Apple’s Strategic Pivoting and What This Means for the Future

Last week, several huge announcements were made that will have a strong effect on the future of Apple. The company has been looking for growth for a while. We’ve previously discussed how they are vertically integrating their business more when it comes to software, but now it seems like they are taking more drastic steps to get continued growth in a world that is already reaching saturation with the iPhone.

First, let’s talk about the original growth story behind the last 20 years of Apple’s success. In the early 2000s they released iTunes and the iPod. This was a strong pivot from being purely a high-end computer company, and one that paid off. The result was domination in the MP3 player market, but also something bigger. Those two offerings evolved into the iTunes Music Store and the iPhone. Since then, these have been a consistent source of growth until the mid 2010s where there didn’t seem to be anymore predictable growth.

It’s Time To Change

So the recent announcement that iTunes would be discontinued is symbolic of the idea that Apple has accepted they need to change in order to forge a new path ahead. This new path ahead involves putting more of an emphasis on the non-iPhone parts of the business.

That will mean introducing iPadOS, as well has offering the App Store for Apple Watch. The iPadOS will probably be nothing different from the previous iOS, but it will signify a focus on the non-iPhone business. And with the App Store being offered to Apple Watch, it is just a matter of time till the watch is available completely untethered from the iPhone.

This would create a whole new type of customer who can’t necessarily afford an iPhone, but can become part of the ecosystem at a cheaper price point. Apple has never shown a strong interest in offering a lower-tier iPhone, and the Apple Watch could be the answer to all of this. Now, it has a much higher addressable market and can begin to deliver some of that growth that the iPhone has been lacking recently.

What Do Management’s Moves Mean

In a way, management doesn’t really have a choice. They let these other segments function on autopilot for a while, but now it seems like they have realized that these can be key sources of revenue (or they will have to be). It is a common move for Apple to look for more growth within their current customer base rather than developing new ones.

These recent announcements are cause for optimism about the future of Apple. It shows that management has some sort of a plan, and isn’t afraid to make big changes in order to get revenue growth back. There has been a price jump in the last week since these announcements, so what I would suggest doing is waiting until the price settles down again, and then make a longer-term bet that would play out over a year or so. The returns on these announcements should manifest sooner than later, as the different revenue streams either start to pick up, or stay still.

Featured image courtesy of Shutterstock. Chart via Yahoo Finance.