Nuggies 02 - Apple Could be Launching Smart Glasses in the Next Year
New products in Apple's flywheel will help grow sales at an already massive company.
Tuesday, June 2, 2020
Apple is working on wearable glasses with an augmented reality display on the actual lenses, according to Apple Insider. The device is rumored to be called “Apple Glass” and could hit shelves as early as 2021 for $500.
Source: Apple Insider
Why it Matters
Just like the iPhone created a new wave of technology that impacts our lives, Apple Glass could be next. The iPhone fundamentally changed how we communicate, how we wait in line, how we pay for things, and more. The same could happen with Apple Glass.
But not all the profit is exclusive to Apple. Just like the App Store, Glass will likely allow third parties to create new services and products to take advantage of the new platform.
How it Fits Apple’s Strategy
The iPhone makes up over half of Apple’s sales but its growth is slowing. Most of Apple’s growth has come from services- like Apple Music and iCloud- and wearables- like Apple Watch and AirPods. Just like AirPods, Glass will rely on the iPhone for storing content and computing power.
Apple Revenue By Segment - the iPhone makes up over half of all Apple’s sales but wearables (Apple Watch, AirPods) and services (Apple Music, iCloud) are driving growth.
Source: 2019 Apple Annual Report
Imagining the iPhone as a central hub for all of your devices isn’t anything new— not even for Apple. Before the iPhone, the Mac was meant to be a central hub to hold all your pictures, movies, music, and more. Back then, Apple’s growth was coming from a new product called the iPod. Apple realized the hub strategy meant that new iPod sales would drive Mac sales and Mac sales would drive more iPod sales. And just like that, Apple’s revenue flywheel was born.
But it also means increased switching costs for consumers. So if you ever think about switching from an iPhone, you would also need to get a new pair of glasses, watch, headphones, credit card, and streaming service. All that and you’d also be that kid that makes the bubbles green.
The flywheel strategy works because Apple creates an end-to-end experience of products and services that’s hard to escape. Leadership at Apple hopes the iPhone can be the key driver in its flywheel and that products like Glass can deliver growth.
The Happiest Flywheel on Earth
Flywheels aren’t unique to Apple. For a definition, a flywheel is a set of reinforcing business activities that takes a lot of effort to get going but is incredibly hard to stop when it’s moving. They’re in some of the largest businesses in the world— including the Happiest Place on Earth.
Disney’s flywheel starts by producing awesome original content and intellectual property: Mickey, Minnie, Anna, Elsa, Buzz, Woody, and more. Disney not only makes money by selling movie tickets, but also through their theme parks and consumer products. Blockbuster movies and new characters boost demand for theme parks and consumer products, and demand for parks and consumer products boosts demand for new movies.
For a timeless illustration, check out Walt Disney’s 1957 illustration of Disney’s flywheel below. With the exception of Disney+ and ESPN, it still describes the business today.
Source: Kottke.org via Acquired.fm
Or put another way, Derek Thompson describes the Disney flywheel in his book Hit Makers:
“One might cynically say Disney’s movies are proofs of concept for TV shows, which are advertisements for its theme park, which serves as a loss leader for capturing merchandising sales. But really, there is no unidirectional line of commercialization. Disney’s empire is an ouroboros, an infinite nostalgia loop is which everything is selling everything else.”
Thank you for reading! Nuggies is created by Thomas Pero and Spencer Koehl, two undergraduate students at the University of Notre Dame.
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