How Apple’s
Latest Offerings Will Expand Its Piece of the Pie
Apple in September signaled
its future direction with its latest round of product launches. It hopes to
engage the family around the living-room TV with gaming and entertainment
content; disrupt the TV broadcasting industry with third-party development of
apps; capture business users and eat into laptop markets with its revamped iPad
tablets; and win over phone users from traditional carriers.
However, the company
faces challenges in developing an “ecosystem around total privacy” and low-cost
suppliers around the world, according to experts at Wharton and elsewhere.
During its announcement,
the firm highlighted its new Apple TV, a set-top box with apps to access
Netflix, Hulu and iTunes and the ability to subscribe directly to HBO and
Showtime, bypassing cable or satellite service providers. It includes nascent
gaming features, and with enhanced search, its upgraded voice-activated Siri
feature allows users to pull up favorite movies or instruct it to forward or
rewind. Apple is also offering its TV platform and operating system, “tvOS,” to
third-party developers, which means more games and video apps are on the way.
According
to Wharton marketing professor Jerry (Yoram) Wind, “Apple is the leader in disruption — it
took over the music industry, the computer industry and the phone industry.”
Wind is also the director of Wharton’s SEI
Center for Advanced Studies in Management. He described the company’s move to enlist third-party
apps developers as “a brilliant move” in open innovation.
“Apple
TV was by far the most interesting technology they introduced,” said Richard
Dasher,
director of Stanford University’s U.S.-Asia
Technology Management Center. With apps from third-party developers, Apple
could carefully manage the growth of an ecosystem with TV as the access point
for home internet, he added. “[That] ecosystem will probably have control over
most of the things in your house and would possibly follow you around wherever
you are.”
“Apple has been an ecosystem company,
and not a hardware company, for some time Twitter ,” said Wharton professor of operations, information and
decisions Eric K. Clemons. “I would not expect the new iPad, the new
TV, or the new watch to be game changers by themselves.” However, “it’s
possible that Apple TV will integrate so well with the iPad or the laptop that
it starts a new ecosystem, one in which my personal videos and all the contents
of the web are equally accessible from my TV, along with all the public and
premium channels I want to pay for,” Clemons added.
The
most compelling aspect of Apple’s latest launches is “what they signal for the
future,” said Hayley Tsukayama, who covers technology for the Washington
Post and who also spoke on the Knowledge@Wharton radio show. Among
those signals is how Apple could boost its TV offering. “We’ve been waiting for
[Apple] to announce this long-rumored streaming video service, and do for TV
what they did for music,” she noted.
Disrupting
Pricing Models
As
Dasher saw it, Apple TV could disrupt the pricing structure in its industry.
“The whole TV payment system and having to subscribe to premium channels and so
forth is probably on the way
out,” he said. “This new TV would help it be on the way out.”
He added that already,
many young consumers are selective in their viewing habits and watch TV shows
on demand. “Apple TV is one step beyond that,” he said. “You have a big company
which is very carefully moving into the next generation of … seamless,
transparent interaction of people with their information technology.”
Tsukayama noted that
while Apple has all along controlled the hardware and software of its products,
its latest “leap into content” is an interesting new move. A foray into
streaming video services will also open up other revenue avenues, she said.
“Internet video advertising is starting to make a dent into TV advertising,”
she added. “It seems like Apple wants to be at the front of it.”
According to Dasher, the
biggest challenge Apple faces on this front is in striking deals with content
providers; its current offerings are limited. However, the “tvOS” platform will
help it hedge its risks with Apple TV by positioning it also as a gaming device
with games from third-party developers. The gaming business “is huge,” said
Wind. “With open innovation in this area, Apple will again be a disruptor.”
Bypassing Carriers
Yet another potential game
changer was Apple’s announcement of an iPhone upgrade program that enables
users to get new models every year, bypassing carriers like an AT&T or
Verizon. With installment payment plans starting at $32 a month, users get an
unlocked phone, annual upgrades, and the ability to choose their carrier.
Carriers typically offer two-year plans for the phones they support, making it
hard for users to switch their phones annually.
“Apple is now deepening and leveraging its
relationship with consumers who don’t like their carriers,” said Wind. “It’s a
great move, and it is consistent with Apple’s strategy of being an innovative
and disruptive firm.” Tsukayama noted that “many people don’t like their
carriers so they may prefer to deal with Apple.”
With the iPhone upgrade
plan, Apple is moving towards a service-based business model, said Dasher.
“Carriers always offered upgrade plans, but now that Apple offers one itself,
it is taking more control of the business away from the carrier,” he added.
“This is new for a phone maker to do this. We will know in the next six months
if this takes off.”
Business on Tablets
Apple’s other major
launch — the iPad Pro — is “the biggest thing outside of Apple TV,” said
Dasher. “This may be a sea change” in how it could expand the market for the
tablet by attracting business users of such devices, he noted. The iPad Pro
offers a larger display than many laptops. It is also lighter, and it packs a
10-hour battery life. Repositioning the iPad Pro to attract business and laptop
users makes sense because “everything is converging,” said Wind.
At the launch event,
Apple got Microsoft and Adobe executives to demonstrate how their products like
MS Office and other work-related software function on the iPad Pro. It comes
with a stylus called the Apple Pencil, and a keyboard connector — following
Microsoft’s Surface tablet with the latter feature.
“It would be interesting
to see if [the iPad Pro] replaces the laptop,” said Dasher. He recalled that
many who bought the first generation of iPads were disappointed because they
did not have the functionality of laptops. Tsukayama noted that Apple CEO Tim
Cook has been working to make the tablet more of an enterprise or a business
device, and she cited the company’s partnerships with IBM and Cisco for developing
such uses.
Apple’s other launches
included the iPhone 6S and iPhone 6S Plus with larger screens, an improved
camera with 12-megapixel resolution and a new “3D Touch” feature that allows
users to call up different options by pushing harder on the screen. The phones
come also with higher data speeds and are more compatible with data services in
foreign countries.
The Power of Big
Only a big company like
Apple could carry off all those experiments, said Dasher. “There is a lot of
focus now on startup innovation, but it takes a powerhouse like Apple that
knows how to deliver content and services as well as a variety of hardware and
be able to link those,” he added. “The glue that holds all this together is
where their value-added is going to come from.” Google is another company that
could execute similar strategies, Dasher noted.
Apple and other members
of the so-called AGFA (Apple, Google, Facebook and Amazon) group have huge cash
reserves they could use for acquisitions, Wind pointed out. “Of all the
companies around, Apple is the one with the best track record in innovation,”
he added. He noted that Google could gain a dominant position in specific
markets, like with its self-driving car. “But Apple is capturing one domain
after another in a systematic way – computers, phones, gaming, etc. — in
providing ecosystems that consumers need.”
The Road Ahead
“The
next ecosystem play for Apple will be the total privacy that Tim Cook talks
about,” said Clemons, referring to an interview Cook had with Charlie
Rose a year ago. “Perhaps many of us will also abandon the Google ecosystem for
an Apple ecosystem if Tim Cook wants to stress complete privacy.”
Clemons noted that many users
were willing to pay more for an operating system that was easy to use and
secure from most hackers, even if it meant abandoning Microsoft’s Windows. “I
keep waiting for Tim Cook to make the next ecosystem move about complete and
total privacy. That would be a game changer. A safe, secure, private and
easy-to-use approach to computing would change everyone’s platform preference.”
Apple has to also contend
with challenges, especially since its dominance is largely in affluent markets,
said Wind. “New technology could come from somewhere else,” he said. “With
seven billion people [the world’s current population], who knows what
challenges there will be from Chinese companies and others that dominate
billions of customers? If I were Apple, I would not just sit there and relax.”
http://knowledge.wharton.upenn.edu/article/how-apples-latest-offerings-will-expand-its-piece-of-the-pie/?utm_source=kw_newsletter&utm_medium=email&utm_campaign=2015-09-16
No comments:
Post a Comment