It's 2019 and tech innovation is dead... because Apple killed it

Winter has arrived for big tech, which has been smothering innovation to stay ahead.

Apple has jumped the shark. That was the last line from my article way back in November 2018, when I wrote that we'd hit peak Apple.  

So imagine my lack of surprise when Apple dropped its revenue expectations by nearly 8% to $84bn (£67bn) from its prediction of Christmas sales in November and, astonishingly, the stock dropped 10% until trading in Apple stock was halted.

The reason? China. Lacklustre sales in the Far East coupled with Trump’s trade war with China put the mockers on sales, Apple chief executive Tim Cook said.

What difference does it make if one of the world’s most successful companies – valued at $1tn last year – misses expectations on first-quarter results by a few millions? So what if Apple’s stock drops 10% in a day? These guys are minted. 

Unfortunately, most industry analysts agree: this is very bad news indeed.  

If Apple sneezes, big tech catches a cold. And this week, winter has arrived for big tech.

Apple may be blaming China for its sales slump, and that is certainly a factor, but the truth is more banal. As The Wall Street Journal reported, the iPhone XR, the lowest-priced model among the three new phones Apple introduced last year, went on sale for $945. A competing model from Huawei that also launched last year, the Mate 20, retailed at half that.

Even Apple nerds agree that there is really no reason to upgrade your smartphone when a new iPhone looks and works pretty much the same as the old one.

Apple has ceased to innovate and sales are dropping as an inevitable result. As I said in the piece last year, Cook is a heroic optimiser – but an innovator? He’s no Steve Jobs.

The only way out for Apple – and, by implication, big tech – is full-blooded innovation. Incremental changes, tweaks or (God help me) electric scooters just aren't going to float an economy. 

The trouble is that there’s a new problem – and it’s structural. Big companies including Apple are not just ceasing to innovate, they are a block to innovation by anybody else.

The economic growth areas in tech right now are arguably cloud, mobile, hardware and social. But if you want to launch a business in these spaces, you will struggle to get funding. 

Launch an ecommerce company and go up against Amazon? Are you kidding? You don’t stand a chance. Just ask UK online retailer Asos, whose stocks slumped 40% in December.

Fancy a new music-streaming service? Fight Apple Music, already pre-installed on one billion iOS devices? No-one will invest in that. 

So new ideas are being smothered at birth by the big four: Amazon, Apple, Facebook and Google. And this is not merely a function of their size and market dominance. These highly competitive companies are systematically suffocating rivals to retain their pre-eminent position. 

Two quarters ago, Apple Music services started growing faster in the US than Spotify, because Apple Music is preloaded on iPhones. Meanwhile, Apple has been able to charge Spotify a 30% tax to be on the App Store and was slow to get Spotify the tools it needed for updating to the App Store operating system. 

It’s hardly a secret that Google buys rivals up before they reach the size threshold to come under European Union rules for monopolies and mergers.

And everyone knows that Amazon is so powerful that it can drive down prices in any market by just suggesting it will enter it.

The big four have been described as "big trucks taking up both lanes of the highway". No-one can get round them. No wonder there were twice as many new businesses being started in the US during the Jimmy Carter administration of the 1970s (the 1970s!) than there are now.

In 2019, innovation is dead and Apple and the other tech giants are to blame. It’s bad news for brands and bad news for the world. 

So where can we look for innovation in 2019? If I was a betting man, I’d put my money on Apple’s nemesis. Not another tech firm. A country: China.

Have a great 2019 – or according to Google Translate:

Andy Pemberton is director at Furthr

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