How Apple will become a $1 trillion business through innovation

It’s only a matter of time

In its most recent quarter, Apple made a profit of $18 billion. The only other occasions in history when companies have ever made more than $15 billion in quarterly profits were in 2011, when Gazprom made $16.24 billion; 2012, when Exxon Mobil made $15.9 billion; and 2008, when Royal Dutch Shell made a profit of $15.68 billion.

So Apple trounced the record. The profit came on the back of sales of 74.5 million iPhones, which itself was helped by recent product launches, including the rather big iPhone 6.

I say it is the biggest profit ever, but in fairness no one has tried to compare profits in the past and adjust them for inflation. Back in 2005, Exxon Mobil made a profit of $10.71 billion, but I don’t have any data going back before that.

The thing I find fascinating about Apple is that it was on its knees not so long ago. Back in the late 1990s, it seemed like yesterday’s company, living off former glories. In 1997, it even needed to secure help from the enemy – Microsoft – in order to survive. That year also marked the return of Steve Jobs after a decade or so in the wilderness; a period when, among other things, he set up Pixar, the company behind Toy Story, which was released before Jobs re-joined Apple.

While sales of the iPhone were no less than 74.5 million in the last quarter alone, I find it equally fascinating that not so long ago, before there was WiFi and 3G, there was no point in an iPhone.

When Apple launched the iPhone, there was no shortage of cynics. What’s the point they said? As this article  argued back in 2007: “The iPhone is nothing more than a luxury bauble that will appeal to a few gadget freaks. In terms of its impact on the industry, the iPhone is less relevant.”

The point is that those words were written before sufficient time had elapsed from the common availability of WiFi, for the implications to be fully appreciated.

There was similar cynicism – this time from the end user – when 4G was launched. Survey after survey revealed that customers didn’t want it. What the end users didn’t appreciate is that applications making use of 4G would go onto the markets, and at that point there would be all sorts of new reasons to want it.

Henry Ford supposedly said: “If you ask people what they want, they would say faster horses.” There is a question mark over whether Ford really did say that, but what is not in doubt is that Steve Jobs loved that quote.

The received wisdom before the launch of the iPhone was that no one wanted a touch screen phone. During this pre-iPhone era, I had dabbled with a touch screen mobile, it was called an XDA, and I used to say it was the worst mobile phone I had ever had. When the contract for this phone came to an end, it was a massive relief.  No one wanted a touch screen phone, because they weren’t very good until the Apple introduced the iPhone.

It is said that Jobs and his designer extraordinaire Jonathan Ive spent ages discussing the iPhone, at one point nearly ditching the idea as they couldn’t get it quite right.

But I think these words, written by John Scully (that’s the man who Jobs hired to run Apple, only for there to be a massive fall-out between the two, ultimately leading to Jobs being fired from the company he founded), says it best of all.

In an interview with Cult of the Mac, Scully said: “It’s hard to conceive how he [Steve Jobs] was able to accomplish so much with so little in those days. So for someone to build consumer products in the 1980s beyond what we did with the first Mac was literally impossible. In the 1990s with Moore’s Law and other things, the homogenization of technology, it became possible to begin to see what consumer products would look like but you couldn’t really build them. It really hasn’t been until the turn of the century that you sort of got the crossover between the cost of components, the commoditization and the miniaturization that you need for consumer products. The performance suddenly reached the point where you could actually build things that we can call digital consumer products”

Apple, pioneer though it was, needed technology to be at a certain level, before its ideas could be applied. The product that marked the beginning of Apple’s rise was the iPod. But the iPod would have been a technical impossibility a few years earlier.

Apple’s critics say it has not done anything truly innovative since the iPad. But that is not because Apple has lost its innovative edge; it is simply because technology has not yet advanced to the extent that makes the next generation of ‘wow’ products possible.

But wearable technology – whether it be wristwatches, bracelets or glasses – is going to be big. Whether it is designed to help monitor your sleep or fitness training; whether it monitors your health, providing disease diagnosis an order of magnitude more effective than anything seen before; or whether it be technology for providing us with data and images in real time wherever we need it – for example, in translating spoken foreign languages, or while out shopping – wearable technology will change the world.

The riches that result will dwarf the money made by Apple to date. And Apple is likely to be a pioneer in this brave new world.

It is only a matter of time before it is worth $1 trillion.