The September iPhone event was an example of the magic tricks only Apple can perform in front of an audience of thousands of journalists. With one hand, the company removed the headphone jack. With the other, Apple started to walk down the path of the cannibalisation of the iPhone.
I believe that Apple is willing to make the ultimate sacrifice to the Gods of User Experience.
In a not so distant future, we will look back at this September event as the first step towards the end of the iPhone reign. At least, in Apple’s financials.
It All Started With the Apple Watch
When Apple introduced the Apple Watch two years ago, it kind of oversold the product’s capabilities. It positioned it as a fitness, communications and a timekeeping device. Apple overstated the communications part, making it look like it was an iPhone in your wrist.
But it wasn’t. Or at least, not yet.
Despite the wrong positioning of the watch, Apple has sold to date more than 15 million units, depending on who you ask. But the ambitions of the Apple Watch truly go as far as becoming the iPhone in the future. Not through traditional apps but in the communications aspect that it enables.
The Apple Watch Series 2 has a faster, dual core processor. It also comes with the much improved watchOS 3 and water / dust resistance. But what really changes our perception of the watch is the much expected GPS integration.
The Apple Watch was already able to pinpoint our location independently from the iPhone. It did so with its WiFi antenna. But it is not as precise as with a GPS. The Apple Watch Series 2 enables new use-cases for apps and the fitness oriented public.
This makes the Apple Watch more independent from the iPhone, at least in some way. And it also tells us that in a future version, maybe next year or the year after, the Apple Watch will gain cellular connectivity.
Connectivity alone is not enough for the Apple Watch to challenge the iPhone. It needs something else. Something that allows for more private communications. An intimate device that can be with us when we need it.
Something like the AirPods. A device that can trigger the cannibalisation of the iPhone.
AirPods, a Computer in Your Ears
We believe in a wireless future. A future where all of your devices intuitively connect. This belief drove the design of our new wireless AirPods. They have been made possible with the development of the new Apple-designed W1 chip. It is the first of its kind to produce intelligent, high efficiency playback while delivering a consistent and reliable connection.
Infrared sensors detect when each AirPod is in your ear, so they only play when you are ready to listen. Motion accelerometers also respond to your touch, allowing you to access Siri with a double tap. When you are speaking, voice accelerometers recognise the vibration and source of your voice. Then, with a pair of beam forming microphones, reduce external noise. Each AirPod provides up to 5 hours of listening on a single charge, while the compact wireless charging case delivers more than 24 hours of battery life.
The W1 chip enables intelligent connection to all of your Apple devices and allows you to instantly switch between whichever one you are using. And of course the new wireless AirPods deliver incredible sound. We’re just at the beginning of a truly wireless future we’ve been working towards for many years, where technology enables the seamless and automatic connection between you and your devices.
This is the transcript of Jony Ive’s video presentation of the AirPods. Reread it again and you will notice that music playback is only one of the many features of these headphones.
To me, the AirPods are the second wearable device introduced by Apple. If the iPhone and smartphones challenged the definition of a computer, the AirPods take it to a whole new level:
- It has a new, custom-designed, W1 chip (“W” as in “wireless”, not Lightning). To date, only the iPhone, iPad, Apple TV and Apple Watch have chips designed by Apple. Other products, such as the iMac, also have a custom-designed image controller chip. There is also a handful of sensors within the AirPods that go further than any other headphones in the market today (microphones, accelerometers, infrared).
- The user interface is not like any other shipped by Apple. It doesn’t have a traditional OS with a GUI. Instead, it is a voice-driven operating system, with Siri doing all the heavy lifting. “Call my brother Brian”, “Play my workout playlist”, “Turn up the volume” and “How do I get to the zoo?” are the examples used by Apple. But it could go as far as “Remind me to call my bank when I get home”, “Find me the closest supermarket” or whatever improvements Apple makes to Siri.
Nowadays, the definition of computer could be reduced to any device with a CPU and a way to interact with it. Be it sound or graphical interfaces. As we will see in this article, an Apple device with a sound-oriented OS could signal the cannibalisation of the iPhone.
The iPod Sacrifice
In the cusp of the iPod reign, the MP3 device accounted for half of Apple’s revenues. Steve Jobs felt uneasy, as he knew that someday, a company would successfully fold an MP3 player into a mobile phone.
That is why he pushed Apple to build the iPhone. A device that in its 2007 presentation was positioned among other things, as the best iPod ever, with a multitouch widescreen. As Jobs used to say:
I think if you do something and it turns out pretty good, then you should go do something else wonderful, not dwell on it for too long. Just figure out what’s next.
Apple didn’t dwell to much with the iPod. It was brave enough to release an untested product that could cannibalise its cash cow (I guess Apple would call it “courage”).
Eventually, the iPod peaked in the holidays quarter of 2008. In hindsight, Apple made the right choice releasing the iPod killer and enabling the cannibalisation of its cash cow. But at the time it seemed like a crazy bet.
Thus, we know that Apple is the kind of company willing to sacrifice its best selling product. And this is a choice other companies have not taken (like Microsoft). This is the essence of the disruption theory, where an incumbent gets surpassed by another company catering to an unprofitable market.
The iPod cannibalisation story is a great tale. But it doesn’t assure us that Apple would be able (and willing) to repeat it again with the cannibalisation of the iPhone. Especially after Steve Jobs’ passing.
The Ultimate Sacrifice of Apple: the cannibalisation of the iPhone
The Amazon Echo (and numerous other cool, smart, connected devices, most not yet created) do not and will not require another high-margin computerized screen. We will operate them independently or by using the computerized screens we already have.
Remember: Apple needs us to buy even more high-margin computerized screens than we already have because that’s what Apple makes – Brian S Hall.
Hall wrote this post last year with the advent of the Amazon Echo. In it, he argues that Apple is doomed because they are unable to build something without a screen (gasp). It carries some weight in its reasoning, not as far as to claim Apple’s fatal destiny. But I found it very interesting at the time.
No screen equals no operating system and no graphical user interface. Two of the most differential characteristics of Apple devices. That reminds me of another story.
When PC manufacturers went crazy with the netbook “revolution”, people asked Apple to build its own netbook. Instead, what we got was the iPad.
When tech companies like Amazon and Google went crazy with their home assistants, people asked Apple to build its own Siri assistant. Instead, what we got are the AirPods.
People tend to think in a linear way when it comes to technology. But, as Steve Jobs used to say, “technology alone isn’t enough”. Apple is willing to start the cannibalisation of the iPhone in order to achieve a more personal technology.
And what is Apple’s recipe for cannibalisation of its own products? Luckily, Phil Schiller detailed Apple’s product paradigm a while back. When we analysed Apple’s iPad Strategy [emphasis added]:
“They are all computers,” he says. “Each one is offering computers something unique and each is made with a simple form that is pretty eternal. 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. 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.
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! 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? [be the most capable computer ever].”
What this means is that Apple products are constantly struggling with each other. Sometimes, technology allows for one to get ahead of the rest and hoards all the resources and sales. Just like with the iPhone. Others, technology allows for another product to pass the herd and hoard resources and sales. Like the Apple Watch and AirPods will in the future.
Today, this fight is about the cannibalisation of the iPhone by the combination of the Apple Watch and AirPods. Two devices working together to bring down the iPhone’s reign.
This topic is not only related to the strategic importance of Apple Music, but also by the success of the Netflix business model. Apple needs to own services and devices that allow it to be closer to the end user in order to thrive.
In This Fight, the Audio Jack is a Collateral Damage
Tons of articles have been written about the absence of the audio jack in the iPhone 7. Forget about it. It is just a collateral damage in the cannibalisation of the iPhone fight.
It is not a fight over which standard wins, whether the century-old jack or the Lightning connector.
The bigger picture shows us that Apple is seriously betting in wireless technology. In June 2016, wireless headphones surpassed regular ones for the first time, account for 54% of US sales. The number one brand was Beats, what a coincidence!
Maybe, when Phil Schiller called the removal of the jack a courageous decision, he meant it. It takes courage for a company to cannibalise its cash cow, a device that has reached unpossible worldwide sales.
You may not buy into the whole “Jony-Ive-we-care-about-the-product-not-the-money”, just like my friend and colleague Javier Pastor:
Apple hasn’t made this decision based on courage. They’ve made this decision based on money. Period.
Of course that the cannibalisation of the iPhone is about money, but not as the end itself. For Apple, money is a means to an end: creating better products.
If you are good at something, never do it for free – The Joker in The Dark Knight.
You can’t change the world every once in a while with empty pockets.