Sunday, May 22, 2016

"Asking the right questions on Apple" (the risk of becoming Blackberry) AAPL

Following up on last week's "Apple, Inc: What Is Buffett Buying? (AAPL)" which looked at one set of Apple's problems, here are a couple more.

From Digitopoly:
Marco Arment had an interesting post yesterday on whether Apple is in trouble because of the investments of others, particularly, Google, in AI. He wondered if it would be disrupted in the same way BlackBerry was but Apple itself.
Amazon, Facebook, and Google — especially Google — have all invested heavily in big-data web services and AI for many years, prioritizing them highly, iterating and advancing them constantly, accumulating relevant data, developing effective algorithms, and attracting, developing, and retaining tons of specialized talent.
Saying Apple is “bad at services” in general isn’t accurate — they’re very good at services that move data around in relatively straightforward ways at a very large scale, such as iMessage, push notifications, and the majority of iCloud.
Where Apple suffers is big-data services and AI, such as search, relevance, classification, and complex natural-language queries.1 Apple can do rudimentary versions of all of those, but their competitors — again, especially Google — are far ahead of them, and the gap is only widening.
And Apple is showing worryingly few signs of meaningful improvement or investment in these areas.
Arment identifies AI as a potentially disruptive event. It is what is termed in The Disruption Dilemma as an architectural innovation. AI doesn’t develop the material for search or a different user interface but it changes how all of that stuff is put together in order to be useful for something.

Take Google’s announced Assistant. It leverages what Google already has with regard to its database of information on the web and takes advantage of its expertise in natural language processing to come up with a distinct way of getting information that is different from just querying Google as we do today. That at least is the promise: being able to have a conversation with a knowledgable but artificial thing and find out information.

Of course, we have been here before. In 2011, Apple integrated Siri into its iOS devices (but notably not its computers, not yet anyway). It was conversational. It had natural language processing. But its focus was inward on device control and on the user. It has the same elements as what Google, Facebook and others are doing but it is not the same.

Arment is correct then to focus on this divergence as a big deal. Either Google is right or it is not. The right question to ask is: if it is right, then can Apple survive it?
But if Google’s right, there’s no quick fix. It won’t be enough to buy Siri’s creators again or partner with Yelp for another few years. If Apple needs strong AI and big-data services in the next decade to remain competitive, they need to have already been developing that talent and those assets, in-house, extensively, for years. They need to be a big-data-services company. Their big-data AI services need to be far better, smarter, and more reliable than they are....