The news broke last week that Apple was the first company in history to break the $800 billion dollar mark. Given Wall Street’s obsession with round numbers, the milestone immediately got investors wondering whether Apple had the ability to make it all the way to $1 trillion, become the first trillion-dollar company in history.
Of course, pundits waxed lyrically about the “core strengths” of Apple and spoke at length how, as a customer-focused company, it would always pull in big money. But a more sober consideration of the facts reveals otherwise.
Apple’s big problem isn’t in its products, it’s with its business model. The company is still based on the idea that consumers want products that they can hold in their hands. And despite all the software innovation at the company, its main advantage still rests with this idea. Unfortunately, the way the world is going, that doesn’t look like it’s going to last forever. In fact, the whole technology sector is becoming a lot more ethereal than Apple would like to admit. Many services that were once apps or downloadable are now disappearing into the cloud, and so might the iPhone itself one day.
When it comes to revenue, the cloud is a massive opportunity. Companies like Google and Amazon are investing heavily in cloud services for businesses, and they’re also looking for ways to increase the “human-machine bandwidth.” The problem, as many companies see it, is that humans have very slow “output bandwidth” compared to machines. The reasons people get so little done when interacting with digital technology is that they can only type and think as fast as their brains will allow. But with AI-augmented cloud services, this is set to change. The new interface won’t be a device you hold in your hand, it’ll be something far more exotic and powerful.
For businesses and people wanting to make money in the startup world, the direction of travel is clear. Those who want to make money need to start thinking about their cloud strategy now so that they can continue to pursue it as the supporting technology evolves. Cheap Windows VPS are already the backbone of many forward-thinking businesses and will remain so as long as cloud technology progresses. Many companies aren’t bothering with their own in-house servers or software at all, and are instead doing everything over the cloud at much lower cost than their competitors.
And this is where Apple could potentially come unstuck. Because it doesn’t have a foot in either the cloud or AI, it is essentially behind the times. Arguably, the days of attractive consumer devices are behind us, and we’re entering a different era - one where the real economic returns will be generated by companies who can tap into cloud services. Apple is relying on the world staying more or less the same, while the other big guns in the fight, particularly Google and Amazon, are betting that things are going to change again, just like they always have done in the past.
If you look at the grand sweep of history, one gets the sense that the writing is already on the wall for Apple. Only around 12 percent of the Fortune 500 companies that existed in 1955 are still on that list today. The rest are new companies offering disruptive services and catering to consumer tastes. What’s more, very few companies facing change manage to transform themselves, with perhaps IBM and General Electric being the only two notable examples. The fact that Apple appears to have abandoned its self-driving car idea means that the company has lost the last truly disruptive project it was working on. Now we’re looking at a future where the company simply iterates on its existing product stack without doing something truly new - which is what the company’s success was built upon.
Unless Apple figures out a way to commoditized data, not products, it’ll start losing to the other players. The company needs a boost. Big time.
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