Observations Attending WWDC, WWDC Keynote Priorities, An Impressive visionOS 2
As mentioned last week, we will shift our attention this week to everything from the WWDC keynote that wasn’t Apple Intelligence. For today's discussion, we will go over my broader observations from attending the keynote at WWDC and then talk visionOS 2.
Happy Monday. I flew out to Cupertino for WWDC. We will begin today’s update with some of my observations from Apple Park.
Observations Attending WWDC
WWDC is Apple's one event each year that is all about developers (as it should be). While the keynote has a mass market audience, everything else about WWDC is focused on helping developers navigate both new and existing platforms. Apple relied on the usual keynote viewing setup area with some developers seated up front near the stage. The press and media are positioned more in the center of the (large) viewing area where shared is provided by Apple Park's ring building. For the press, shaded seats are a hot commodity for both personal comfort and work (blogging, tweeting, etc.).
One thing that became apparent from attending this year’s WWDC is that the
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Google I/O 2023
Hello everyone. Welcome to June.
Virtual Member Meetup on Monday. Following the WWDC keynote, there will be a virtual member meetup in the member forum in Slack on Monday at 5:30 pm ET / 2:30 pm PT. Hopefully that time will also allow some members in Europe to join. This meet-up will provide an opportunity for members to have conversations in real-time about everything that was announced. In addition to participating in the discussion myself, I moderate the discussion topics etc. The discussions are then made available afterwards for other members to read through in Slack.
Above Avalon Report. With Apple widely expected to unveil its first headset on Monday, my expectations for the device are found in the Above Avalon Report "Apple's Reality (Headset) Plans" published back on April 12th. You can read the report here. An audio version of the report is also available via the Above Avalon Reports podcast (part of the podcast add-on).
Today’s update will be focused on the Google I/O 2023 keynote. In addition to covering Neil’s thoughts on the keynote, the discussion goes over the weakest/strongest points of the presentation as well as the oddest parts. Given the discussion’s length, Spotify earnings was pushed off. We will circle back to Spotify post-WWDC.
Let’s jump right in.
Google I/O 2023
Google held its developer conference in mid-May. Like Apple’s WWDC keynote, Google’s I/O keynote (available here for viewing via YouTube) is geared toward consumers, developers, and the press. The company then held more developer-focused presentations afterwards.
While Google unveiled AI-driven features in prior years, the difference found with this year’s Google I/O keynote is that it took place in the shadows of ChatGPT and Microsoft's AI push. One got the sense that Google felt insecure about the AI attention being given to others. It was hard to ignore the “we are actually the AI leader” tone emulating throughout the presentation. The thing is, very little that was shown on stage struck me as “only Google.” AI will be adopted by all of Big Tech – it already has been.
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Above Avalon Podcast Episode 184: Let's Talk WWDC 2021
In episode 184, Neil discusses the big themes found with this year’s WWDC. The episode then takes a deep dive into watchOS direction and what Neil sees as missed opportunities for unleashing more of Apple Watch’s potential.
To listen to episode 184, go here.
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Moving Forward in a Pandemic
More has happened in the past month from a global economic and health perspective than in the past ten years. We are in uncharted territory as 200 million people in 21 U.S. states find themselves facing “stay at home” directives while a growing list of countries including Italy, Spain, France, Australia, the U.K., and India are in complete lockdowns. Travel around the world has essentially come to a standstill.
Although it may be natural to search for comparisons between the coronavirus pandemic and prior crises, such an exercise will prove inadequate. Silicon Valley finds itself in the most difficult operating environment it has ever faced.
Apple’s strategy for navigating the coronavirus pandemic is centered around continuing to move forward, however difficult that is proving to be. Along those lines, management is taking recently learned lessons from how coronavirus trended in China, South Korea, and Japan to come up with a blueprint for what to do around the rest of the world.
Key Developments
Over the past two weeks, Apple has announced a number of initiatives and actions related to slowing the coronavirus pandemic in the U.S. and around the world. This includes helping those workers on the front lines.
Apple and its corporate peers were early in embracing social distancing and allowing employees to work from home.
Apple was the first major retailer to close its retail stores in the U.S. The decision wasn’t a light one as Apple stores are vital sources for customers looking to get help and service for their communication devices. A third of Apple store visitors are there for service.
Apple has joined most of its peers in donating medical supplies that had either been stockpiled to protect employees from California wildfires or were in some way connected to the company’s extensive supply chain and manufacturing apparatus.
The preceding actions are desperately needed and should be applauded and serve as a model for others to follow.
There were two other announcements from Apple that spoke volumes as to how the company planned to navigate the coronavirus pandemic:
Unveiling a reimagined and revised WWDC. With Apple historically holding its annual developer conference in June, the company had the time to turn misfortune into something positive by turning the cancellation of an in-person conference into a reimagined online-only WWDC (still scheduled to take place in June).
Unveiling a number of new products. Apple announced updates to the MacBook Air, Mac mini, iPad Pro, a new Magic Keyboard (with trackpad) for iPad, 20 new Apple Watch bands, and iPadOS 13.4 which brought system-wide support for cursors, trackpads, and mice.
As large portions of the U.S. hunkered down to combat the coronavirus and Apple’s board likely invoked certain provisions of its business continuity plans given the sudden deterioration in market and operating conditions, Apple went forward with plans for its biggest event of the year and its spring product release.
Along with doing its part to help combat the virus, Apple is also recognizing the reality that society doesn’t stop, even during a pandemic. That decision may come off as distant, or even careless, as if Apple isn’t willing to recognize the seriousness of the matter. However, this is a misreading of the situation.
By continuing to move forward, even during a pandemic, Apple is being true to itself. Apple is a toolmaker developing products capable of improving people’s lives. Such a mission never stops, even during a pandemic plaguing 180+ countries.
Anecdotal reports out of China point to sustained demand for iPads, despite lockdowns and quarantines, as families look for education tools to supplement children’s time away from the classroom. The U.S. now finds itself in a similar situation with some states having closed schools indefinitely. Employees are finding that work obligations haven’t disappeared, even in the face of new challenges in the form of closed schools, daycares, and the need to keep families safe.
In such trying times, we still need functioning tools in the form of smartphones, laptops, desktops, and even wearables, not to mention accompanying services and software powering those tools. One has to imagine FaceTime usage is at record highs as video calls replace face-to-face interactions.
Challenges
It would be an understatement to say that Apple faces challenges in its quest to continue moving forward in the midst of a pandemic.
Consider the following developments:
Stay at Home Directives. California is currently in a “stay at home” directive under which residents are urged to stay at home and only leave the house for essential needs such as food and medicine. California’s governor doesn’t think there will be any significant change to the order through at least mid-April.
Tim Cook, along with most other Silicon Valley CEOs, is following the order and working from home (as shown in the video clip below).
Google positioned the order as a key factor for canceling I/O, its annual developer conference, altogether. Apple’s announcement of running with a revised WWDC this June was announced prior to California’s stay at home order. It’s not entirely clear how Apple can create an online-only WWDC while employees are urged to stay at home. In a worst case scenario, will we see executives give presentations and product demoes from their homes?
Social Distancing. There is irony found with how social distancing efforts, which have been proven to be very effective in slowing the virus spread, stand at odds with the vision and goal behind Apple Park as a place for spontaneous collaboration. Even when stay at home directives are rolled back, Apple still faces a massive challenge in keeping employees safe from the virus at Apple Park and other corporate offices.
Retail Closures. Apple’s 460 stores outside Greater China have been closed indefinitely with most of Apple’s 70,000 retail employees unable to help hundreds of millions of Apple users. While Apple has announced plans to slowly reopen stores, the company is taking a localized (and cautious) approach to such openings.
Travel Restrictions. Apple’s massive supply chain and manufacturing apparatus require Apple employees to spend time with partners on the ground and to collaborate on product development. Last year, an unintentional leak from United Airlines showed that Apple was responsible for 20% of all business seats that fly between San Francisco and Shanghai. It’s an astounding percentage that speaks to the degree to which Apple’s design, engineering, and operation teams spend time in Asia. The coronavirus pandemic has resulted in a near halt in global travel, and it is logical to assume this will have an impact on product development timelines.
Operating Environment
A scenario that many people may not want to admit to is that the next 12 to 18 months may be the most difficult operating environment Silicon Valley will ever face. Even if the U.S. is successful at slowing the virus spread in hot spots, ongoing travel restrictions around the world will cause long-term headaches. There are then the possibilities of additional virus waves in the fall and winter. This may end up leading to permanent changes in how companies get work done.
Some of the challenges found with the coronavirus pandemic may very well lead to product launches being delayed. Despite having one of, if not the, most formidable supply chains in the world, Apple isn’t immune to disruptions. The products Apple unveiled last week were mostly ready to go prior to the coronavirus pandemic spreading around the world. As a general rule, the products Apple is working on today are targeted for release 12 to 18 months from now.
Despite having $40 billion of cash and cash equivalents and another $167 billion of marketable securities on the balance sheet, is it imperative that Apple recognizes market dislocations in short-term lending markets. There is then the potential financial fallout from a prolonged period of subdued customer demand. No one knows for sure whether or not customer demand will snap back in the U.S. and Europe once stay at home directives and lockdowns have been rolled back. China, South Korea, and Japan provide hope that the demand answer is yes. However, the U.S. is clearly attacking coronavirus differently and that may mean that the rebound will trend differently as well. Even stellar balance sheets can turn south in a prolonged pandemic.
While the preceding challenges are daunting, a realization that is only now starting to sink in is that the top five giants (Apple, Amazon, Microsoft, Alphabet, and Facebook) have business models that aren’t dependent on the public leaving their homes. It’s an observation that will have implications for decades to come.
Strong Brands
Apple finds itself at an advantage to most of its peers as it saw firsthand how China, South Korea, and Japan handled coronavirus (and are now working to keep the virus at bay). In terms of the supply chain, Tim Cook and his inner circle were at the company during the SARS outbreak in 2003. Jony Ive reportedly spent three months quarantined at Foxconn during the SARS outbreak, working on the Power Mac G5 Tower. The current executive team was also at Apple during the aftermath of September 11th, 2001 when Apple unveiled the iPod six weeks later. There are then the natural disasters that Apple’s supply chain works around. However, there is something about the coronavirus pandemic that is different. It’s a challenge like Apple has never faced.
Earlier this week, Nike reported earnings (which were better than consensus expected). Nike’s new CEO, John Donahoe, of eBay fame, said “We know it’s in times like these that strong brands get even stronger.”
He’s right. The best brands will come out of this challenging time stronger than ever. Why? The companies with the best brands always strive to continue moving forward.
Listen to the corresponding Above Avalon podcast episode for this article here.
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For additional discussion on this topic, check out the Above Avalon daily update from March 30th.
Apple's Product Strategy Is Changing
This year’s WWDC felt different. While every WWDC keynote is filled to the brim with new features, this year’s announcements included highly anticipated items like a new Mac Pro and differentiated iPad software features. In addition, there were some genuine surprises such as SwiftUI (a big deal with wide-ranging implications for Apple’s ecosystem). Despite there being no discernible change to the grand vision behind Apple’s product development, there does appear to be a noteworthy change to strategy.
The Past
Apple had been following a product strategy that can be thought of as a pull system. The company was most aggressive with the products capable of making technology more relevant and personal.
One way of conceptualizing this product strategy is to think of every major Apple product category being attached to a rope. The order in which these products were attached to the rope was determined by the degree to which technology was made more personal via new workflows and processes for getting work done. Accordingly, Apple Watch and iPhone were located on the end of the rope held by Apple management. Meanwhile, Mac desktops were located at the other end of the rope while iPads and Mac portables were somewhere in the middle.
As Apple management pulled on the rope, the Apple Watch and iPhone received much of the attention while the Mac increasingly resembled dead weight.
The preceding exhibit may make it seem like all of Apple’s product categories moved in sync with each other as Apple management pulled on the product “rope.” In reality, the quicker Apple pulled on the rope, the more chaotic the end of the rope moved. The following exhibit does a better job of demonstrating the chaos found at the end of the rope.
The Apple Watch and iPhone were Apple’s clear priorities while the iPad, Mac portables, and Mac desktops ended up facing a battle for management attention. The iPad seemed to have the clear advantage in that battle, at least when it came to capturing mindshare among Apple’s senior ranks. Recall Tim Cook’s comment about the iPad being the clearest expression of Apple’s vision of the future of personal computing.
Today
Over the past two years, we received clues that a major change was beginning to take hold in Apple’s product strategy. This change was on display during this year’s WWDC. Consider the following announcements:
The Apple Watch continues to gradually gain independence from iOS and the iPhone with its own App Store and the ability to create watchOS apps without an iPhone app.
iPadOS is a promise from Apple that iPad will be given unique software features versus iPhone. Features like multitasking and Apple Pencil support give iPad differentiation from its more popular sibling (iPhone).
The new Mac Pro is clear evidence of Apple industrial design, along with the engineering and product design teams, attempting to come up with a long-term solution for the most powerful computer in the product line.
SwiftUI is the kind of foundation Apple needs to properly leverage a thriving iOS developer ecosystem in order to benefit other product categories.
Apple no longer appears to be relying so much on a pull system when it comes to advancing its product line. Instead, a push system is being utilized, and every major product category is being pushed forward simultaneously. The change was designed to reduce the amount of chaos found at the end of the “rope” that Apple was pulling. Accordingly, the primary benefactors arising from this new strategy are the iPad and Mac. This explains why this year’s WWDC announcements felt more overwhelming than those of previous years. Apple was able to move its entire product category forward at the same time.
This revised strategy ends up supporting a core tenet of my Grand Unified Theory of Apple Products - a product category's design is tied to the role it is meant to play relative to other Apple products. (A deep dive into Apple’s product vision and the Grand Unified Theory of Apple Products is available here for Above Avalon members.) By pushing the products geared towards handling the most demanding workflows, Apple has a greater incentive to push the products capable of making technology more personal and relevant.
It’s not that every product category in Apple’s line is now on equal footing in terms of importance and focus. Some products will receive updates every few years while others require more attention due to needing annual updates. In addition, Apple’s revised product strategy likely won’t change the sales ratios between product categories (iPhone outselling iPad by four times while iPad outsells Mac by more than two to one). Instead, the change from a pull to push system manifests itself with each product category being given a defined and unique role to handle within the Apple ecosystem.
Wearables are tasked with handling entirely new workflows in addition to a growing number of workflows that had been given to iPhones and iPads.
The iPhone is the most powerful camera and video player in our lives.
iPads and Macs are content creation tools.
Implications
There are a number of product-related implications arising from Apple’s revised strategy:
Mac Desktops. Despite being in the post-PC era, desktops are experiencing some kind of renaissance. Some of this isn’t entirely surprising given how the desktop has always been viewed as an antidote to some of the ideals found with mobile. However, what is new is the realization of the desktop’s role in the AR era. Mac desktops are niche in terms of the number of users relative to other Apple product categories, albeit a very powerful and crucial niche.
Mac Portables. It is time to take Apple management at its word when it says the Mac is important to Apple’s future. Mac portables will likely retain a place in Apple’s product line for the foreseeable future. A few years ago, low-end Mac portables seemed to be on a dead-end path thanks to iPads. There is no longer any evidence that such thinking is widely held in Apple’s senior ranks. An ARM-based Mac portable seems inevitable at this point.
iPad. Just a few years ago, some in the tech pundit world thought the iPad lacked a future. Such thinking was due to slowing iPad sales combined with larger iPhones being able to handle many of the use cases originally given to iPad. While the iPad has always been viewed as the future of computing within Apple, we are starting to see that vision materialize. iPad sales are now routinely surprising to the upside as Apple adds a “pro” layer to the iPad category in terms of powerful hardware and software.
iPhone. The iPhone as a product category continues to mature, as seen with a longer upgrade cycle. Going forward, the iPhone will primarily be known as the most powerful camera in our lives and a video consumption device. Many of the less intensive use cases and workflows currently given to the iPhone will naturally flow to wearables over time.
Wearables. Apple is the wearables leader. Fitbit would arguably be the closest from the perspective of unit sales but even then, the company is quickly losing momentum. Lessons that Apple learned with iPhone and iPad are now giving the company a wearables advantage that is likely at least five years. An independent Apple Watch not requiring an iPhone to set up is inevitable. The move would increase Apple Watch’s addressable market by three times overnight. In addition, Apple is well on its way to establishing a wearables platform as it competes for prime real estate on our wrists, in our ears, and in front of our eyes.
Will It Work?
Is Apple making the right product strategy decision moving from a pull to push system? It’s too early to tell. At first, the revised strategy may seem like a no brainer as each product category ends up benefitting from more attention. However, it’s not a given that such a dynamic is in Apple’s best long-term interests.
The source of my hesitation in Apple’s new product strategy is that the company’s long-term success is dependent on one item: making technology more personal. Anything that takes away from that goal ends up being a hurdle. Is Apple supporting legacy workflows to the detriment of Apple’s long-standing mission of making technology more personal and relevant?
One reason Apple decided to change product strategies in the first place was to avoid an all-out uprising among the 1% of the user base creating content consumed by the other 99%. The mistake Apple made over the past few years was pulling the product “rope” too fast and in the process, leaving many of its pro users, defined by the workflows needed to be supported, behind.
For a company that is resource constrained when it comes to time and attention, there is no guarantee that Apple’s functional organizational structure and design-led culture can realistically scale to push an endless number of product categories at the same time. This was the key benefit found with Apple’s pull system. The focus was to advance the products capable of making technology more personal and relevant while trying to bring as much of the broader product portfolio along for the ride. The move to a push system is inherently more complex. Apple finds itself doing a whole lot more that it did just a few years ago.
Some will push back at the claim that Apple is resource constrained considering the company has $113 billion of net cash on the balance sheet. However, such a view doesn’t take into account how Apple functions. Apple could have thrown together some components in a big box and shipped a new Mac Pro shortly after realizing that the previous Mac Pro design was a dead end. Instead, Apple’s industrial designers, working in close collaboration with various teams, took a little over two and a half years to come up with what is marketed as a long-term solution for handling the most demanding content creation workflows. Similar questions now plague Apple pertaining to its approach to “pro” Mac portables.
My concerns regarding Apple’s revised product strategy would be alleviated if Apple came up with a plan to push legacy platforms forward by doubling down on future initiatives involving making technology more personal. This is why SwiftUI is intriguing. Apple is positioning SwiftUI as a way to improve a developer's productivity by requiring less code, resulting in better code. What if that is only scratching the surface as to Apple’s ultimate objective? What if the Mac is being repositioned as an AR creation platform while iOS is gradually positioned as a platform for developing wearables apps? Using a billion iPhones to develop apps consumed on billions of wearable devices is the type of goal that would require years of work, foundation building, and periodic changes to product strategy.
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