Does Apple Need To Take Bolder Risks?

Is the incremental pursuit of perfection too slow and small for a new era potentially dominated by big data, artificial intelligence and virtual reality? Or, when does an infinite loop just become a big circle? JL

Farhad Manjoo comments in the New York Times:

The next moment in tech is likely to be dominated by data-driven online services — more products like Siri and Apple Pay, fewer stand-alone hardware innovations like the iPhone.In that environment, the slow search for precision and perfection might no longer be in Apple’s best interest.

Apple is running out of parking spaces. If you drop by its Infinite Loop headquarters, you will find the place stretched beyond capacity. Even the valets, who double and triple-park the Teslas and Porsches that now flock to the world’s most valuable company, have given up finding free spots.

People at Apple speak longingly of the company’s new campus, Steve Jobs’s $5 billion circular glass dream, which is scheduled to open next year. The Spaceship, as it is called, is almost ready. Soon Apple will slip the surly bonds of Earth, the strictures of time and space and be ready for launch.

That was the plan, anyway. But in the last few months, after more than a decade of unprecedented growth, history was interrupted. Apple’s last two earnings reports showed that it had finally hit a peak. Though Apple’s profits remain the envy of the corporate world, a naysaying pessimism now surrounds everything it does.

Three months ago, I said this view was too gloomy. Given the size of its customer base and the unlikely prospect of iPhone lovers switching to Android, Apple’s short-term future looked O.K. “No need to fret, Apple is doing fine,” I wrote.

That is still true. Several analysts project that over the next year, Apple’s iPhone sales will return to slow growth rather than decline, which should keep its bottom line at its current stratospheric level.

But you don’t build spaceship-shaped corporate monuments on the prospect of doing just fine. The deeper question is whether Apple can keep its place as the North Star of the tech firmament. Can the company build the next great platform in computing, as it did the last one? Are its best days ahead of it, as Timothy D. Cook, the chief executive, insists — or is the new campus the capstone of an era of Apple dominance that we will never see again?

I will offer a suggestion. To thrive in the next era of tech, Apple needs to take a series of bigger, bolder risks.Apple’s last decade and a half, mostly under Mr. Jobs, has been defined by perfectionist focus. As its executives and marketing videos repeatedly boast, Apple says no to a thousand ideas before it says yes to one. That attitude was perfectly suited to a particular era in tech — the rise of mobile devices, which were the ultimate expression of Apple’s expertise in creating jewel-like hardware.

But the next moment in tech is likely to be dominated by data-driven online services — more products like Siri and Apple Pay, fewer stand-alone hardware innovations like the iPhone.

In that environment, the slow search for precision and perfection might no longer be in Apple’s best interest. Mr. Cook’s goal, now, should be to alter Apple’s governing ethos to induce a small measure of chaos into his company.

It is likely that Apple is already working on some bold plans in secret (a car and a pay TV service are among several that have long been reported). The shift I’m calling for would not be radical, just evolutionary. It should be more nimble and slightly more public with its experiments, and push more of them out sooner. When it releases stuff, it should move faster to fix and improve what is wrong. Above all, it should take more risks; it should say yes more often.

These changes will be difficult because they could upset Apple’s customer base and its brand. Experimenting more means failing more, usually in public. Failing means looking bad, and looking bad isn’t something Apple does well. The news media is especially unkind to perceptions of “failure” from Apple. When Apple’s Maps apps had flaws, it was considered headline news. (Never mind that Apple Maps is now much more popular than Google Maps with iPhone users.) The Apple Watch sold more units in its first year than the iPhone did — but because the watch was far from perfect, and it hasn’t yet become a must-have new gadget, it’s widely derided as a whiff.

Still, for Apple, a more freewheeling attitude, one that pushes it to put out more experimental products, could be worth the risk. We’re in an odd time in tech. There are lots of new technologies pegged as potential next big things — artificial intelligence, virtual reality, drones, wearables, the Internet of Things — but figuring out how all these pieces should fit together to create experiences people love necessarily involves experimentation.

In this environment, the best new products are not likely to be obvious. They will most likely be ridiculed at first and they may actually be kind of useless in early versions. But over time, with brainstorming and updates based on consumer feedback, you might discover something precious.

A good example here is the Amazon Echo, the voice-recognizing household computer that has morphed from an odd gimmick into a useful and groundbreaking example of the future of computing. And it seems no accident that the Echo — like Amazon’s successful cloud business and its Prime subscription service, both unlikely ideas — were birthed from a company whose chief executive has embraced risk and failure as a signal measure of corporate health.

“I believe we are the best place in the world to fail (we have plenty of practice!), and failure and invention are inseparable twins,” that chief executive, Jeff Bezos, wrote in a recent letter to shareholders. He added: “Most large organizations embrace the idea of invention, but are not willing to suffer the string of failed experiments necessary to get there.”

Apple has accumulated many of the pieces to create technologies of the future. It has expertise in voice recognition, data mining, wearables, and of course, hardware and software

design. Most importantly, it also has a huge installed base of users who willingly try its newest products.

What it doesn’t have quite yet is enough of an appetite for the speed and risks that come with creating and maintaining new services. Some of its sins here have been unforgivable. Siri was one of the earliest voice-recognition technologies released to the public. It wasn’t perfect when it came out and Apple has made slow improvements over time. Today’s Siri is vastly more powerful than yesterday’s.

But it still feels like a missed opportunity. There is so much Siri should be able to do that it cannot. Why can’t Siri plug into more parts of my phone? Why can’t it tap into the Uber app to call a car for me, or start up HBO Now when I say, “Hey, show me last week’s ‘Game of Thrones’?”

Ben Thompson, who writes at the site Stratechery, recently cited a similar litany of shortcomings in Apple’s services — among them the App Store, iMessage, Apple Pay and Apple Music. Mr. Thompson said that Apple’s unusual functional organizational structure — in which executives are in charge of certain business functions, like engineering or marketing, and not product lines — worked better for creating hardware products than compelling online services.

I’m not sure I quite buy Mr. Thompson’s thesis about the cause of some of Apple’s mistakes in its online services. It is not clear that Apple needs a wholesale restructuring rather than simply a greater push from Mr. Cook to be bolder in these products.

It is important to note, too, that Apple has very patient customers and that the overall value of its ecosystem often makes up for particular deficits in some of its services. Consider Apple Music, a subscription music service that offered no great improvements over competing services like Spotify. Yet despite being late to market and not as pleasant to use as rivals, Apple Music has snapped up 13 million subscribers paying $120 a year.

“It’s already become a $2 billion business, and it did not exist last year,” said Kulbinder Garcha, an analyst at Credit Suisse who has said that Apple can realize significant growth in its profits by creating and improving online services. If Apple moves quickly to fix some of the problems with Apple Music — cleaning up its user interface, adding handy features like Spotify’s in-app lyrics browser — it could easily build on that early growth.

“These things don’t have to be a hit from day one, but what’s important is that they keep learning from their mistakes and keep updating them,” Mr. Garcha said. In other words, Be faster, take more risks, go bold.