Apple results highlight need for innovation not iteration

Despite marking record revenues for the last financial quarter of 2013, Apple’s earnings have disappointed investors, with the company warning it is set to report its first quarterly revenue decline in more than 10 years in the current quarter. While disappointment is always relative when it comes to Apple’s gargantuan results, the company must change the game again this year to prevent those decreases turning from a blip into a habit.

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The imperative for Apple to move on from iteration back to market-defining innovation as it has done so many times over in the past was made clear in its fourth quarter earnings call last night (27 January). While Apple sold a record 51 million smartphones in the three months to 27 December, this fell short of the 54.7 million analysts had predicted.

Apple CEO Tim Cook elaborated on why the iPhone 5C – its new entry level smartphone – failed to take off: chiefly that its high-end counterpart, the 5S, had more “unique” features such as the Touch ID fingerprint scanner, which drew more attention and higher sales.

Apple turned the PC market upside-down in 2010 when it released the first iPad. But since then, Apple’s computing and hardware innovations have been iterative: colours, different screen sizes and software features that consumers are “intrigued” by like Touch ID, as Tim Cook put it in the earnings call. But what Apple really needs to do is blow another vertical wide open again and find new revenue streams if it is to continue reporting record quarters – particularly as with better hardware comes fewer upgrades in the smartphone, desktop, laptop and tablet markets it already operates in.

Fortunately, Apple plans to do just that. Cook confirmed in the call that 2014 will be the year Apple will enter new product categories. 

When asked whether Apple still considers itself an innovation company, Cook responded: “Innovation is deeply embedded in everybody here and there is still so much of the world that is full of very complex products, etc. We have zero issue coming up with the things we want to do that we think we can disrupt in a major way. The challenge is always to focus on the very few that deserves all of our energy and we’ve always done that and we’re continuing to do that.”

Whether Apple’s new product category is a watch, a TV, mobile payments or something so completely mind blowing nobody has invented a segment for it to sit in yet: Cook’s call for focus is also crucial.

And when it creates the new product of the future, Apple should look to marketing of old to communicate it. The focus, in this case, should be on Apple leading a category rather than entering one.

Some 30 years ago Apple introduced the Mac with such advertising chutzpah in its Orwellian Super Bowl spot it sold more than $150m worth of the computers by the end of the year. Apple’s iPod ad of the noughties convinced millions to rip out their headphones and replace them with cool white earbuds. And the first iPhone ads set the bar for slidey, shiny, screeny smartphone advertising.

Apple must boldly go to where its marketing has gone before and be bombastic in 2014 – especially if its new product innovation is out of this world.

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