Step by step, Apple locks users further into its ecosystem

Step by step, Apple locks users further into its ecosystem

June 3, 2014 – 3:43PM

Ben Grubb

For some observers, Apple chief executive Tim Cook was playing catch up with the incremental software announcements made on Tuesday.

But like the late Steve Jobs, Cook demonstrated that he has a bigger plan for the company’s millions of fans: they can look forward to being further and further locked into a symbiotic relationship with their Apple devices, much like in the movie Her.

‘[They’re designing ecosystems] that make sure you can’t leave them … so that your level of emotional dependency is going to make you surrender to the operating system. 

IBRS analyst Guy Cranswick

Although Apple unveiled no new products at its World Wide Developer Conference that people could hold in their hands, it did unveil a slew of new software features that will change the way people interact with the iPhone, iPad and Mac computers – new versions of which are due out later this year.

Two of the major highlights for developers were HealthKit for Apple’s iOS operating system, which lets people monitor their health and acts as a data hub for fitness apps, and HomeKit, which includes home-automation elements so they can develop ways for people to control locks, garage doors and lights from their devices.

Cook also unveiled a new programming language called Swift, which will make it easier for people to create apps, and which should lower the barrier of entry for anyone wanting to make their own.

While these developments will not have an immediate impact on consumers, they will probably alter the way people interact with their homes and allow the idea of a fully automated house to become a reality. Think The Jetsons or Smart House.

As is often the case, the usual critics came out swinging, saying that the announcements showed that Apple could no longer innovate like it used to when Jobs was at its helm.

To some extent Anthony Agius, the original founder of the Australian Apple discussion forum MacTalk, agrees, and says that Apple is starting to copy its rivals more so than usual in recent years.

But he says the company is doing it in a measured way.

”They aren’t just throwing ideas against the wall and seeing what sticks,” he said.

”They’re seeing what their competitors are doing and taking the best ideas.”

IBRS analyst Guy Cranswick agrees. ”It makes an awful lot of sense for them to be doing what they’re doing,” Cranswick said. ”Although of course it has that unfortunate association of muscling out all the other companies, or apps, that have forged consumer behaviour [on Apple products].”

Mr Cranswick was talking about Apple’s other new features that rival Dropbox and Snapchat. As well as introducing a new self-deleting messaging feature similar to Snapchat, it also unveiled iCloud Drive, which, like Dropbox, allows users to store files online and access them on different devices.

”I think the perception is that Apple has stalled in the innovation game because they were so far ahead of all the others in that period in the first half of the noughties – sort of from about 1998 to 2007, when we had the launch of the first iPhone,” Cranswick said.

”That was a really fast period of innovation and since then Apple has tweaked and refined.”

Because of less hardware announcements from Apple and more software tweaks, Cranswick said Apple innovation was harder for some to see.

”It’s harder to get connected to something that isn’t tangible.”

Despite this, he still believed Apple needed to focus on bringing out the next big thing in computing if it wanted to continue expanding its market share, which has recently stalled.

”It needs to be something that solves a problem, does something dramatic like the iPhone,” he said.

Instead of focusing on hardware, Agius said software was where innovation was now at for Apple.

”A lot of the unique things now happen in software,” Agius said.

”I think innovation is different now. If you look at what Apple has done with the iOS platform and the Mac platform I don’t know how you can look at those and say they’re not doing cool stuff that no one else is doing. I mean look at HomeKit, which talks to other appliances – no one is doing that. It’s the same with HealthKit – no one is doing that either. Gathering information and making it available to other apps and providers; that’s the area of innovation Apple is focusing on.

”They’re taking things that they’ve already made and making them better rather than focusing on a whole new product set. I think that’s where the [true] innovation lies with Apple at the moment.”

Cranswick said Apple’s strategy appeared geared towards locking people into its ecosystem.

”It’s almost reminiscent of the film Her. In Apple’s case it’s probably called Him,” Cranswick said.

”[They’re designing ecosystems] that make sure you can’t leave them … so that your level of emotional dependency is going to make you surrender to the operating system.

”I think implicitly this is the way that big consumer technology brands have worked.”

Mr Agius added: ”They’re definitely creating a strong ecosystem. They definitely want you not to move away from their ecosystem. They’re creating a very sticky environment.”

Apple would likely struggle with growth over the coming years, Agius said.

”It’s interesting times for Apple in that I don’t know if they can gain market share,” he said.

”Anyone who wants an iPhone already has an iPhone.

”There’ll be small gains here and there. But in terms of spurts in growth? I think it’s kind of over.

”It’s gotten to the point now where they have to massage [what they already have]. Putting something new out is not enough. It has to be better. And I think that’s where Apple might struggle.”

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: