Two very interesting articles from analysts following-up on Apple's announcements last week. What both articles hint to is the fact that the strength of Apple's long term position is often underestimated because people do not take into account the systemic properties of Apple's offering. However, once you start considering Apple as a "Hardware as a Service" company, its position appears even more formidable than it already is.
It’s a lot easier to give the designers control when Apple’s business model is predicated on achieving high margin, not necessarily the lowest possible cost. Relatedly, all of the company’s software development, from operating systems to cloud services, exists to differentiate the hardware, not to make money in their own right, resulting in a virtuous cycle that means it is becoming more difficult to compete with Apple’s hardware products over time.
This cycle of design, differentiation, profit-taking, and reinvestment is seen most clearly in the iPhone. [...] Apple’s cycle of accelerating improvement only matters to the extent that iPhone customers perceive benefit from those improvements. It is easier, though, to perceive and value those benefits the more you use a device, and the more uses a device has; to put it another way, an infinite number of interactions with a slight improvement is even more valuable than a few interactions with a huge improvement. By extension, the mistake made by Apple bears who continually claim the iPhone is “good enough” is to underestimate just how much people use and value their phones.
Much more interesting than this value is the notion that Apple is in business to deliver a product/service mix to loyal customers and to preserve their loyalty through constant improvement and innovation. You can see strategic intent in increasing the attach rate per device of services. You can see a strategic intent in building loyalty and the right customer base which is likely to be loyal. You can see strategic intent in the iteration of the product in a way that extends loyalty and expands the solid base but also increases the $/day rate. This analysis correctly informs almost all decisions the company makes. [...]
The fact that Apple has just launched a subscription service for the iPhone makes what was clearly their strategy all along plain to see however it has been a strategy in effect for decades. It isn’t a difficult idea to embrace. It always surprises me that it’s not more commonly held.