Newness, Timing, and Market Entry Strategy

What Apple’s HomePod and ARKit teach us about iterative product development

Apple’s yearly WWDC is usually a pretty big deal. Of course, absent the much anticipated later held iPhone launch, WWDC gives us a lens into what Apple’s strategic priorities are. As a developer conference, WWDC demonstrates to the world the direction the company wants to herd its enormous base of dedicated developers.

There is much to be made of the discourse surrounding Apple these days, particularly those pointing to its apparent and inevitable demise. The assertions raised primarily focus on Apple’s lagging in the technical competencies of the fourth industrial revolution, particularly AI, machine learning, and cognitive intelligence. That Google’s Assistant runs laps around Siri is seldom questioned, and to say that Apple’s HomePod speaker/home assistant — coming in December this year — is late to market would be a vast understatement. Amazon’s Echo home device will be three years of age by then, an eternity in the tech world.

There are also questions raised around the efficacy of Apple’s vertical business model and unshakeable stance on user privacy, especially in a world where data gathering — often cross-platform — is necessary for the training of machine learning engines and consequently the development of superior services. As I alluded to in my story describing the ‘leeching’ phenomenon, firms that deliver cross-platform services, appear at least in theory to be structurally in better shape to take advantage of the latest technology paradigms than vertical firms with siloed ecosystems such as Apple. The most dire scenario for Apple then is that its business model renders it anatomically incapable of even competing in machine learning and artificial intelligence, and the firm gets relegated to merely a hardware (and OS) springboard for over-the-top services such as Google’s and Facebook’s.

However, one thing that is often left out of the conversation is the health of Apple’s developer ecosystem and of course its valuable and loyal user base. In tandem, these forces should prove a tougher wall to topple than the nature of its business model.

Through the years, Apple has mastered the art of market entry. We talk a lot about timing as a success factor in market entry. Discourse around failed startups and technology products often identify them as being either too late (Windows Phone) or too early (Google Glass). Of course, ‘too early’ is infinitely more interesting as a topic of discussion because the consequences of ‘too late’ are quite easy to understand. ‘Too late’ produces a range of bread and butter consequences such as the irreversible ceding of market share, absence of learning curve effects, or second-rate supplier relationships.

‘Too early’ is a bit different, generally the reason is that consumers habitually aren’t ready for a new paradigm or means of interaction, or the necessary ecosystem of complementary applications doesn’t yet exist. But when do we know when the right time is? And is the right time something that just happens through the passing of said time, or do trailblazers have a role in influencing when a market is ripe for a new product? And if so, how is that achieved?

Thinking about this is a fun exercise. As a teaser, had Apple not invented the iPhone would someone else have come along and done it anyway? Or would we all still be using Windows Mobile with a stylus and trying to scale down x86 applications to phones!

Evidently, market entry strategy is not just about the right timing, but how we influence market maturity by iterating on existing use cases and competitive advantages. The push towards augmented reality (AR) is particularly interesting, the launch of ARKit at WWDC solidifies Apple’s enthusiasm for the medium. Microsoft made a splash in AR with the launch of HoloLens in early 2016 by taking a vastly different approach to Apple’s. The HoloLens is undoubtedly a magnificent feat of engineering, but its market adoption remains gravely in question simply because an ecosystem of compelling use cases doesn’t yet exist. Or in the parlance of timing, HoloLens is ‘too early’, it launched before applications or needs were ready. ‘Too early’ though, is far too often a drastic oversimplification.

ARKit is Apple’s approach to augmented reality, an API framework that allows developers to easily create AR experiences for iOS devices. It is a notionally less exciting development than HoloLens, but a masterstroke. Within hours of its unveiling at WWDC, keen developers had already created a number of demos to showcase its possibilities. When iOS 11 officially launches, the platform will likely birth more augmented reality applications in a matter of weeks than HoloLens will achieve in perhaps months or years. That’s obviously credit to Apple’s enormous existing base of active iOS developers, but also its broad user base, who have suddenly been gifted with the powers of AR. With the snap of its fingers, Apple was able to transform its millions of iPhone customers, to millions of AR customers . Apple has already beaten Microsoft, despite being apparently a year late.

If word on the grapevine is to be believed, Apple is working on augmented reality eyewear of some sort, and if that launches with success in several years time, we’ll hear the chorus of ex post-facto pundits saying Apple’s timing was right, and HoloLens was ‘too early’. But it won’t be so much the right timing as much as it will be the right product at the right time, I suspect that the market will determine that AR capabilities for mobile had to come first to bridge the gap between the present (multi-touch smartphones) and the future (AR wearables).

Apple isn’t flawless in this regard but has a proven track record of learning from mistakes. The Apple Watch launched without appealing to an existing need or use case. Its enduring value proposition — novelty — was only particularly compelling to early adopters desperate to try new things. With the second iteration of the product, Apple chose to focus on health and fitness, latching onto an existing need for wrist-worn devices. Apple Watch still consists of the smartwatch functionality touted in its first generation release, but now more people have a reason to go out and buy it.

Three Levels of a Product

Anyone who’s studied strategic marketing or product strategy would be familiar with the multi-layered product concept, or ‘three levels of a product’. The diagram below is a typical example of the three product levels in use.

The premise is that all marketable products can be broken down into three distinct layers.

• Core product: the core benefit or use case.
• Actual product: the tangible and intangible feature set of a product offering.
• Augmented product: the competitive advantage or differentiation, and associated services.

In the case of the new Apple Watch, the core benefit is health and fitness tracking, the actual product consists of unique smartwatch features, and the augmented product consists of Apple’s user experience, and connected ecosystem. But the beauty of frameworks is that they’re made to be adapted. Let’s have a look at the following diagram that I’ve created, disaggregating the original iPhone into three levels.

The core product is the phone. This is interesting because the actual phone remains the least interesting and least important element of the device which was famously touted as an iPod, a phone, and a breakthrough internet communications device all at once. Today, the cellular phone is such a minor part of the actual iPhone, that you might even forgive Apple for leaving it out altogether like the headphone jack. Having said that, there’s no way the iPhone would have succeeded if it weren’t for the phone. Although the iPhone positioned itself as a revolutionary mobile computing device, the phone as the ‘core product’ latched onto an existing need. Back in 2007, phones were the only universally demanded and established use case for mobile devices.

As such, the phone acted as the pull factor, through which consumers were able to discover additional benefits of mobile devices, namely powerful internet browsing and the revolutionary app store that came after it. In the years since, the expectations have shifted. What was once the augmented product — apps and the revolutionary multi-touch UX — is now the core product, and things like AR have moved from the fringes of our imagination into the augmented layer. The nature of product development and innovation is a poetic process of the product level circles continually closing inwards. The fun part is figuring out what new things are going to occupy the outside of that circle, and how we can prepare for that.

With this in mind, the HomePod is another ingenious product. I’m more bullish than most on its prospects for when it launches at the end of this year. There’s no mistake the HomePod is late to market compared against the competitors we would likely associate with it: the Amazon Echo, Google Home, and the Sonos home speaker system. The Amazon Echo and Google Home have performed admirably but are still very much niche devices, largely because they don’t address a core product use case desired by consumers for the form factor. Typically speakers in the home are used, well, as speakers, and Apple’s decision to position that HomePod as a music device that piggybacks off AirPlay more so than a home assistant is sensible. By leveraging a clear, existing use case — quality music speakers — as the core product benefit, Apple is able to peg its Siri AI home assistant as an augmented product offering, as illustrated below.

For Amazon Echo and Google Home, AI assistants occupy the core benefit. But when this is the case, the addressable market is naturally limited to people who explicitly want a home assistant. This is a significantly smaller market than people who just want a good speaker to play music easily in their homes.

Consumer’s think from the inside out, not the outside in. The most elementary of a consumer’s need should be addressed first. The original iPhone launched with incredible functionality, but it was at its core, an exceptional phone. Amazon Echo, Google Home and Apple HomePod all perform the role of the home assistant, but as the HomePod enters the market, its framing as a mass market music speaker communicates to a lot more potential customers.