Ideas

Allen Adamson

Co-Founder

Why Apple's Shift From Hardware To Hollywood Is Critical -- And 4 Reasons It Will Likely Succeed

You don’t have to be a business guru to know that Apple’s current business model, selling hardware - phones, tablets, watches and computers – is unlikely to garner as much success in the next few years as it has in the past few years.

It’s not so much that Apple's competitors are catching up to them in the shiny, new gadget arena, but that the gap between the latest iPhone and the previous one is diminishing. Apple has been so good at making incredibly good products for so long that most of its customers around the world are happy enough with what they have, be it an iPhone, an iPad or MacBook.

That Apple helped reinforce its hardware success story when it launched the app industry a decade ago only adds to its current strategic conundrum: How to shift ahead of a fast-evolving industry and hang on to its powerful leadership position.

 

On Monday, at its headquarters in Cupertino, California, Apple’s Chief Executive, Tim Cook, unveiled its plans for just such a strategic shift. In a presentation more evocative of Hollywood than Silicon Valley, Cook signaled that Apple’s next category game-changer would be a suite of entertainment, financial and news services created to take the company not just above and beyond its iconic hardware, but above and beyond competitors in the entertainment industry.

Will it succeed in this shift from hardware to Hollywood? As someone who has researched and written about how organizations can – or can’t - shift ahead to stay relevant, my belief is that Apple will likely succeed in its new initiative for four key reasons.

It was almost 20 years ago that the Aflac duck appeared on the scene in his first commercial “Park Bench.” Since then, the Aflac duck has become an international advertising icon. One of the industry’s biggest success stories, the Aflac name is recognized by 93% of American consumers. The American Family Life Assurance Company used a brilliant tactical branding signal – a mnemonic device – to help build awareness of not just its name, but to differentiate itself within the insurance category. Over the years the Aflac duck has made loud and clear that the company provides financial assistance to families when a medical situation occurs.

First of all, the timing is right. Most organizations don’t consider a shift until it’s way too late. Revenues have been down for far too long. Coffers are drying up. Business is under severe pressure. In addition to this, the organization is losing its best people to more exciting players on the scene. The brightest stars are jumping ship. A successful shift ahead requires lots of resources, both money-wise and talent-wise. Apple has both. It has already used a $1 billion budget to buy dozens of original TV shows and, in addition to its super in-house talent, it has cut deals with Hollywood stars including actors Reese Witherspoon, Octavia Spencer and Jennifer Aniston, and directors Steven Spielberg and J.J. Abrams. That it is still in a very powerful position, operating from strength, bodes well for its future plans.

The second reason I believe Apple will be successful in its shift ahead is that it has the right corporate culture. It is, by nature, an intensely creatively-driven organization. Often, when companies try to shift ahead, no matter how good the new strategy might be, they don’t have the right DNA to nurture it and make it work. Apple thrives on creative enterprise. This not only differentiates it within the technology space, but gives it an incredible launching pad to enable it to succeed in the category of content creation. Even Amazon, with all its resources is, in general, getting burned in Hollywood because its culture is based on figuring out how to sell things for less and moving fast to do so. Unlike Apple’s, this is not the DNA best suited to a Hollywood success story.

And, the third reason Apple will likely succeed in its strategy shift? It has the ability to execute brilliantly. Apple has a widely acknowledged and admired history of doing things extraordinarily well, from product design, to package design, to retail design. To put it simply, Apple knows how to deliver the goods exquisitely, and at great scale. In a world crowded with content, only the best can – and will – break through. My belief is that Apple has what it takes to successfully break through, not just in content creation, but in content distribution.

Which brings me to my final reason. Apple already owns the pipelines. All those billions of Apple devices in people's possession are going to provide even more value – to consumers and to Apple. Unlike Comcast or Verizon, Apple does not have to build an infrastructure for its new services, be it Apple News+, its videogames, its original programming. Apple’s reach is simply amazing. As Oprah Winfrey, serving as the closer for the two-hour “shift ahead” event at the Steve Jobs Theater on Apple’s campus exclaimed to the audience, “They’re in a billion pockets, y’all. A billion pockets.”

There is no doubt that Apple is entering a highly competitive environment after years of being king of the hill in another competitive environment. Can the organization succeed in its categorical shift ahead? My bet is yes. Apple has money on its side. It has talent and a creative culture on its side. And it has a distribution system on its side. My belief is that leveraging all of the above will enable it to take on and succeed at this ambitious pivot. My belief is that Apple had – and still has – the magic to be a game-changer, hardware to Hollywood no exception.

This article originally appeared in Forbes.

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