Hardware + Services (Premium)

Microsoft once referred to its shift to the cloud as software + services, but Apple is undergoing a similar strategy shift today. Perhaps we might refer to it as hardware + services.

As I’m sure you know, Apple held its annual September event yesterday and there were no real surprises: it announced the iPhone 15 family of smartphones, Apple Watch Series 9, and Apple Watch Ultra 2. There are many ways to view this event, with critics pointing out Apple’s ongoing creeping evolution in place of real innovation, while fans will simply appreciate the upgrades, especially if their devices are three years old or older.

But maybe there is a different way to view this event and its announcement. Or, different ways. After all, Apple is a unique company, and it's interesting watching it adapt to the world it created with the iPhone. That is, now that the iPhone is both dominant and mature, Apple has had to find new ways to grow. And so it has changed, and fairly dramatically, since the first iPhone launch in 2007.

So let’s jump in.

With rare exceptions, Apple has launched new iPhones alongside other new products at a special event each September dating back to 2012 and the iPhone 5. But thanks to the sheer popularity of the iPhone and lengthening upgrade cycles, Apple has sought new avenues for growth via new hardware models and an impressively potent services push. And in recent years, this September event has changed quite a bit too, reflecting the strategic changes at Apple.

Apple's mix of hardware and services used to be so much simpler. But it has expanded in each area greatly over time, building a cohesive and exhaustive ecosystem that is as lucrative for Apple as it is useful to its customers. Indeed, Apple is today the world's largest company, with a market capitalization of $2.76 trillion at the time of this writing. Clearly, its leadership has made some good decisions.

To understand how much things have changed, consider the Apple of 20 and 10 years ago. At the close of its fiscal year in October 2003, Apple reported annual revenues of $6.2 billion and the Mac was its biggest business, followed by the iPod. But by the close of fiscal 2013, in October 2013, Apple was a much different company: co-founder Steve Jobs had passed, and though the company was selling roughly five times as many Macs as it had a decade prior, the Mac was just its third-largest business in 2013, and well behind iPhone and iPad, two products that didn't even exist in 2003.

Ah, the iPhone.

Most people here have at least a rough understanding of the iPhone's trajectory, and its impact on the personal computing industry and outsized influence. But more interesting to me, perhaps, is how the iPhone evolved over time. Since the first version, Apple has routinely been slow to adopt modern technologies, including 3G, phablet form factors, and USB-C, but it has also shown a kind of maturity in its plodding, methodical update cadence, experimenting...