, after its introduction of less exciting iPhone 7 and 7 Plus.

But how will it mitigate this revenue decline due to commoditization of smartphones? Given the past track record and its drive for innovation, these concerns can be completely written-off. However, devices can only be enhanced to an extent around its form factor or use cases.

And now again, boom! Popped up another surprise from Tim Cook’s couple of announcements, which makes Apple’s intent very clear that it would adhere to its innovative DNA in the form of new MacBook Pro with Retina Touch Bar and Apple’s TV App for Unified TV Experience for tvOS and iOS. It’s a well known phenomenon that Apple takes time to land its befitting products with utmost perfection rather than inferior products and solutions. However, in today’s time it’s quite important to be fast and first instead of taking all the time to refine and fine-tune the best possible product, solutions and services.

It is just a matter of time for competition to catch with these feature and capabilities like Retina Touch Bar. While Apple can take pride in reminding the world of personal computers and gadget users as it was the innovator who introduced pointing device in Power Book keyboard 25 years back. Today, again it gives us this Retina Touch Bar making most of us lazier with its introduction in the latest Apple MacBook Pro; when most of us thought only a bit of improvisation on system, size, memory, performance, ports and speed would be in the offing.

We always felt and expected, that it’s only the matter of time before Apple could really bring more innovation out. Why? Because, it has a strong ecosystem, with base of more than 1 billion devices with an over-head hanging sword of commoditized market. It’s the time to pull the favorable levers and cope up with the declining iPhone revenues and avoid the repetition of product commoditization. However, it’s time for Apple to think beyond devices and give more push to other strategic levers like platforms and services of iOS ecosystems adopters. These may be smaller in its revenue contribution, but it will have higher growth rates and will mitigate the decline of major revenue contributing category.

With Apple TV App, it has stated its intention clearly about the new battleground like TV/video and bringing in an integrated content of (music, sports, movie/TV) and services play. What is Apple doing with its cash pile of $147 billion? Can it deploy the cash to buy Netflix and give complete push to its content/services business and take Amazon Prime to laundry? May be or may not be, but these are the aggressive business decisions Tim Cook needed to take along with its right blend of innovative and creative legacy culture of Apple.

CMR believes Apple has two strategic choices - a) it can continue to work on incremental improvisation on new devices and face the current challenges today the tech world is facing, or b) invest aggressively to become an integrated-content player with right partnership. It has all the right levers and enabling environment to pull this strategy and play the big boys game of 3As (Apple, Amazon and Alphabet).

It’s the latter option, which Apple might be considering to bite on. Apple’s future forecast of lower margins does hint that it might invest hugely around integrated services play (Apple TV Unified Experience is one of the steps forward) or acquiring complementing businesses.