Using Evolution to Understand Apple’s Business Model

The technology super star Apple continues to release revenue reports that are, for lack of a better term, amazing. Compared to competing companies, they routinely blow everybody else out of the water.How is this the case? There tends to be two main explanations put forth by Apple’s critics and commentators.First, Apple rakes in a constant flow of money because of the “Cult of Mac”. In other words, their dedicated base of fanboys and fangirls buy up every Apple product, no matter what. This explanation is too simplistic, though. It can’t possibly explain more than a fraction of their revenues. The average Apple product owner isn’t rushing out to buy every new incarnation of the Macbook or iPhone. They wait a few years, decide to purchase the new model, and then they tend to pass on the old piece of tech to others.Apple’s own planned obsolescence schedule anticipates that their products will retain utility for their customers longer than the competitor’s equivalent. Your Macbook’s hardware will last anywhere from 3-5 years (depending on usage) and in the meantime Apple makes sure that its software updates remain compatible.Now, it’s possible that there’s positive spillover from the free advertising and hype created by Apple fanatics. They convince their friends and family to try out and buy gadgets that might otherwise not be of interest to them. However, the abrasiveness associated with Apple fanboys and fangirls tends to make them the butt of many tech jokes and may even be harming Apple’s image. The bad reputation associated with these fanatics is likely causing negative spillover, which harms revenue.Second, the careful, clean design of Apple’s products enchant people. Customers routinely sacrifice hard-earned dollars for something beautiful––not because it’s functional or a big improvement, but because it looks nice. But the primacy of design isn’t the case either. Industrial designer Don Lehman writes, “Apple does not design for aesthetics.” Of course, their well-known attention to design is surely a contributing factor to their sales and to drawing in new customers. But I don’t think it’s the main factor that keeps their revenues high and consistent. Other companies also focus on using beautiful design; Apple is not alone in this.All we really must do to confirm this point is practice a little casual observation. For example, later this year the iPhone will enter its fifth generation. Since it was introduced there have only been relatively small design changes. The overall aesthetic has not experienced any big shifts. Each year minor tweaks are made, a few features are added, and slight redesigns are implemented.No reasonable person would shell out money for something that’s only a little more functional or aesthetically pleasing than what I already own, and Apple doesn’t expect you to. As Glenn Fleishman, an editor at TidBITS, puts it: “Apple isn’t selling the third-generation iPad to those who bought an iPad 2. Rather, Apple is targeting both new customers and owners of the first-generation iPad.”So the question remains, what is Apple doing that’s so different from its competitors? To be sure, they put out some awesome technology, but once again, so do other companies. I think the key to understanding Apple’s success is in looking at the similarities between their business model and evolutionary principles, specifically those of what’s called punctuated equilibrium. This theory predicts that most species experience long periods of very slow, gradual change called a stasis, while major changes are rare and sudden.When Apple puts out a new product, like the iPhone or Macbook Air, they start pretty basic. They get a feel for the environment, gauge how people react to the new thing, and the next year (or generation) they make a few changes. But these changes are designed to help the product adapt and survive to its environment.John Gruber at Macworld states that Apple practices a “slow and steady process of continuous iterative improvement––so slow, in fact, that the process is easy to overlook if you’re observing it in real time. Only in hindsight is it obvious just how remarkable Apple’s platform development process is.” Evolution in the natural world takes massive amounts of time. Similarly, in the tech world, Apple’s application of change occurs at the relative equivalence of a snail’s pace.However, every so often Apple releases a revolutionary product. This is consistent with the punctuated equilibrium’s predicted events of rare, but sudden large changes––albeit carefully researched and planned changes on Apple's part. They then start the process over by implementing small changes from generation to generation.Unlike companies such as Facebook––who’s motto is “Move Fast and Break Things”–– Apple isn’t trying to introduce shocking disruptions to the tech world every year. Instead, they are trying to slowly improve on a technology so that it becomes the most well adapted object for its environment.I see evolutionary principles as a useful tool for looking at Apple's successful process. To be sure, there are technical differences between this process and “true evolution.” But at the same time, some evolutionary knowledge goes a long way in understanding their approach.Jathan Sadowski is a Research Technician in the Global Institute of Sustainability at Arizona State University. Follow him on Twitter @jathansadowski