You might think McDonalds is a fast food chain, but you would be surprised to know that they can be better described as a real-estate company that sells burgers. Businesses always try to leverage their strongest assets and focus on things that would increase their profitability.
Xiaomi has been one of the biggest competitors in the smartphone space, they have shipped hundreds of millions of devices by now, but senior executives still address the company as an “Internet Company“. This is probably something that dictates their internal policies and goals, as they are aggressively expanding to add different products to their ecosystem. Xiaomi offers these products at cut-throat prices as revenue from hardware sales isn’t part of their end game. They clearly plan to offer consumers a wholesome ecosystem and charge them for services later down the road.
This isn’t a new revenue model as several companies including Amazon work on similar ideology. This is where Apple can take lessons from smaller companies and plan for the future. A recent report from Bloomberg reiterates this point as their revenue forecasts are clearly slowing down.
Smartphone technology is getting cheaper and better, so Apple might not get away with increasing prices every year. They have to shift to their focus to improve profitability from existing services. An interesting article from Slashdot states something similar, they take data from Goldman Sachs and show how underutilized services from Apple are. According to estimations from Goldman, only 10% of its users pay for iCloud while Apple Music had only 35 million subscribers last year, in comparison Spotify had 83 million paying customers during the same period.
Apple already has a well-established ecosystem but the underwhelming performance from their services shows a clear lack of focus from the company. Services like iCloud shouldn’t be tied down to the Apple ecosystem, but they should offered on more platforms. Goldman recommends Apple should bundle their services in something similar to an Amazon Prime package and charge an upfront amount. This can be a great approach, as users subscribing for only a few services might feel compelled to try the rest. Services like Apple Music also need constant work, so that they can match their competitors in functionality and quality.
They depend too much on their iPhone sales for revenue generation, but if some of their services become more profitable, they can take risks and consequently innovate better. Apple has taken some bold steps to bolster their services, even going as far as releasing Apple music on Android, but knowing their predicament they can do way better.