Dazzling Results

Wednesday, 4 February 2015

Juan Pablo Vazquez Sampere, writing for Harvard Business Review, “We Shouldn’t Be Dazzled by Apple’s Earnings Report”:

But one thing has changed. Apple used to revolutionize industries, announcing record sales numbers because it had introduced a new technology, feature, or product that we had never imagined but that, when we saw it, we all instantly wanted. That Apple seems no longer present. In this instance, all Apple has done is copy a feature for its own best customers. While that’s very effective for today, it does not solve the problem of tomorrow for a company that competes on serial innovation.

That one feature he’s talking about is the larger display sizes for the iPhone 6. I’ll reiterate that Apple has never been a company that serially produced revolutionary product after revolutionary product. Their revolutions have been very few and far between: Apple II, Macintosh, iPod, iPhone/iPad. Everything else is constant iteration and refinement.

So I’d argue Sampere is provably1 wrong on Apple’s history. And it seems doubly weird to publish this two months before Apple Watch is set to hit. Potentially, Apple Watch is clearly another “we had never imagined but that, when we saw it, we all instantly wanted” product.

I would also argue that Apple’s record-shattering results last quarter are remarkable. Not because the iPhone 6 and 6 Plus are revolutionary, because they’re not. But because it shows that design can matter in the mass market. For decades the industry’s conventional wisdom held that design wasn’t important. The industry’s leaders created shitty software and shitty hardware. Apple’s success has upended the industry’s value system. Almost all of Apple’s competitors value design more today than they did a decade ago: Microsoft, Google, Samsung, HP — all of them.

There’s no reason to buy an iPhone 6 or 6 Plus other than because you’re willing to pay a premium for superior hardware and software quality. And last quarter 74 million people around the world did just that.

As its products evolve, Apple pours ever more effort into incremental improvements in the details. The bigger displays are the most noticeable differences in the iPhones 6, but everything else was improved too: the camera is better, both in terms of speed and image quality; the CPU is faster; the GPU is faster; battery life is better; the display quality is better; Touch ID is better. And then there’s Apple Pay.

Again, none of those improvements are revolutionary. But it’s a solid list of year-over-year improvements, and the results show that consumers agree. The most telling — dare I say dazzling — number Apple revealed last week wasn’t the number of iPhones they sold during the quarter, but the price people paid for them. Average selling price went up year-over-year, in an industry where average selling prices are going down.

The problem isn’t that Apple has changed. The problem is that Apple has not changed, and their continuing success is proving that conventional disruption theory does not apply to consumer-driven markets in which outstanding design and integration (as opposed to modularity) can drive demand.

Apple is disrupting the conventional tenets of business even more than they are any particular product category in consumer electronics. There is something fascinating — in several ways unprecedented — going on with Apple right now. Rather than study it, understand it, describe it, and teach it, Sampere2 has chosen to deny that it’s happening.3

  1. A few readers have reported my use of provably here as a typo, thinking I intended to write probably. But I meant provably — able to be proven. You can look at Apple’s entire history and show that revolutionary products have been few and far between. ↩︎

  2. For a taste of what Sampere considers to be actual innovation, see his year-ago HBR piece, “Xiaomi, Not Apple, Is Changing the Smartphone Industry”. (My retort would be that both companies are changing the phone industry, but in very different ways.) ↩︎

  3. It’s starting to look like you could say the same thing about Clayton Christensen himself. He and his followers (of which Sampere seems to be one) are trying to force the existing theory to fit modern-day Apple, rather than adjust the theory to explain Apple. ↩︎