This year's show was actually worth the wait: a year and a half after OpenAI shocked the world by launching ChatGPT, Apple finally entered the artificial intelligence field.
The Apple Intelligence unveiling at Apple’s Worldwide Developers Conference was clearly not a mind-blowing event. It didn’t have the wow factor of Steve Jobs’ early presentations when the first iPhone and iPad were released, nor did it have the same kind of success as OpenAI’s surprise launch of ChatGPT version 4o a month ago, which seemed to bring human-like AI one step closer to reality.
Apple's late entrant into the world of AI should give us all some peace of mind. After all, if generative AI caught one of the world's most innovative and well-funded companies off guard, maybe we can be more forgiving of the leaders of local banks and hospital systems. From food and beverage companies to pharmaceutical companies to small businesses, leaders are struggling to adapt to the most transformative new technologies of our time.
Some business leaders have responded with procrastination. They understand that AI is important, but they haven't approached it with the urgency and focus necessary to make the biggest impact. Others have chosen to do nothing, citing legitimate concerns about privacy and intellectual property. This is the same thinking that led many retailers to underinvest in e-commerce in the early days of the internet, giving Amazon a head start.
Other executives are taking an ad-hoc approach. They show the right level of urgency but don't really have a plan. As a result, they try to sprinkle AI magic dust on everything in the hopes that something will work. While trying out Midjourney or adding a chatbot to your website isn't a bad idea, these experiments are likely to be a distraction with little benefit to the business.
The third approach is to go all in. These leaders are putting so many resources into AI that they risk starving other efforts that are important to the long-term health of their business. Innovation isn't just about adopting the latest cool thing; it's also about preventing your business from going bust. AI may be what kills you, but so are several other threats that deserve just as much attention.
Apple did none of these three things. Its foray into AI got something important right, and more importantly, it offers valuable lessons for any CEO struggling to figure out what their company should do.
AI Strategy that Leverages Your Strengths
Apple's approach to artificial intelligence isn't a copycat of Microsoft or Google's: It takes advantage of some of the company's unique strengths.
First, Apple reaches more people on more devices than any other company, and the company is building that installed base by integrating its version of AI into MacOS and iOS: Apple's AI runs on iPhones, iPads, and Macbooks, allowing users to work seamlessly across all devices.
Second, Apple is using its unique strengths to create a beautiful user experience. As CEO Tim Cook said, the overall goal is to “make our most personal products even more useful and enjoyable.” The system summarizes and prioritizes messages and offers tools to rewrite emails and other text. This should encourage rapid adoption by everyday consumers who don't want to become trained prompt engineers.
Third, Apple has built its own capabilities in designing its own hardware, including its own CPUs. The company has said that new AI features will leverage those chips first locally on devices and then in its own cloud with Apple processors. This should give it an edge over rivals and avoid reliance on Nvidia, the dominant AI chip maker.
Fourth, and perhaps most importantly, Apple has differentiated itself in recent years as one of the few tech companies that seems to genuinely care about consumer privacy. Much of the presentation was spent explaining how Apple's version of AI protects users' personal data. Much of the processing is done on-device, with even Apple unaware of the details of the more power-hungry queries that need to be sent to the cloud.
Like Apple, when developing their AI strategy, companies would be wise to take a moment to clearly identify the assets and capabilities they bring to the table.
AI strategies to help solve strategic challenges
Apple’s unique approach to artificial intelligence can also help solve big business challenges.
One of the biggest challenges for the company is the lackluster sales of new iPhones. Sales of the flagship model fell 10% year over year in the quarter ending in March. The main reason is that users don't have a strong reason to upgrade to the latest models. Sure, the iPhone 15's camera is great, but the cameras in the iPhone 14 and 13 are pretty good too. Apple's AI strategy is focused on local device processing, so new features don't work on older devices. Consumers will finally have a reason to upgrade.
Another challenge for Apple is that it has struggled to connect with consumers off screens. Its virtual assistant, Siri, has struggled for years as competitors like Amazon have infiltrated more homes with their Alexa interface. As part of the new strategy, Apple will implant an AI brain into Siri that will enable it to respond to commands and act based on users' “personal circumstances,” which should make the game more level.
The company has also struggled to attract and retain technical talent in the field. It turns out that many AI researchers have an academic mindset and prefer to share and publicize their findings, which doesn't sit well with Apple's notorious culture of secrecy. Apple is trying to solve this problem by partnering with OpenAI and a number of other companies that have yet to be named. Admittedly, it's unclear how effective this approach will be. But it's a start.
Of course, the biggest challenge facing Apple is the stock market. For the past year and a half, investors have been dying to know what Apple's plan is. Strategies like mimicking OpenAI or Google only show how far behind Apple has fallen. Instead, the company has redefined AI as “Apple Intelligence” and focused on more immediate (and admittedly smaller) solutions, like helping you write an email, rather than developing true general artificial intelligence. That said, there are undoubtedly teams within Apple working at breakneck speed to catch up with OpenAI, Google, Anthropic, and the like. This is not part of the stock market strategy. And the stock market strategy seems to be working. Hours after the AI announcement, Apple's stock price hit an all-time high.
When creating an effective AI strategy, the most important thing business leaders can do is define the problem they want to solve – a business problem, not a technical one.
Join the Game
Ultimately, Apple's first big foray into AI pales in comparison to what they'll be able to accomplish over the next few years. But the key is that rather than procrastinating, distracting, or going all-in on AI, they went into it with a great initial strategy that was firmly based on what Apple does best and the key challenges they faced. This is a lesson all CEOs and strategy chiefs can learn.
Dev Patnaik CEO of Jump Associates.
