Think Different: Apple’s 10 Biggest, Riskiest Bets

Even the most vociferous Apple haters can surely admit that Apple — judged upon the evidence of its record-breaking quarterly profit of US$18 billion, the most of any public held company ever — is not only firing on all cylinders but also creating products that consumers around the world are willing to pay a premium for.

Apple sold an astounding 74.5 million iPhones last quarter. It sold 5.5 million Macs — a number that is on the rise, while other PCs have fallen. Plus, the company sold 21.4 million iPads — a product that’s basically just a refinement of its previous-generation iPad.

The question is why? The sheer scope of Apple’s success is mind-boggling. Certainly there are many reasons Apple’s products are selling, and many reasons Apple is able to build and ship products with enviable profit margins.

An Apple fan can argue that Apple’s products boast build qualities that are second-to-none and that they are the “best overall” product in most every category. However, that’s not necessarily always true. Other manufacturers are building devices that rival Apple’s, sometimes offering more features or better screens in smaller dimensions at lower prices.

As I see it, there are more ways Apple runs its business differently — or simply better than most other tech companies — than anyone outside of Apple’s executive ranks can know.

The following are 10 crazy-risky, possibly genius decisions that seem to be paying off for Apple.

1. Apple Built Brick-and-Mortar Retail Stores (2001)

Instead of focusing on online sales — even though in 1997, Steve Jobs reportedly said Apple’s online store generated $12 million in sales in the first month — and instead of focusing on expanding partnerships with big box retailers, Apple built its own retail stores.

Apple spent lavishly to create an upscale experience — designing open, airy showcase environments for Apple products. At the time, retail experts predicted they would fail. Plus, Apple did something unheard of in the world of electronics: Apple displayed working models of its iPods and Macs, letting consumers touch and hold the relatively expensive products. Back in the day, other competitors used cardboard cutouts or plastic product replicas.

Now, in 2015? Apple Retail Stores are insanely popular around the world, generating some of the highest revenue per foot for retail environments in the U.S.

2. Apple Put a Touchscreen on the First iPhone (2007)

While BlackBerry was all the rage with a fan base of addicted users who loved pushing the buttons on their “CrackBerry” handsets — Apple announced the first iPhone without a physical keyboard, favoring instead a touchscreen.

While iPhone had a lot of cool new tech, the touchscreen was a risky move. It seems obvious seven years later, but at the time, people loved physical buttons.

3. Apple Did Not Make a Cheap Netbook (2008-2009)

Remember when netbooks were all the rage? They were small, cheap laptops with small screens and small keyboards, and they were super portable. In fact, some intrepid tech tinkerers managed to hack some of them to run Mac OS X.

Around 2008 and 2009, netbooks represented one of the fastest-growing PC segments. Instead of a cheap netbook selling for a few hundred dollars, Apple introduced the MacBook Air in 2008 — with a price tag of $1,799!

The MacBook Air went on to become one of the most popular laptops ever created, setting the standard for general-purpose laptops, all the while helping Apple grow Mac sales while other PC sales were constricting.

In 2008, Apple had all the tools it needed to produce a cheap netbook — and did not. In fact, even a year later, tech enthusiasts not only wanted Apple to produce a netbook, but also seemed to believe that it should do so immediately, before it loses ground.”

4. Apple Introduced a ‘Draconian’ App Store with Rules (2008)

When Apple introduced its App Store, it was an innovative new way to easily deliver apps to customers’ iPhones — better still, it let developers build apps to sell to Apple iPhone owners. So far, so good. The bad? The risky decisions? Apple would approve each and every app through a murky, hard- to-understand process that turned Apple into a censor of good taste and righteousness — no porn, no bikinis, no apps with bugs or apps that might be confused with other apps.

Some developers toiled for months to create their work of art only to have it rejected by Apple for vague reasons. Meanwhile, Apple would take a 30 percent cut of the sales from the revenue generated by apps sold in its App Store — 30-freaking-percent! Apple faced intense pressure to “open up” its App Store and relax the rules and lengthy approval process that left even big-name developers fraught with apprehension after submitting their apps for Apple’s approval.

When Google’s Android hit the world, it was going to be so much better, so much more open, such an amazing boon to freedom and innovative apps. And it sort of was. Yet Android was plagued by malware and is saddled by apps of generally lesser quality than those created for iOS.

The result of Apple’s App Store stand with developers? The apps tend to be more polished than those designed for other platforms. Developers tend to develop for iOS first, then sometime later create versions for Android or Windows. And the money? Developers earned a cumulative $10 billion in 2014 alone.

5. Although Competitors’ Tablets Failed, Apple Created the iPad (2010)

When Apple first announced the iPad in 2010, even Mac-loving, iPhone-toting Apple fans weren’t sure what to make of it. The iPad had a funny name reminiscent of feminine hygiene products and it didn’t seem ready for work like a laptop or even a netbook. It didn’t even come with a stylus.

It’s hard to remember now, but the initial reaction to the iPad wasn’t nearly as positive as you might imagine. In fact, Steve Jobs later told Walter Isaacson that the immediate media backlash against the iPad left him depressed.

Apple could have delivered what consumers seemed to want at the time — a cheaper, smaller laptop. Instead, it created a device that was bigger than an iPhone but lacked all the features of an iPhone, while offering a slab without a keyboard that couldn’t do real work like a MacBook.

Yet, against all odds, the iPad set the standard for a great tablet experience that was adopted by hundreds of millions of consumers, far outpacing Apple’s MacBook sales. By 2014, the tweener device went on to outsell the full PC lineups of Acer, Dell, HP and Lenovo combined.

6. Apple Took a Stand Against Adobe Flash (2010)

Apple never supported Adobe Flash running on iPhones, iPods and iPads, which was a decision that Apple took considerable heat over — from developers, from the tech press, from Adobe, and from anyone who wanted to access Flash-based content on their iOS device but couldn’t.

Steve Jobs even penned an open letter, “Thoughts on Flash,” to address the issues. He argued that Flash wasn’t nearly as “open” as Adobe made it out to be, noting that Apple wanted instead to support HTML5, CSS and JavaScript as its open standards. Jobs also said that Flash performance and battery-eating characteristics on mobile devices wasn’t up to par.

Perhaps more importantly, Apple shrugged off a lot of Adobe Flash developers who could build apps for the iPhone — and other devices at the same time. Instead of enabling Flash, Jobs flat-out said that Apple wasn’t going to be beholden to another company’s software layer:”We know from painful experience that letting a third party layer of software come between the platform and the developer ultimately results in sub-standard apps and hinders the enhancement and progress of the platform. If developers grow dependent on third party development libraries and tools, they can only take advantage of platform enhancements if and when the third party chooses to adopt the new features. We cannot be at the mercy of a third party deciding if and when they will make our enhancements available to our developers.”Fast-forward to 2015, and there are now 380,000 members of Apple’s paid developer program — and that army has been instrumental in creating the robust Apple app ecosystem that helps fuel device sales.

7. Apple Ignores Market Share in Favor of High-End Devices (2013)

Apple always has ignored the drive to gain market share at the cost of building high-end, relatively expensive devices, but the pressure to produce a “cheap” device hit a fever pitch in 2013 — Apple “clearly” needed to build a low-cost, entry-level iPhone in order to gain market share in emerging markets, especially in China.

Plus, with Android adoption rising like a rocket, the dominant view was that Apple needed to buckle down and create a low-cost iPhone in order to compete. The call for a low-cost iPhone was everywhere. Want to reminisce? Check out this headline from AllThingsD: Why Build a Cheaper iPhone? Because It’s Stupid Not To.” Ouch.

Instead of a dirt-cheap iPhone, Apple made the plastic iPhone 5c, which was less expensive than an iPhone 5 — but far from low-cost or cheap. Despite the so-called demand for such a product, most Apple iPhone buyers opted for the more expensive iPhone 5s.

Fast-forward to 2015 and the iPhone 6 and iPhone 6 Plus. Apple enjoyed an astounding average selling price of $687 for its iPhones last quarter. Apple never created a cheap iPhone and yet — with so much good smartphone competition out and about — Apple still sold 74.5 million iPhones last quarter.

8. Apple Did Not Rush a Big-Screen iPhone to Market (2013)

Apple may have been caught by surprise by the popularity of large-screened iPhones, but in 2013 the company didn’t panic and rush a bigger-screened iPhone to market, despite all sorts of pressure to do so.

At the time, Sterne Agee analyst Shaw Wu reportedly said that Apple was leaving money on the table by not offering a larger iPhone, plus Apple needed to reclaim its high-end leadership. Instead, Apple released the iPhone 5s with Touch ID and the iPhone 5c — and somehow managed to continue to grow profit each and every quarter, as well as put itself in a position to sell 34,000 iPhones every hour, 24 hours a day, for every day in the last quarter of last year.

Now, it’s possible that Apple could not have physically produced a larger-screened iPhone in 2013, but I don’t believe that’s the case. I believe that Apple had the resources to do it; instead, Apple CEO Tim Cook had the patience to wait and get it done right.

In fact, a large-screened misstep might have caused Apple to stumble with consumers and developers alike, ultimately giving competitors a chance to pound on Apple.

The results? Hard to argue with the best iPhone quarter ever.

9. Apple Did Not Shoehorn Mac OS X and iOS into One OS (2014)

While Lenovo is making some very interesting Yoga laptops that fold back onto themselves, letting their touchscreens turn into a tablet-like experience — or bend back to let you use a full-size keyboard for a laptop like experience, all in the same Windows operating system — Apple has done the exact opposite.

The Mac lineup does not have touchscreens at all, and as recently as October 2014, Craig Federighi, Apple’s senior vice president of software engineering, said, “We don’t think it’s the right interface, honestly.”

In addition to Lenovo — and other PC manufacturers — Microsoft has been enjoying a modest comeback with its Surface Pro tablets that can function as laptop replacements. The common denominator is laptop power coupled with a flexible OS for touch-based apps, as well as PC-style apps with physical keyboards.

Apple is building “traditional” MacBooks while selling “traditional” tablets — the iPad. Apple’s stance is to produce best-of-breed devices instead of converged devices — and just make sure they work really well together through Apple’s vision of“continuity.”

And how is that working out? Apple sold 5.5 million Macs, up from 4.8 million in the same quarter a year ago. It sold 21.4 million iPads, down from 26 million from the year-ago quarter. Sure, iPad sales have slowed, but 21 million? Every other tablet maker on the planet would love to sell that many, especially at Apple’s premium prices.

Will this move ultimately show the same kind of long-term gains as Apple’s other risky moves? Time will tell, but Apple is clearly taking a development stand against touchscreen Macs.

10. Apple Did Not Sell a ‘Smart’ HDTV (2014)

The last time Apple released a new Apple TV settop box streaming device was in March of 2012. For years, the tech press and various industry analysts have been predicting that Apple would release a true Apple HDTV — a big, glorious screen running Apple apps and delivering entertainment to save us from the clutches of old-school cable and broadcast TV.

Sure, it would be expensive, but the design would be a work of art! It didn’t help when Walter Isaacson’s biography of Steve Jobs revealed that Jobs thought he had “cracked” the interface for an integrated television set. That was 2011. Fast forward to early 2015, and Apple hasn’t released anything approaching the promise of Jobs’ comment.

So why is this an important, risky decision? I’ve got to believe that Apple has seriously looked into producing its own Apple-branded HDTV. The company has had the cash to outright buy one of the major HDTV makers for years if it felt it needed to, but Apple has not. In my mind, this shows amazing restraint.

So how is this a good decision? HDTVs are replaced slowly in households. They last for years. Apple easily could have created a fancy smart HDTV that basically would just look good in the living room. If it wouldn’t be appreciably better than a connected settop box, though, why build it? Why risk the Apple brand by producing a TV that would not move the whole industry forward in terms of the way the world consumes content in the living room?

By not producing a product prematurely, Apple not only hasn’t slowed down the momentum of its ever-growing profit train, but also may have put itself in a position to deliver a truly connected-home Apple TV device that will provide continuity throughout an Apple household. Hindsight is 20/20, but the signs seem to be pointing toward something far more interesting than a Netflix-slinging flatscreen TV with a glowing Apple logo.