How iOS drives Apple

It’s hard to see if you’re not in tech or deeply understand technical concepts, but the biggest thing Apple announces every year isn’t the new iPhone or iPad or Watch etc, etc. It’s their software, in this case iOS 8 + OS X Yosemite. Their business model enables their operating systems to be constantly upgraded, centrally controlled, and just frankly stronger than other companies.

This is one reason that other companies attempt to have launch events, but none of them are anything like an Apple Event — software doesn’t sell. Facebook introduces a new SDK? Yawn. Google introduces a new version of Android? Normal people don’t care. Normal people want concrete items they can go purchase. “New operating system” doesn’t have the same sex appeal as “the new iPhone” or “the Apple watch.”

If you look closely though, there are some very clear reasons normal people are so happy with their Apple hardware, and they’re all enabled by the small, continuous updates that Apple makes to its OS (notice that I specifically don’t say services — cloud is a weakness as explained extremely well here). There’s no doubt that Apple makes some of the best hardware — but other phone makers have done well at that (HTC & Motorola) without much market success because of the lack of tightly coupled software.

The end result is that you get new value out of your old product. My parents will get the benefits of iOS without buying a single thing or understanding the underpinnings of an entire OS upgrade. That dumb planned obsolescence story that came out regarding Apple? Moronic. iOS 8 will still support the iPhone 4S. Yes. The 4S. The one released in 2011. As nice as the iPhone 6 looks to me (it looks very nice), I’m stuck under contract like most people in the US. Therefore, I am bound to AT&T’s wonderful upgrade policies.

Keeping the customer happy by centrally upgrading their OS is key to the Apple experience. Android phones degrade in experience over time and very rarely get OS updates. Hence why Android phones typically compete based on price (aka are cheap) and manufacturers like Samsung and Motorola are getting painfully squeezed out of the high end. Why would anyone pay $199 for a Galaxy next to a nice iPhone 6? For the gimmicky edge display on the Galaxy Note? Good one.

Apple can tightly control all the features and seamlessly integrate; other companies simply can’t. Look at Watch control of AppleTV. AirPlay, HomeKit, HealthKit, WatchKit, etc etc. As you add more Apple products you extend the value of your existing ones. Google is trying to match this with Chromecast and its various Android initiatives (Wear, Auto, etc), but its much tougher when you don’t control the hardware. Your Apple laptop will instantly become more powerful because of Continuity built into Yosemite & iOS 8… With the total bill for all those upgrades coming to $0. Throw in iCloud Drive, or Family Sharing, or any of the other features I left out, and your existing hardware grows more valuable for the low, low price of free. Apple can do this because their business model is primarily driven by hardware margins. They don’t need to sell you ads or sell your personal information. Therefore you get the latest and greatest for free, keeping you happy with your Apple product, and more than likely sending you right back when the time comes for a new phone.

Even deeper under the hood are features that end users don’t even know exist — Extensions being but one example. The “share sheet” that is seen in many apps is about to be extended greatly in iOS 8, meaning you can share to apps other than Mail, Messages, and Twitter. Imagine replacing passwords with TouchID. I for one can’t wait to log into Mint with my thumb and replace my highly insecure 4 digit passcode. Nerds may fawn over these upgrades but these are tough if not impossible things to explain to normal people; the iOS 8 page on Apple’s site lists “design” (whatever that means) as a “What’s New” feature of iOS 8. These things just work like they’re supposed to, and get out of the way of users. Your normal user just got added features without really doing anything.

Overall, Apple is in an extremely high margin business of selling a tightly coupled ecosystem. The “halo effect” that emerged around the time of the iPod has truly started to be driven by the iOS led Apple ecosystem. There is no surprise that Mac sales are growing even as the PC market shrinks quarter after quarter. Everything from thermostats, door locks, lights, cars are all beginning to hook into the ecosystem. Add the Watch and you start to see the vision that Tim Cook’s Apple is picturing. Steve Jobs may have pushed for the “digital hub” of the iMac & iLife, but the “personal hub” of your entire life is in your pocket — one being driven by iOS and its yearly upgrades.