Market Insight

Understand Apple’s future strategy based on WWDC 2017 launches

June 06, 2017

Ian Fogg Ian Fogg Senior Director, Mobile & Telecoms
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At Worldwide Developer Conference, Apple made numerous major announcements, notably:-

  • iOS11 beta with built in machine learning (CoreML) & augmented reality (ARkit) support for developers plus a new App Store design.
  • watchOS4 adding the ability for Apple Watch to share data directly with gym equipment in real time and better music support.
  • HomePod, a music-centric wireless speaker with Siri. Does not ship until December, $349.
  • iMac Pro, with much more potent hardware, ships late 2017, price starts from $4999.
  • New 10.5 inch iPad Pro with smaller bezels. New larger iPad Pro with faster chipset.
  • Greater focus on VR, with external graphic hardware support for Macs with USB-C Thunderbolt, available for developers only now, $499.
  • Updated MacBook Pro models and iMacs with Kaby Lake chipsets.
  • Relatively small enhancements in macOS High Sierra beta & new tvOS beta.
  • Amazon Prime video confirmed to launch on Apple TV this summer.

 

Our analysis

Apple has a reputation for being highly secret, but at WWDC Apple demonstrated this view is overstated because of the enormous number of hardware and software products Apple pre-announced: On hardware, Apple unveiled two major new devices in new categories, HomePod and iMac Pro, neither of which ship until late 2017. Plus, Apple provided numerous clues to future iPhone, Mac, Watch, TV and iPad hardware through the new beta versions of each platform’s operating system.

Apple’s innovative and extensive WWDC news highlights three of the major pillars of Apple strategy:

  • Building ‘Minimum Good Products’, not Minimum Viable Products (MVP), means Apple often takes longer to launch because it needs the underlying technology to be at a more advanced level. This helps Apple with customer satisfaction levels because there are fewer rough edges. With this strategy, Apple hopes the competition has not gained too much of a head start with early launches. Apple itself describes this approach as always aiming to make the best products.
  • ‘Stepping stone innovation’. When Apple introduces a new technology it routinely focuses on one use case to drive wide adoption, and years later builds on it once the installed base is there. Examples: Touch ID was initially for security, then enabled Apple Pay, and now in iOS11 peer to peer mobile payments; depth sensing arrived with iPhone 7 Plus portrait photo mode, now is an enabler for AR.
  • Market just one or two key benefits of new products, even if they are multifunctional. HomePod is a full home hub with ties to HomeKit smart home automation, an on-board Siri AI voice interface, as well as high quality music playback, but Apple chose to focus on music to introduce the device. Apple successfully did the same with the original iPhone and iPad, and took a less successful diffuse approach with the initial Apple Watch.

HomePod, the new AR, VR, machine learning and other offerings are not late, as many will argue, but are arriving on this timescale because Apple’s strategy differs to those launching beta quality products as a commercial Minimum Viable Product (MVP).Only if Apple has misjudged and a market, it’s less mature than Apple had thought, and as a result competitors are able to establish an unassailable lead will these products be late. Otherwise if a market is nascent and immature, by launching later with a better product Apple is actually more likely to succeed

‘Stepping Stone Innovation’ enables us to predict Apple’s future

More significantly, the announcements also offer clear indications for future Apple product plans. By considering these WWDC announcements as potential initial moves along ‘Stepping Stone Innovation’ we can predict the direction for Apple on many fronts.

Augmented Reality will transform Apple device hardware design and mobile app innovation:

  • Smaller display bezels will become the norm, because they will make AR a more immersive experience. The new iPad is just the start. A future iPhone with no bezels would be less tiring to hold to consume AR experiences.
  • Use of existing devices for AR will lead to fast adoption. Apple’s AR demos used current iPhone and iPad models. iOS 11 adoption – including AR – will likely roll out as fast as iOS10 which is now used by 86% of iOS devices. By comparison, other AR offerings leveraging Google’s Project Tango currently require specific smartphones with extra sensors.
  • Encouragement for third party AR apps will lead to unexpected AR innovations. It’s hard for Apple or anyone to predict in what genres of apps AR breakthroughs will come given Apple now has 16m registered developers. AR will be used by games certainly, but the killer AR app could come from anywhere.
  • AR smartglassess will be in Apple’s labs now. Apple has long resisted touchscreens on the Mac because of a usability argument that it is too tiring to hold arms above a desk surface for prolonged periods, using a smartphone or an iPad for AR has the same issue. Apple will launch AR glasses once the technology balance is ready to make AR a better experience.

HomePod’s music focus is a Trojan Horse for Apple’s smart home portfolio:

  • Use of an A8 chipset opens future app possibilities. The initial HomePod has a music focus and the use of an A8 chipset is to enable better sound quality. The A8 continues to be used to power the iPhone 6 and would enable Apple to open the HomePod range for third party developers in future, as it previously has done for Apple TV and iPhone.
  • Siri will see a major new version in 2017. The current Siri experience on iPhone, iPad and Apple Watch does not offer a fully two way voice user interface, often spoken questions posed by users are answered with visual information, unlike Amazon’s Alexa. This dates back to its original launch on iPhone in late 2011 and has changed little in the years since. But because HomePod has no on-board display, Siri must gain fully two way voice UX before HomePod ships in December.

Other announcements also offer insights into future Apple directions:

  • Future Mac Pro modularity may leverage USB-C. Apple has stated that 2018’s redesigned Mac Pro desktop will offer a more flexible design. At WWDC, Apple’s embrace of external graphics card support via USB-C and Thunderbolt offers similar benefits now, at least for VR developers.
  • While Apple has made its first VR moves, they were small. Apple only showed VR on the Mac, which is a much more niche audience than on the scale of its iOS mobile device installed base. More significantly, Apple’s focus was to support VR content creation, which uses similar tools to those needed to make AR content. IHS Markit expects Apple to continue to pursue a mass market AR offer as a higher priority than immersive VR.
  • QR Code support shows China remains a priority. In iOS11 beta, Apple is belatedly adding QR Code support. While most Chinese consumers already scan QR codes in apps, offering built-in support which is available to developers will help Chinese app developers integrate it into their offerings.
  • iPad iOS enhancements demonstrate Apple will continue to market iPad Pro as an PC replacement. In the new beta, the iPad gains drag and drop between apps, a new task switcher, and a Files app with support for both iCloud and third party storage providers including Dropbox, Onedrive and Box. These features combine to make the iPad’s software more competitive with the PC.

WWDC was a major set of product and developer launches which demonstrates tremendous innovative ambition. Apple showed several major new technologies which will shape Apple’s hardware and software portfolio for years to come.

IHS Markit is continuing to research each of the many announcements, if you are a client, please get in touch to hear more detail about specific areas of interest.

Organization
Apple Inc.
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