- What Apple revealed this week
- Why Carl Icahn is considering “getting back in”
The big news this week, spilling out of the Apple WWDC, is that in the post-iPhone era the next Apple will be Apple and that it has the time, plan and resources to be able to deploy the Artificial Intelligence it needs.
In fact that AI, via Siri, is now being opened up to developers outside the Apple campus — an important development.
A revamped Siri, which so far has scarcely set the Thames a light, is at the core of Apple’s methodical construction of an ‘OS for your life’ <my phrase not theirs>.
Another instance — as I noted in my Artificial Intelligence strategic report — of how AI is becoming the next great instrument for change.
In this briefing, I’ll look at the ever smarter Siri, how Apple is creating an open platform for its AI, and what that means for rival Tech Titans.
The Bears are wrong about Apple
It seems that to stifle media yawns at this week’s WWDC, Apple would have had to demo a vacuum energy powered transit vehicle to Mars.
Apple’s problem with the media, notably Bloomberg and CNBC, is that it temporarily lacks momentum and is positioned as a hardware company offering premium priced priced products in a commoditised world. A rapid, superficial and incorrect reading of the situation.
At the same time there’s Apple’s famous policy of keeping future products under wraps within a culture about as leak proof as the proceedings of the Chinese Politburo Standing Committee.
In the ‘magical’ Jobs era it worked because a next blockbuster seemed guaranteed.
That’s no longer the case, despite the ‘open secret’ of the Apple car, and with the Watch having fallen short of ‘blockbuster’ status — although, as I’ll cover in future, Watch 3.0 could play a major role in upending medicine and I’ll devote a special briefing on the Apple car, going into the patents, hirings and real estate moves behind it.
Apple’s policy has been to let others open new markets and then come in with better designed, more tightly integrated products offering better customer experiences — the prime example being the iPhone itself presaged by the iPOD.
What Apple revealed this week
At WWDC, Apple laid out its future direction in a quick fire series of ‘show rather than tell’ presentations.
In a nutshell, here’s the WWDC scoop.
Apple is building an uber-platform to lie on top of its device specific platforms — iOS, macOS, watchOS and tvOS — which will be managed by Siri from the Cloud via voice and screen based AI.
In addition, the user will be protected <as she is not by Google, Facebook or Microsoft> by Apple’s ‘differential privacy’ policy of collecting personal data but obscuring the identities of the individuals involved <which, admittedly, is not 100% proven yet but is unmatchable by Google, Facebook or Microsoft>.
There was no mention of AI, VR/AR or the car, and no need to unveil high gosh factor advances like Google’s AlphaGo. Apple simply signalled that it hasn’t fallen behind, as many have been suggesting, in its ability to integrate the necessary ‘smarts’ into its evolving products over the next five years.
Moreover, hard to believe in this era of neurasthenic, real-time twitch, Apple has got the time to get its ducks in a row for its next phase.
What Apple bears overlook is Apple’s clear brand leadership. It’s by far the top global brand. And there is trust in that brand over trust in its competitors, especially those like Google and Facebook that make paydirt by selling precise personal details to third parties.
Apple has won over the herd
They also tend to overlook the fact that Apple has created a cult, numbering hundreds of millions of people, most of whom will buy its products simply because it’s Apple and because of peer pressure. There are now over a billion Apple devices in play out there.
Access to the crown jewels
The centrepiece at WWDC was that Apple is now opening up its ‘crown jewels’ — Siri, iMessage and Maps — to create a platform open to voice and commerce, which will add considerable sparkle to those ‘crown jewels’ and is the clear route to the next phase.
In short, Apple will allow a great deal of the machine learning to happen locally on the device — getting smarter each time we speak to her — but collecting randomized user data on its servers, allowing it to improve its algorithms, with the constraint of a “privacy budget” that prevents too much data coming from any one device.
Why compromise now on Steve Jobs’s legendary fiat of a ‘closed’ Apple?
First, no doubt, to shock a lady called Alexa.
Second, Apple has in any case faced up to the reality that it can’t do everything itself. The trick now will be to synthesise the product edge yielded by the integrated vertical model with the need to leverage outside cognitive and computer science prowess by ‘opening up’.
Siri’s getting better anyway — it needed to.
It can now voicemail iPhone transcriptions, recognise facial features within Apple Photo and make keyboard recommendations based on text message conversations, and it’s losing its ‘aw shucks’ response to certain questions.
The fact that it’s voice and screen driven gives it an advantage over Amazon’s impressive Alexa digital assistant, which is just voice driven when it comes to in-vehicle infotainment.
This WWDC ‘opening up’ is very big and should have Google, Facebook, Amazon and Microsoft concerned.
Like Tencent in China with WeChat, which Facebook is desperately trying to emulate, Apple is methodically setting about creating ‘the OS for your life’: wherever you are, whatever you’re doing it will serve your needs all day long by offering the ‘Apple experience’ via a comprehensive set of Apple devices — iPhones, iPADs, Macs, wearables, TV remotes, in-vehicle Car-Play infotainments, and odds on by 2022 cars themselves.
Where Apple outguns its competitors, apart from its epic financial resources and brand leadership, is that it has written into its DNA the ability to merge hardware and software in a single device in a way that no other company can match and that unlike them it will actually be making and selling the ‘doorway’ devices by the millions to its ‘OS for life’, including cars, thereby combining continuity, AI and multiple first rate devices seamlessly — something which Facebook <clearly>, Google <which has a truly chequered record in hardware>, Amazon, Microsoft and the Chinese contenders can’t do.
What can go wrong?
Among other things, that:
- The ‘opening up’ doesn’t achieve sufficient traction with third party developers and apps providers, although, for example, Skype, Pinterest, Lyft and WeChat are already engaging.
- Between now and 2020 Apple so underwhelms its customers with upgrades, new product and the Apple Ecosystem that they decamp in droves to other suppliers, essentially Android suppliers, for less tightly knit hardware and software product.
- The competition, especially with Amazon in mind, will trump Apple across the board with the emphasis on across the board..
I reckon it’s odds-on that none of these will happen.
Maybe, Warren Buffett’s hired guns, Todd Combs and Ted Weschler made the right call last month when they invested $1 billion in Apple, although they scarcely bet the ranch as the holding represents less than 1% of the Berkshire Hathaway portfolio.
Interesting, too, that Carl Icahn who made waves by dumping his huge Apple investment, citing worries about China, said last week that ‘he’d consider getting back in’.
I’m aware that by necessity this briefing doesn’t cover the whole pitch by any means, but with the Project Titan car I’ll offer a separate briefing, and I’ll also look at wearables and the TV remote, all within the context of the evolving competitive marketplace.
In the meantime, if you haven’t had a chance to read my full strategic briefing on Artificial Intelligence (2016-2021), then you can do so for free…
Feel free to contact me here if want to discuss in general terms how this might affect your portfolio.