Apple innovation and execution
People have been claiming that Apple has forgotten how to innovate since the early 1980s, or longer - it’s a standing joke in talking about the company. But it’s also a question. Apple changed the world with the Mac and the iPhone, but the iPhone will be old enough to vote this summer, and, as the saying goes, ‘what have you done for us lately?’ The shareholder version of this is ‘where’s the growth?’ As the company stands today, the iPhone has been flat for years, the iPad, Watch and AirPods that came after are flat as well, and the only growth comes from services - which is great for cash but mostly consists of milking the existing customer base, not creating something new.
Expanding this a little, since the iPhone launched Apple has created three (!) more innovative and category-defining products - the iPad, Watch and AirPods. The iPad is a little polarising amongst tech people (and it remains unfinished business, as Apple concedes in how often it fiddles with the keyboard and the multitasking) but after a rocky start it’s stabilised as roughly the same size as the Mac. The Watch and the Airpods, again, have both become $10bn+ businesses, but also seem to have stabilised. (The ‘Wearables, Home and Accessories’ category also includes the Apple TV, HomePods and Apple’s sizeable cable, dongle & case business.)
Services, on the other hand, just keep growing and growing, reaching $100bn in 2024, but unlike Apple’s new hardware products, there’s very little that’s innovative or ‘Apple’ here. They work fine, mostly, but none have any particular differentiation, and some, such as Apple TV+, are baffling in their pointlessness. However, they are all very effective in getting cash from Apple users (and, of course, at least $20bn of this is TAC payments from Google to make it the default in Safari, for now).
Meanwhile, since both the Watch and AirPods on one side and the services on the other are all essentially about the attach rate to iPhone users, you could group them together as one big upsell, which suggests a different chart: half of Apple’s revenue is the iPhone and another third is iPhone upsells - 80% in total. This is Apple as profit-maximiser.
Now what? The problem with saying ‘Apple hasn’t done much lately’ was always that you said this and then a month later it might launch the Watch or the AirPods. You don’t know what’s in the labs!
Except that these days, we kind of do. We knew Apple was working on a car for a long time because it was such a big project it was bound to leak, although Apple never said anything publicly. We know it’s working on xR because it launched the Vision Pro, but the Vision Pro wasn’t ready to launch. And we know it’s working on LLMs because spent an hour talking about that at WWDC last summer, and then realised that it couldn’t launch the flagship feature after all. And there’s the problem.
I think the car project was the classic Apple of Steve Jobs. Apple spent a lot of time and money trying to work out whether it could bring something new, and said no. . The shift to electric is destabilising the car industry and creating lots of questions about who builds cars and how they build them, and that’s a situation that should attract Apple. However, I also think that Apple concluded that while there was scope to make a great car, and perhaps one that did a few things better, there wasn’t really scope to do something fundamentally different, and solve some problem that no-one else was solving. Apple would only be making another EV, not redefining what ‘car’ means, because EVs are still basically cars - which is Tesla’s problem. It looks like the EV market will play out not like smartphones, where Apple had something unique, but like Android, where there was frenzied competition in a low-margin commodity market. So, Apple walked away - it said no.
You can generalise this point: Apple has a lot of money (it has $140bn of cash, and paid shareholders $115bn in buybacks and dividends in FY2024 alone) and it could buy or build lots of things, but it doesn’t follow that they would be a good fit. People often suggest that Apple should buy anything from Netflix to telcos to banks, and I used to make fun of this by suggesting that Apple should buy an airline ‘because it could make the seats and the screens better’. Yes, Apple could maybe make better seats than Collins Aerospace, but that’s not what it means to run an airline. Where can Apple change the fundamental questions?
That takes us to xR, and to AI. These are fields where the tech is fundamental, and where there are real, important Apple kinds of questions, where Apple really should be able to do something different. And yet, with the Vision Pro Apple stumbled, and then with AI it’s fallen flat on its face. This is a concern.
The Vision Pro shipped as promised and works as advertised. But it’s also both too heavy and bulky and far too expensive to be a viable mass-market consumer product. Hugo Barra called it an over-engineered developer kit - you could also call it an experiment, or a preview or a concept. Lots of serious people think that some combination of glasses and headsets could be the next universal device after smartphones, and Apple should certainly be working on that, but no-one thinks the hardware is ready to deliver that today, and the Apple we know doesn’t ship things that aren’t ready. It ships MVPs that get better later, sure, and the original iPhone and Watch were MVPs, but the original iPhone also was the best phone I’d ever owned even with no 3G and no App Store. It wasn’t a concept. it wasn’t a vision of the future- it was the future. The Vision Pro is a concept, or a demo, and Apple doesn’t ship demos. Why did it ship the Vision Pro? What did it achieve? It didn’t sell in meaningful volume, because it couldn’t, and it didn’t lead to much developer activity ether, because no-one bought it. A lot of people even at Apple are puzzled.
The new Siri that’s been delayed this week is the mirror image of this. Last summer Apple told a very clear, coherent, compelling story of how it would combine the software frameworks it’s already built with the personal data in apps spread across your phones and the capabilities of LLMs to produce a new kind of personal assistant. This was the eats of Apple - taking a new primary technology and proposing way to make it useful for everyone else The hero demo at WWDC was ‘when is mom’s flight landing? / what’s our lunch plan? / how long will it take us to get there from the airport?” with your iPhone synthesising data from across apps and services to answer real-world questions posed in ways that computers could not answer before. This is your iPhone knowing who your mother is, finding the flight in all the various threads of comms in the last few weeks, knowing that it need to find a flight in the near future, and showing you what you need.
None of this is quite science fiction anymore - it’s the kind of thing that LLMs ought to enable. But it also implied an enormous amount of engineering as well: Apple was effectively talking about a multimodal, agentic, tool-using model, running mostly in on-device compute (or perhaps in the ‘private cloud computer - Apple ever explained what would run where), with direct access to read, write and take actions on your data, so it has to be right, or have a lot of guard rails, or both (Simon Willison pointed out the prompt injection challenge here). But Apple showed a demo, and it only does demos when things are nearly done, and it said it would ship ‘later this year’ and it never misses deadlines like that. So we should be using it, today.
And now we find that we didn’t really see a demo, only a mock-up of a great concept, and that this product won’t ship until maybe late 2025, and possibly (going by the rumour-mill) 2026, or even 2027.
Oh.
The obvious comparison, of course, is Apple Maps, another product where Apple badly underestimated the technical complexity of what it had taken on. In that case it actually shipped the unfinished product, and in the aftermath Scott Forstall was defenestrated. In this case the not-working product hasn't shipped, and most consumers wouldn’t know, except that Apple has spent the last nine months shouting about ‘Apple Intelligence ’ and actually shipped a new animation for Siri, which prompts anyone half-paying attention to think that Apple has shipped a new Siri without improving anything. This is a mess.
Stepping back, I’m unsure how much of a disaster it is for Apple to ship what it described last summer in 2026 or 2027, and in the meantime push out a flow of more achievable individual features. On one hand, it’s not as though anyone else has what Apple described working yet, even Google. On the other, a year is a long time given the speed of AI progress right now, especially given the ferocity of competition that Apple faces in China and the waves of new features that the OEMs there are pushing. And ‘Apple Intelligence’ certainly isn’t going to drive a ‘super-cycle’ of iPhone upgrades any time soon. Indeed, a better iPhone feature by itself was never going to drive fundamentally different growth for Apple, but failures like Humane and Rabbit point to what else Apple (or others) might do with this technology once it works. The rumoured new home smart-screen device is probably a lot less appealing without this, and the AR glasses would need this too, except that those really are years away.
However, it clearly is a problem that the Apple execution machine broke badly enough for Apple to spend an hour at WWDC and a bunch of TV commercials talking about vapourware that it didn’t appear to understand was vapourware. The decision to launch the Vision Pro looks like a related failure. It’s a big problem that this is late, but it’s an equally big problem that Apple thought it was almost ready.
And the failure of Siri 2 is by far the most dramatic instance of a growing trend for Apple to launch stuff late. The software release cycle used to be a metronome: announcement at WWDC in the summer, OS release in September with everything you’d seen. There were plenty of delays and failed projects under the hood, and centres of notorious dysfunction (Apple Music, say), and Apple has always had a tendency to appear to forget about products for years (most Apple Watch faces don’t support the key new feature in the new Apple Watch) but public promise were always kept. Now that seems to be slipping. Is this a symptom of a Vista-like drift into systemically poor execution?
On the other hand, I’m old enough to remember when people said Apple was going to miss Machine Learning, and narratives are always easy to build when something’s gone wrong. But it’s worth re-watching this Apple video from 2013, and wondering if we still have that Apple.