Apple’s challenges for the next decade

Quick Summary:

Here we are in the beginning of 2022, and Apple’s future looks very bright to me. But it doesn’t mean the company faces no challenges or risks. I’ve listed a few of these longer term, strategic issues that I think could pose a threat to the company’s performance:

  • Apple has to work harder not to look hypocritical, as its values and business practices are increasingly misaligned with how certain regimes such as China or Russia, big partners and markets for the company, operate — with Apple having little leverage over the situation. On top of that, many of the aspects of Apple’s vertical integration — its core differentiator — are questioned by regimes and regulators. Examples include pre-installed apps, software and services; controversies over App Store and payment systems; charging ports, and more.
  • As Apple reaches increasingly less tech-savvy customers with their personal technology products, the importance of clearly understandable, obvious and reliable software an UI only grows. I think Apple significantly underinvests into refining their software and UI, as the amount of bugs, irritations and obscure UI inconsistencies appears to be large. Apple doesn’t necessarily see all that feedback, as most of these issues do not show up in bug reports.
  • Gaming — especially AAA gaming — is rapidly becoming a dominating form of media, entertainment, competitive and social activities for entire generations, and Apple does very little to be an influential player in this area. It’s past time Apple should make all of their hardware and software platforms the best environment for gaming and should invest in exclusive content, similar to how it does with film and TV.
  • The web experience defines so many aspects of how we use our devices, but Apple has no control over it. Web apps are becoming ever more powerful even on mobile, and on desktop, they have especially hit native software hard. As we increasingly consume and create directly on the web, Apple’s on-device vertical integration becomes less of a differentiator.
  • Apple will face stronger headwinds in recruitment and retention of high skilled talent. Increasingly heated competition with large rivals that are not shying away from paying extra, rising cost of living in Northern California, hybrid or completely remote work becoming a standard across the industry (which is historically at odds with Apple’s culture of secrecy and collaboration), and potential reputation issues might all contribute to staffing challenges.

Full Article:

Apple is the most expensive company in the world and one of the most popular ones, so it’s not surprising that it constantly attracts attention from all kinds of observers, publicists, critics and analysts. Not all of them are experts, and more often than not we hear opinions about how Apple is doomed, backed by nonsensical arguments or completely twisted interpretation of facts.

With the company having just hit $3T market cap, with the amounts of cash that would allow them to buy pretty much anything they might want, with stronger than ever lineup of products, peak-high customer satisfaction levels, and ambitious new products and services in the pipeline, Apple’s future looks very bright to me — even brighter than I thought just a few years ago. But it doesn’t mean Apple has no obstacles, threats, challenges, or risk factors ahead of them whatsoever. As a long observer, customer and fan, I’m paying very close attention to how the company operates and within which context they do it, which are the weaker points in their products, and what are the trends that worry me. In this article, I’ve tried to focus on higher-level, strategic things, as opposed to lots of minor annoyances. These are of course relevant for the beginning of 2022 — let’s see five or ten years from now how many of the things on the list are still worth talking about.

If I’m to pick just one hole in the whole story of Apple’s brand, culture, and values the company stands for, it would be how Apple needs to rely on increasingly controversial practices when it comes to operating in some of their biggest markets — particularly in China. Tim Cook is clearly a value-driven CEO, and it appears to me that he truly wants to be remembered as someone who stood for and fought for good things. Even Apple’s official press release boilerplate says that Apple’s goal is to leave the world better than they found it. It’s not a lip service. Proudly calling itself a “California company”, in its home country and many others, Apple publicly stands for privacy (even going to an extent of fighting with FBI on topics such as access to customer data), security, encryption and scaling back of ad tracking technologies. Apple’s investments in reducing green house emissions and carbon footprint, and in renewable energy, in its products and processes is truly remarkable and leading the entire industry. Apple regularly donates to charities and publicly endorses and supports figures who’ve been fighting for human rights and equality, such as Nelson Mandela, Dr. Martin Luther King, Jr., Michelle Obama, and many others. Apple has been openly opposing the Trump Administration’s immigration policies. I could go on here — the list is very long.

Beyond having stances about certain social and political issues, Apple is very opinionated about the way their products should be designed and work. Apple has very tight rules about software distribution and App Store — although many skeptics think it’s a bean-counting move that’s all about the money, I tend to believe that Apple’s key priority is controlling user experience and making things easier and more transparent and streamlined for average users — as opposed to developers (and then of course, money too!). Apple would hate to allow “stores” or platforms to appear within App Store — hence its opposition to games streaming services and other types of software. Core differentiator of Apple products is tight vertical integration — all the way from proprietary silicon through first party apps and accessories, and even data transfer and charging cables.

You might think I’ve listed a number of random and obvious facts above. But they are not random at all. The fact of the matter is that all of the things I mentioned above are being increasingly challenged by regulators and governments in many countries.

Over the years, there’ve been multiple reports about Apple’s practices in China (the latest one is from The Information) — some people call them “shady”. While the China topic is way more complicated and multi-faceted than many realize — and also peppered with somewhat nationalist American “China is evil” attitude that’s evident among many key opinion makers in the West — it’s undeniable that Apple has to increasingly bend over backwards to continue to effortlessly operate in China. And they have no other choice — as Ben Thompson notes, not only Apple’s manufacturing and operational prowess almost completely depends on China, but China is a huge market. Even if it made sense, pulling out of China is almost impossible for Apple right now. Which means, they have less leverage — and China knows that. All Apple’s statements about human rights and privacy start to sound hypocritical once you learn about local Chinese labor camps that are reportedly involved in manufacturing of components for iPhones, or about iCloud servers with customer data moved to China by demand of the government (although, reportedly, Apple still retains the encryption keys), or Apple clearly censoring local App Store by removing apps that the Chinese government considers wrong, or even modifying own services such as Apple Maps to twist the geographical reality.

And it’s not just China. Russia, probably inspired by what they see happening with Apple in China, has been testing the waters too. An official app of Russia’s biggest political opposition leader Alexey Navalny has been removed from the App Store, and the local government already made demands to Apple about how the disputed territory of Crimea should be represented in Apple Maps.

But it’s not just politics anymore — even the notion of Apple’s vertical integration is being increasingly challenged. Recently, Russia introduced the law that requires all device manufacturers to pre-install Russian apps on their devices that are sold in Russia. This whole idea goes against the entire philosophy of Apple controlling their devices and the user experience. In China, everyone uses WeChat — which is not just a chat app, it’s essentially a self-contained app platform with productivity software, games, payments, social network features, news distribution platform, and many more — over which Apple has zero control. The experience of using an iPhone in China is dramatically different from using it in the USA or Europe.

On top of all that, there are regulators. App Store cut and third party payment platform debates aside, even things like charging cables are endangered by governments such as the EU. Apparently, one day Apple might be forced to switch from Lightning to USB in Europe just because some people with power thought it was a good idea — god knows what kinds of terrible implications that might bring when it comes to design and innovation. Admittedly I’m stretching here — but if countries think that Apple is no longer allowed to create their own charging and data transmission ports, or to pre-install their apps on their own devices, what would stop them from deciding one day that Apple can no longer use proprietary silicon, or use their own operating systems, or their own services? Vertical integration — the core thing that sets Apple apart — would be torn down.

Clearly, Apple doesn’t want any of that. I can bet Tim Cook is not too happy about making tough deals with China — but as a pragmatic and rational leader, he has no other choice but to engage and search for compromise. Russia is a big enough market for Apple to increasingly bend to. But other countries and regimes are watching and willing to follow suit. Where is that line when “enough is enough”? If China demands tomorrow that all customers data should be open to local government with no restrictions, and that only local Chinese software and services should be pre-installed on iPhones — would Apple agree to that, and if they don’t, what happens to the company? If Russia enforces even more controversial laws, is there a point when Apple would decide to pull out from the local market — or are extra sales on the spreadsheet too important, and further violating own values and design principles is ok? As history teaches us, there is never a point where a troll or a bully would stop — when they feel they are feared, or their demands are being met, they would keep pushing. And it doesn’t feel that there is a clearly articulated, values-driven vision in the company about what the lines are that Apple will never cross. Considering tremendous value of Apple’s aspirational brand and the image of trust between Apple and its customers that the company works hard to build, this is a slippery slope.

One of the strongest selling points of Apple’s products have been their legendary “ease of use”. “It just works”, “Just get a Mac” — you know it. As Apple products continue to penetrate into mainstream and broaden their target audiences, this becomes ever more important — it’s one thing when you design a relatively easy to use personal computer for a segment of creative professionals or tech enthusiasts (who are still nerds), it’s completely different when you create phones, tablets and watches for literally everyone and their mom.

Arguably, with Apple’s products becoming more and more popular, the critical necessity of easy to use software and intuitive UI is only growing. But these products need to move with the times and respond to competition too — which means they constantly get more features and become more complex. It’s obvious that the more complex a system is, the more it’s prone to errors, and the more difficult it gets to operate and comprehend. It’s a dilemma Apple faces.

Considering the above, designing software and interfaces at Apple is arguably one of the most difficult jobs in the world, and I admire the efforts these people make. But I think they are not enough, and Apple should invest more resources in it — not just money and headcount, but time to iterate, test and carefully assess feedback from customers — including feedback one would never see in bug reports or on a spreadsheet. While as a customer I’m thrilled that I’m getting a major new release of macOS, iOS or iPadOS every year with tons of exciting and useful features, I’m probably more frustrated that these features are either roughly implemented, not scaled across many regions, or not obvious or easy to find and master. Let alone older incomplete features and bugs that persist for years and will probably never be touched by Apple again.

I’m, however, an advanced user and I can get around certain bugs or issues — as frustrating as they might be. But many people are not as tech savvy as I am. Recently, I purchased a brand new iPad for my father. He is an older person who is not very friendly with technology, and an “easy to use” iPad seemed like the best option for him. As not just his son but also the biggest tech “expert” in the family, I now get questions or hear about frustrations almost daily — and I have to admit that some of these frustrations are very fair.

The amount of bugs and UI issues in Apple software is not small. Even initial device setup was something my father couldn’t initially figure out. We had to spend 30 minutes figuring out why iMessage couldn’t log into iCloud account. Turns out, after you enter an account email address, you need to tap “Return” — the system never said it, and it’s inconsistent with how the rest of the OS works. To turn off constant password requests in App Store, you need to tap on a slider that you can’t see because of a UI bug that moves a part of the slider beyond the interactive area. Enabling screen sharing via SharePlay led to sudden ends of FaceTime calls several times. I have to regularly explain to my parents how to switch from a front camera to a back camera during a FaceTime call — how could they’ve guessed that if you tap on a black part of the screen during a call, a whole new row of buttons appears?

And it’s just basic, core functionality that is confusing for many ordinary people who are supposed to be key target audiences for Apple products. Moving and deleting apps is always an exercise in anxiety (just wait until I introduce my dad to widgets!). Trying to explain to him how an iPad numerical password is different from an iCloud password, and why, is an impossible task. Explaining what iCloud Backup does and does not back up, and how come certain contacts are or are not stored in iCloud is even more difficult. Adding someone to a shared Photo album may or may not work randomly, and setting up shared iCloud storage across Family Sharing required me to tinker with the devices for half an hour — it just didn’t initially work with no error messages or explanations.

This is not only Apple’s fault — technology becomes way more complex and there is no way around it. But the least Apple can do is to streamline it as much as it can, make choices and options in UI very clear, and — most importantly — make things predictably, reliably work all the time. They are the only consumer technology company in the world who can do it, as they design both hardware and software — and yet, the amount of bugs and annoyances is irritating and makes me wonder whether this vertical integration potential is being fully executed. It is depressing to see my old man demotivated as he fails to do certain things on his device, thinks that he is stupid, and as a result, wants to put the device aside — while in reality, it’s Apple’s software quality or obscure UI to blame, not his capabilities.

For the company that values customer satisfaction, user experience and adoption of their products by average people so much, Apple is not doing a good enough job to refine their software and streamline their UI. Who knows if there could emerge a competitor who might take advantage of this?

I’ve just recently written an entire separate article about this topic that is personally dear to my heart — so I’m not going to repeat myself. I might be professionally deformed and biased, but I truly believe that Apple completely ignoring — and in some cases, even fighting — AAA gaming is a long-term threat that might make their entire ecosystem and brand less relevant with a constantly increasing number of people who consider gaming as one of the key pillars of their lives across entertainment, competitive, and social networking. With Apple clearly chasing mind share and recognition in music, film, TV, podcasts, sports, personal communication and other media and services, it’s past time Apple has to get serious about both making its hardware and software platforms the best environment for AAA gaming, and investing in creating differentiating, exclusive, high budget gaming experiences.

This is admittedly a very complicated and controversial topic and I wouldn’t pretend I have the knowledge to analyze it from a purely technological standpoint. Instead, I want to address it from a philosophical angle. For long years now, web and cloud have been emerging into becoming overarching meta platforms that are designed not only to standardize and unite experiences of using different hardware and software platforms, but to bring it to the lowest common denominator. No matter if you use iOS, Android or Windows, your Google services and apps look and feel the same, you use dozens, if not hundreds, of web apps and web services in your browser — and chances are that browser is Chrome, not because it’s the best experience, but because it’s everywhere and integrated with Google services.

This leads to an obvious situation where user experience between different platforms is increasingly converging, and it’s becoming more challenging to platform owners, like Apple, to differentiate. The upside is that it’s now easier than ever to switch — but it’s the downside for platforms too. If everything that you use is your browser, it doesn’t matter that much if you use that browser on a cheap Android or Windows machine, or on iPhone or Mac.

Apple has been fighting this trend from two angles — the App Store, and powerful hardware. The App Store is more philosophical — Apple has been doubling down on the approach that browser is in many cases a suboptimal experience, and it’s better to instead use native software — apps. In many cases, it’s true. In others, apps are actually worse counterparts to their web fronts, and it’s often just simpler and quicker to go to a website instead of downloading and using an app. In addition to pushing the native app paradigm, Apple has been evolving Safari browser in a way that made many critics claim that it has been very late to adopting modern web technologies and has been crippling the performance of Progressive Web Apps. As for the powerful hardware — especially on the Mac where the native app ecosystem has been hit by web and browsers particularly hard — Apple’s answer is custom silicon. Yes, the web experience on Apple platforms is very similar to other platforms in terms of UX, but it’s better experience still because it’s just faster and uses less battery, Apple assumes.

This is a clear dilemma for Apple — on one hand, it has to leverage its vertical integration between hardware, software and services by making native apps endpoints to the user experience — but on the other hand, by doing so, it neglects all the increasing conveniences of cross-platform web and thus makes that user experience worse to an extent. To be clear, Apple has been actively improving the back end of their cloud services lately (although my Reminders still routinely fail to sync) and investing more in Safari — but it still feels that Apple thinks of themselves as a native software company first and foremost.

UX on an Apple platform still relies heavily on the on-device data and software (apps) that one has installed, whereas the Google approach is much more “ambient” and flexible — instead, UX on Google relies on how you use the web and their web services. Considering that we are living in a cross-platform world, and even if you are all-Apple, you still can’t help but use Google services — in the long term, Google’s approach looks more future-proof to me.

It’s not clear what Apple’s solution should be. I wrote my thesis about Apple’s cloud platform opportunity here, but it’s admittedly unclear what problem this approach would solve, let alone huge investments and change in business model it would require. If Apple is truly convinced that even in the long term, on-device is a better experience than web and cloud, they might want to double down on both own native apps and services, and work with third parties to make sure that as a customer, I would only want to use web as a last resort — not as a primary way of doing (and finding) many things, as it exists today. Apple has zero control over the web, and the fact that web defines the experience of using Apple’s products so much should worry the company.

Competing for top talent has always been a huge challenge in Silicon Valley and in tech overall, so this is nothing new for Apple. But things have been becoming increasingly heated on this front in the last few years.

First, Apple is now competing in a larger number of markets. Across a growing roster of product categories, all of which require unique expertise in hardware and software, with the increasing reliance on own custom silicon, ambitions in first party software and services, interest in wearables, healthcare, transportation, AR/VR and much more, the hunger for top talent at Apple only intensifies. All of this talent is also in high demand at Google, Meta/Facebook, Microsoft, Amazon, Tesla, and many other companies Apple directly competes with. As Apple becomes bigger, it is increasingly more difficult for one person to make a huge contribution, and the temptation to go to smaller or start-up teams and enjoy that VC money and stock options — as opposed to being “just” a cog in a giant machine, especially considering Apple’s tight-lipped culture of secrecy — is strong for many. I don’t think Apple can continue attracting and retaining top talent at the same rate if it doesn’t change certain policies about employee public speaking opportunities and doesn’t review its internal information flow processes between different teams (which are all risks in itself).

As Apple becomes more and more vertically integrated, each piece of the puzzle becomes ever more critical to the overall perception of their products. If silicon is not great, the entire product will suffer. If software quality is poor, no amount of silicon improvements or industrial design breakthroughs would make the experience much better. This means that Apple increasingly needs to make sure it retains the best talent across the growing number of their teams, and they can’t “cheap out”, or easily partner with external companies, here or there. I’ve been hearing for years that number one reason certain things don’t work at Apple as great as they should (especially on the software front) is because many teams are understaffed. This will become even more visible in the future unless things change.

Second, the current global pandemic is completely redefining expectations from high skilled workers in terms of how and where they are supposed to work. Gone are the days when the only way to work at a big company would be going to an office every day and be there 9-to-5. Businesses globally — and these include Apple’s direct competitors — are embracing hybrid or even completely remote work options. During the years of the pandemic, many companies hired many employees completely remotely, who might work from far-away cities or even countries, in different time zones, and have never — and might never will — even attend their HQ office buildings. More and more applicants and employees expect and demand hybrid or completely remote work options — and if certain companies would not offer it, they would think twice before applying or staying from jumping to competitors.

This is a new reality for Apple that has historically relied on in-office collaboration and secrecy. On top of that, cost of living in Northern California has been atrocious for years now, and finding someone willing to move their families to Silicon Valley — unless they are paid a premium — is becoming a challenge. All of these are risks to the company, and it might find itself in a position where it’s unable to retain or attract great talent unless it completely rethinks its approach to remote work, becomes more open to decoupling strategic positions from Cupertino or even the USA, and improves the compensation to prevent people from jumping ship. Just a few days ago Mark Gurman reported that Apple now plans to pay employees hefty bonuses to stop them from quitting.

Lastly, the topic of the company’s image and values is important here. Across entertainment and tech, we are increasingly seeing the issues of companies cultures and HR practices becoming ever more important in the decision-making process for employees and applicants. Things like companies attitude to employees unionization, treatment of harassment cases, image and behavior of top managers, adhering to own public values globally are all very important in the eyes of international talents who have the ability to choose from a list of employers. From the outside, it feels that Apple’s image is largely very positive, but the company needs to be very careful about some of the topics I mentioned in the first part of this article — especially human rights issues, cooperation with certain governments — unless it wants to risk damaging its reputation in the eyes of own employees.

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Maxim Samoylenko

Maxim Samoylenko

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