Apple CEO Tim Cook faces his biggest challenge

With a new iPhone just days away, Apple CEO Tim Cook faces his biggest challenge.

When Tim Cook stepped into those unfillable shoes left by Apple co-founder Steve Jobs, the world asked 'what happens to Apple now?'.

Five years later, as he is about to unveil Apple's next iPhone and Apple Watch, those asking the question just keep getting louder.

Cook has just been hit with a $19 billion tax bill in Ireland, iPhone sales are declining and Samsung's latest phone is getting rave reviews. In the round up of articles last week summing up Cook's five-year anniversary, a Forbes columnist stamped Cook's report card with a C.

Every year Apple has a lot riding on the reception of the iPhone but this year there is more than ever.

The simple analysis of Cook as Apple CEO in contrasting him against Jobs has always been one of direction.

Jobs was the genius who guided ideas from conception to growth. He was focused on vertical growth.

Cook seeks growth another way. He identifies new markets, he expands product lines, he ensures growth through finding new people to buy existing products. Under Cook, Apple has expanded horizontally.

Cook has proven himself as a strong leader, taking the fight to the FBI to protect privacy and, having publicly come out as gay, driven Apple's support of social causes.

Apple is a bigger company under Cook and arguably, given Cook's stated aim of wanting to "leave the world better that we found it", a better company.

Many people will tell you that Cook could not replace Jobs. Cook is one of them.

"Steve's not replaceable - by anyone," Cook recently said in a lengthy interview with The Washington Post. "I never viewed that was my role. I think it would have been a treacherous thing if I would have tried to do it".

Jobs launched the iPhone, Cook expanded into China. Jobs was an ideas man. Cook is the man who focuses on the supply chain.

While that summation is narrow and somewhat unfair, the truth is that some critics will be ready to jump on Cook next week with the barbed arrow of "Apple doesn't innovate anymore" possibly regardless of features of the new iPhone 7 and Apple Watch that are expected to be unveiled at Apple's big launch of the year in San Francisco.

Apple CEO Tim Cook. Photo / Getty Images
Apple CEO Tim Cook. Photo / Getty Images

There are several reasons why some people are predicting grim times ahead for the iPhone, which makes up more than half of Apple's sales.

Apple has reported falling sales for the iPhone, year on year, for the past two quarters.

Apple's delayed decision to enter the phablet space paid off with the launch of the iPhone 6 and 6 Plus, which was a tremendous success for Apple. But two years later, with Apple due for another major release as part of its traditional "tick tock" cycle of small step, big change cycle, it now is under pressure to repeat that success.

According to the rumours, the iPhone 7 is likely to look similar to the iPhone 6S and older iPhone 6, albeit without a headphone jack. While it will undoubtedly have key features including possibly a dual-lens camera in the bigger iPhone 7 Plus that will be a big selling point, the most likely first reaction to the physical design will be complaints by those bemoaning the loss of the headphone jack and the associated hassle of needing an adaptor to use existing headphones.

That is not to say the iPhone 7 will not appeal to Apple fans, particularly the larger iPhone 7 Plus which is expected to include a dual-lens camera. Apple bought Israeli imaging tech firm LinX last year which created multiple lens camera that was better at shooting in low light, offered the ability to select your focusing point after you took a photo, and provided optical zoom.

Adding to the pressure Apple faces next week is the recent launch of the Samsung Note 7, a flagship phone that is waterproof and has an iris scanner for security that got rave reviews before the news broke of exploding batteries that has been a major blow for the South Korean technology giant. Despite Samsung being forced into damage control, even if Apple finally releases an iPhone with a proper waterproof rating, it will be hard to sell that as anything more than playing catch-up to Samsung.

There is even some technology pundits predicting that many people will delay their iPhone upgrade until next year, when Apple could unveil a more significant upgrade to mark the 10th anniversary of the iPhone.

Whatever new features are on offer with a new iPhone and Watch, Apple's biggest challenge is not in refining old products but in creating new ones.

In the five years since Cook took the helm, Apple has released just one new product line: the Apple Watch. Apple has not released sales figures but it's believed that it has sold 15 million units in its first year, which makes the Watch a good business but not a huge one.

Jackdaw Research analyst Jan Dawson, a leading Apple analyst, calls the Apple Watch "a modest success in Apple terms and a smash hit in the context of the market into which it was launched".

Apple is expected to unveil the second-generation Watch next week, with key features likely to be a sports model that is waterproof and has built-in GPS, two missing features that have reduced the Watch's functionality as a true sports watch despite the massive effort Apple has spent in building up a database of 30,000 hours exploring what happens to the human body during exercise and how to best measure that.

And whether you are looking at the first five years of Apple under Cook or answering that question of "what happens to Apple now", research is the key point with both.

The idea that Cook cannot guide Apple to great new things ignores the evidence of the bottom line: under Cook, Apple has doubled, as a percentage of revenue, the amount of money its spends on researching and developing new products.

"I have no doubt that Apple is spending enormous amounts of money on developing products and services we haven't seen yet," Dawson says.

"That almost certainly includes an entry in the car market, but it might well also include products in the virtual and augmented reality field, additional wearables, and who knows what else.

"Unless something happens to Tim Cook over the next few years, I'd absolutely expect him to be the CEO that announces several new products that dramatically expand the scope of Apple's business and provide a foundation for Apple's long-term future."

Looking beyond next week's launch and towards the next five years, the key focus areas for Apple will be in fitness and health, artificial intelligence, augmented reality, entertainment through Apple Music and Apple TV and, if the rumours are true, an Apple car.

There is a lot riding on Apple's launch of a new iPhone next week. But instead of what happens now, the real question is what happens next.


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