Apple’s Product Strategy: No News Is Good News

Question: how long should it take for a company to come up with an industry-changing, category-redefining, market-dominating new technology with sales of $10 billion or more.
Answer: For the vast majority of companies, the answer of course is never.  For Apple, the answer appears to be, not soon enough.

It has been 2.3 years since Apple’s last game-changer — the iPad, which helped drive year-on-year profitable sales growth of 30+% (and mostly >50%) for ten consecutive quarters.  During this astonishing run, Apple’s annual revenues climbed over $100 billion and its stock peaked at >$700 per share. But predictably — in fact inevitably — Apple’s growth rate has since slowed, and nervous investors have driven its share price down by 45% from peak.  To add insult to injury, numerous pundits have declared that Apple’s uncanny knack for innovation died with Steve Jobs’ passing and its best days are clearly behind it.
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To be honest, it does feel like a long time since Apple launched a home run product, and it’s easy to believe that if Steve Jobs were still around, we wouldn’t still be waiting for some new form of technical wizardry.  But a closer look at Jobs’ legacy for serial innovation suggests that such expectations are unreasonable. 
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As noted in the exhibit below, during his two CEO stints at Apple, Steve Jobs never launched consecutive blockbusters in less than 2.3 years.  In fact, it took six years for Apple to pivot from the iPod to the iPhone.  From Apple II to the MacIntosh took 5.3 years.  And even though Apple was working hard on tablets long before the launch of its smartphone, the iPad was launched 2.6 years after the iPhone.

So why is Tim Cook being held to an unprecedentedly higher standard for product innovation?  Perhaps because investors have been spooked by the sharp declines in Apple’s growth rates of late.  But as shown below, Apple has always ridden a revenue growth roller coaster between game changing product launches.

​At least for now, what we’re seeing or not seeing from Apple is nothing new.  The company’s future — as it always has been — will be determined by whether it can pull off yet another new product game-changer.   Pundits and investors can have legitimately differing opinions on this question, but it is clearly too early to declare that Apple’s inability to launch blockbuster products over the past 2+ years somehow proves that innovation is dead at the company.
So what’s behind the title of this piece — that for Apple, no news is actually good news?

There actually were two shreds of reassurance coming out of Apple’s otherwise mostly inconsequential quarterly earnings report this week.  First, Apple announced surprisingly strong iPhone sales, exceeding analyst estimates for the quarter by 20%.  That iPhone sales remained strong despite Samsung’s recent Galaxy S4 launch, supported by a breathtakingly lavish advertising budget, reaffirms just how strong the now venerable iPhone design really was.

How large is “breathtaking”? Samsung’s global marketing expenditures for mobile devices is estimated to currently be on an annual run rate of $12 billion, more than the advertising spend by Apple, HP, Dell, Microsoft, and Coca Cola combined on all their products!.  In that context, Apple’s market resilience is notable.

Second, and more importantly, Tim Cook’s commentary during this week’s analyst meeting reaffirmed that the company has not abandoned Steve Jobs’ “outside-in” strategic perspective, which focuses the company’s energies on creating great products and customer experiences. 

In response to an analyst question on whether internal growth targets drive Apple’s product development and launch timing, Tim Cook responded:
“The way I think about is, we’re here to make great products and we think that if we focus on that and do that really, really well that the financial metrics will also come… If you don’t start at that level you can wind up creating things that people don’t want.”
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While obviously, it would have been beneficial for Apple to have launched yet another blockbuster product by now in what would have been an unprecedentedly short amount of  time, Apple’s greatest threat would be rushing to market with unimaginative products that  tarnish its stellar reputation for product excellence.
No one, starting with Tim Cook himself, claims he’s another Steve Jobs.  But give the current CEO credit: he gets it.  He is committed to sustaining Apple’s legacy for product excellence. Cook deserves at least as much time as his predecessor to tell if he can deliver.