24 Jan 2014

Apple: a history in three bites

Can it really be 30 years? It seems like only yesterday I sat in the school computer room, marvelling as I did my German A-level homework on an Apple Macintosh.

They were neat machines, sparse and clean (see image below), and the point-and-click technology was a revelation for someone whose first exposure to computing was a ZX Spectrum (I’ve still got that though: we’re trying to connect it to the C4News video wall so we can play 5ft-high Manic Miner).

It’s been a long road for Apple, and its half-trillion dollar stock market value is testament to its business acumen and skill. Yet the future is far from certain for America’s leading home computer maker. Its journey seems to me to break down into three stages.

Bite one

In the early days, the computing business belonged to the box-makers – hardware manufacturers like IBM dominated the market.
Then Microsoft released its operating system and made it run on almost any machine: the age of software was born, and the boxes were just so many grey rectangles cluttering up the study (or garage, in many cases).

Apple stuck to its guns, refusing to let Microsoft’s software run on its machines. As Microsoft’s dominance rose, Apple saw its prowess shrink.

Apple Macintosh computer, model M001, c 1984.

Apple’s genius was to fight back on hardware. The company realised that computers were making their way out of the study and into the living room. It responded by building beautiful kit; the kind of computer that wouldn’t look out of place in a home 90 per cent furnished from Habitat.

It also targeted the creative market, recruiting designers, artists and musicians, and cultivating a clique naturally inclined to champion Apple’s high-cost, high-design ethic.

Bite two

From the launch of the iPod in 2001 (see image below), Apple had the kind of run of success enjoyed by perhaps only one firm in a generation. Its product launches became part of the corporate mythology: in his trademark polo-necked black sweater and jeans, chief exec Steve Jobs would brandish the latest gadget, and retailers would watch them fly off the shelves.

Yet behind the hype was a business model of breathtaking efficiency. It worked like this: Apple would find a product which, while already available, was lacklustre (MP3 players, tablet computers, touch-screen phones: Apple invented none of them). It would then perfect that existing product to create a beautifully designed, user-friendly version, which it sold at a large premium.


But while most manufacturers settled for simply taking a customer’s initial purchase money, Apple managed to keep the tills ringing by continuing to monetise over the lifetime of the product. To get music for their iPod, customers would purchase through iTunes (Apple got a cut); to use their iPhone, customers would sign a pricey contract with Apple’s preferred mobile network (Apple got a cut); and to buy apps for their iPad, customers would purchase through the App Store (Apple got a cut).

Bite three

Steve Jobs’s death in 2011 prompted concerns over Apple’s future: how would the company cope without its visionary leader?

His successor, Tim Cook, is certainly a master negotiator, and was the driving force behind many of the deals which monetised Apple’s products.

But it’s hard not to feel that Apple is a company running out of creative drive. The hype around wearable devices is being harnessed by other manufacturers: Google and Oculus Rift for virtual reality, Samsung and Pebble for watches, and Nike and Fitbit for wristbands.

Apple could really use a new product that opens up a whole new after-sales market. As I’ve blogged before, a TV set would do the trick. But honestly, anything would do if it convinces investors that there’s more in the pipeline than reiterations of current lines.

Let’s be fair: most chief execs would stick forks in their eyes for a share price of $500+, and Apple’s products continue to gain healthy market share and a loyal following – an impressive feat for a company that straddles the laptop, tablet and phone markets.

But it’s growth that investors look for, and the longer Apple takes to get out in front of the competition, the more those golden years of growth will look like a piece of corporate history rather than an ongoing story.

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