WWDC Expectations
WWDC Expectations
Update: bumping to the top of the page
Beyond the usual updates of iOS and OS X, there are two significant rumors about what Apple might unveil next week at WWDC.
The first is Healthbook, as detailed by Mark Gurman here and here . The second is Apple’s plan for a smart home, first reported by The Financial Times . I’m considering them together because at a high level they are actually quite similar: both will likely rely primarily on 3rd-party hardware that is integrated at a software level on iOS. It’s a strategy that makes a lot of sense both at a theoretical level and at a strategic level for Apple specifically, which leads me to believe that both reports are mostly correct.
Right now the health-monitoring and smart home markets are in their infancy; as Clay Christensen first laid out in The Innovator’s Solution , in immature markets nothing is “good enough,” meaning functionality is prioritized over price, giving the advantage to integrated solutions (in mature markets, everything is good enough, meaning price is prioritized over functionality; I discussed the extent to which this applies to the consumer market here ).
What Apple is rumored to be proposing for both health monitoring and smart homes is, unsurprisingly, an integrated solution: a series of devices and appliances that rely on one central interface for all of their functionality and interaction. It’s a similar model to the old digital hub, where your digital devices were spokes surrounding your Mac; in the future Apple allegedly envisions your home and personal accessories to be spokes around your iPhone:
(See also: Digital Hub 2.0 )
Contrast this to Android@Home and Android Wear. Just as Android was developed from the beginning to be a standalone device that relied on the cloud, not a computer, Android@Home and Android Wear are at their heart meant to enable standalone devices that connect with all types of other devices through the cloud.
This is a modular world, and while it is ideal for a mature market (as noted above), in immature markets it leads to a landscape like this:
Lots of devices that use Android@Home and Android Wear may be sold, but the majority will be like cheap Android: smart in name, but not in actual usage. It will only be over time, as devices and appliances become more capable and as standards develop that functionality will become “good enough” such that the more integrated solution would be seriously challenged.
All of this is good news for Apple. As I wrote in Why Apple is Buying Beats :
I believe the iPhone will be Apple’s chief revenue driver for at least the next five years. Something like the iWatch may be interesting, but it’s unrealistic to expect it or any other product category to drive Apple’s growth in a meaningful way, at least in the short term. So Apple needs lots of small revenue drivers in place of one big one. And that means accessories.
To that end, there are two rumored products in Apple’s pipeline that fit this vision: the iWatch (to go with Healthbook) and an enhanced AppleTV (to go with the smart home). While I don’t expect iWatch news next week, I am hopeful for news about the AppleTV. Regardless, I expect both to be Apple’s next priorities on the hardware front.
Perhaps more interesting is to consider how Apple might go about integrating 3rd-party devices and appliances into their vision. There will certainly be some sort of licensing program similar to the “Made for iPod” program, and the price of inclusion could be steep, particularly for big ticket items like home appliances or specialized medical devices (when “Made for iPod” launched Apple reportedly charged the greater of $10 or 10% of the retail price, although this dropped over time). This could absolutely be a material revenue stream sooner rather than later.
More significantly, though, each item purchased that is “Made for iPhone” further locks a consumer into the Apple ecosystem; Apple will likely long struggle to generate significant growth from such a massive base, but making it even harder for people to leave would cheer investors who tend to discount AAPL based on the perceived fragility of their position.
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