Apple’s mission is “to bring the best user experience to its customers through innovative hardware, software, and services.” And in a manifesto dated 2019, Tim Cook set the vision as “We believe that we are on the face of the earth to make great products, and that’s not changing.”
Inside the multi-billion dollar business platform
Still, in 2022, iPhone sales saved the quarter for Apple in the second quarter of the year.
In the middle of a downturn, the iPhone saved the day. And it’s not just about a product. The iPhone is a business platform.
Indeed, the iPhone is a piece of hardware that sits on top of the software, operating system, and marketplace, creating the whole Apple ecosystem.
What I like to define as a business platform.
iPhone sales in 2022 shot at over $205 billion, representing 52% of Apple’s revenues.
The other interesting aspect is the only other segment that grew was the services segment.
The service segment, in 2022, reached over $78 billion in revenues.
And guess what that means?
The service segment comprises advertising, AppleCare, cloud, digital content, payment, and other services.
In 2022, the services segment primarily has higher net sales from advertising, cloud services, and AppleCare.
All services mostly exist thanks to the iPhone (the Apple mobile ads market wouldn’t make sense without the iPhone).
When you factor in all the ancillary services and products (wearables, accessories, ads, care, cloud subscriptions) that Apple sells as companions to the iPhone, its contribution to the overall company’s financial success account for around 70-80% this year!
The iPhone was launched in 2007.
This makes Apple’s domination in the mobile market a 15-year run so far.
Apple today is worth over 2.5 trillion dollars!
Thus, you can understand what it means from a financial standpoint for a company to be able to build the next business platform.
Why does Apple’s mission matter?
Breaking down Apple’s mission statement
The Company is committed to bringing the best user experience to its customers through its innovative hardware, software and services.
Apple points this out in its annual reports. Understanding the elements of Apple’s mission statement is critical:
- Best user experience.
- Innovative hardware.
- Innovative software and services.
This element also crafted the way the organizational structure is designed.
Therefore, at Apple, user experience comes first; this gives great power to design and designers over engineers.
Not surprisingly, Apple products are beautifully crafted. Everything about Apple products has to be designed with maximum attention to detail.
At the same time, Apple has leveraged software and integrated it into the hardware, making its products more valuable for users.
Understanding Apple’s platform strategy as a key driver for its mission
On January 9th, 2007, on the stage, at Macworld San Francisco 2007, Keynote Address, Steve Jobs explained:
This is a day I’ve been looking forward to for two and a half years.
Every once in a while a revolutionary product comes along that changes everything and Apple has been well first of all one’s very fortunate if you get to work on just one of these in your career.
Apple’s been very fortunate it’s been able to introduce a few of these into the world in 1984. We introduced the Macintosh, it didn’t just change Apple it changed the whole computer industry.
In 2001 we introduced the first iPod and it didn’t just change the way we all listen to music, it changed the entire music industry.
Well, today we’re introducing three revolutionary products of this class:
the first one is a widescreen iPod with touch controls.
The second is a revolutionary mobile phone.
And the third is a breakthrough internet communications device.
So three things: a widescreen iPod with touch control, a revolutionary mobile phone, and a breakthrough internet communications device
an iPod, a phone, and an internet communicator,
an iPod, a phone
are you getting it?
These are not three separate devices, this is one device and we are calling it iPhone.
Today Apple is going to reinvent the phone
This is how Steve Jobs introduced the iPhone!
Yet, the real, more silent revolution came the year after, in 2008, when Steve Jobs introduced the App Store:
As Steve Jobs explained at the time:
So you’re a developer and you’ve just spent two weeks or maybe a little bit longer writing this amazing app.
And what is your dream? Your dream is to get it in front of every iPhone user and hopefully they love it and buy it, right?
That’s not possible today, most developers don’t have those kinds of
Even the big developers would have a hard time getting their app in front of every iPhone user well we’re going to solve that problem for every developer big to small and the way we’re going to do it is what we call the app store.
This is an application we’ve written to deliver apps to the iPhone and we’re going to put it on every single iPhone.
With the next release of the software and so our developers are going to be able to reach every iPhone user through the App Store.
That was the turning point!
An iPhone without its App Store would not be worth much, even though that is a beautiful device.
This also leads to a clear business strategy for Apple:
The Company’s business strategy leverages its unique ability to design and develop its own operating systems, hardware, application software and services to provide its customers products and solutions with innovative design, superior ease-of-use and seamless integration.
And a set of business objectives to be achieved:
As part of its strategy, the Company continues to expand its platform for the discovery and delivery of digital content and applications through its Digital Content and Services, which allows customers to discover and download or stream digital content, iOS, Mac, Apple Watch and Apple TV applications, and books through either a Mac or Windows personal computer or through iPhone, iPad and iPod touch® devices (“iOS devices”), Apple TV, Apple Watch and HomePod.
The Company also supports a community for the development of third-party software and hardware products and digital content that complement the Company’s offerings.
Indeed, part of the “best user experience” implies a high-quality buying experience where the whole process is controlled and customized:
The Company believes a high-quality buying experience with knowledgeable salespersons who can convey the value of the Company’s products and services greatly enhances its ability to attract and retain customers.
Therefore, the Company’s strategy also includes building and expanding its own retail and online stores and its third-party distribution network to effectively reach more customers and provide them with a high-quality sales and post-sales support experience.
The Company believes ongoing investment in research and development (“R&D”), marketing and advertising is critical to the development and sale of innovative products, services and technologies.
Breaking down Apple’s vision statement
How does Apple build a business platform on top of a product
This also justifies the wide premium the company can still sell its products.
This is the fruit of what I like to call a business platform strategy, where the product becomes a platform for a business ecosystem to build up, and as a result, the company enjoys wide margins for years:
Below also another graphic that explains that:
Apple’s multi-sided value proposition and the push into privacy as core to its value proposition
Starting in 2019, Apple started to emphasize more and more over privacy, to strongly distinguish itself from other companies, especially the Google-Facebook duopoly, which business models are based on advertising.
More precisely, Apple added an opt-in policy; each time, there was the chance a user might get tracked (for various reasons).
This shifted the previous policy upside down. Where users accepted tracking by default, now they need to opt-in.
Image Source: The Verge
This led to the destabilization of the whole Facebook advertising machine, which the whole revenue model got based on tracking users across various platforms.
Indeed, Facebook quickly rebranded into Meta, and it’s trying to build a platform on VR so that it can break free from Apple’s marketplace.
Yet, the Facebook advertising machine is already losing billions of dollars, and it might sink billions for years before a VR platform takes off.
Indeed, the Facebook rebrand into Meta and its swift move into the Metaverse isn’t a vision; it’s a survival move.