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Apple Needs to Reinvent Itself. It Just Might Be Doing So.

Farhad Manjoo

STATE OF THE ART JUNE 6, 2017

Credit Doug Chayka

SAN JOSE, Calif. — One of Apple’s greatest strengths is timing. The company that’s hailed for innovation does not often invent things first — it didn’t create the first personal computer, the first digital music player or the first smartphone. Instead, Apple reinvents, slipping in and producing something more original than what we used to use.

On paper, Apple is aiming to pull the same trick with a device called HomePod. The $349 gadget — which Apple unveiled on Monday at its annual developer conference and will begin shipping in December — is inspired by the Amazon Echo, the smart speaker that houses Amazon’s virtual assistant, Alexa, and that seemed like a joke until many people (including yours truly) suddenly began to love it.

Apple’s version ticks all the Apple-y boxes: It’s very pretty; it’s about twice the price of the Echo; and it has much better sound, including the ability to create a kind of surround sound customized to your room.

Yet the reinvention that matters here isn’t about a single device — it’s larger: The success of HomePod will really depend on whether Apple can reinvent itself.

For some time now, Apple has faced questions about its growth and what rabbits it can pull out of its hat next, especially as rivals including Google, Facebook and Amazon appear to have gotten the jump on it with emerging technologies like artificial intelligence, virtual reality and augmented reality. The Apple iPhone remains the most profitable computing device in the world, and Apple’s immediate future looks sunny, but its long-term outlook has begun to look partly cloudy. In a world that seems to care less and less about beautiful hardware and more about services that help you from afar, over the air, without your ever having to touch a machine, Apple risks becoming an anachronism.

HomePod will be a test of how Apple responds to these difficulties. That’s because for Apple to outdo Amazon in the home assistant game, it will need to prioritize skills that have long been on its back burner — cloud services and A.I., for instance.

But here’s the surprising thing: Apple seems to be up for such reinvention. If you read between the lines at its keynote address on Monday, you would have noticed something. Again and again, like shamans calling on some new and powerful magic, Apple executives invoked the buzzwords of modern computing: “machine learning,” “deep learning” and “computer vision.”

Subtly but unmistakably, they were suggesting a shift. Apple seems to be transforming itself into a new kind of company, one that prioritizes the nerdy technical stuff that will become the foundation of tomorrow’s intelligent machines — whereas in the past, the company tended to hide this stuff, even if it recognized its importance.

This shift doesn’t mean that HomePod will succeed, or that Amazon’s device is in trouble; with a head start, much cheaper devices and lots of irrepressible fans, the Echo has momentum that will be difficult to curb. Plus, nobody knows yet how well HomePod will work.

In broad strokes, the device seems to do much of what its rivals can. Say, “Hey Siri, play me some Carly Rae Jepsen,” and it will belt out perfect Canadian pop. It will also answer questions about the music it’s playing, and, just like the Echo, it can perform a wide variety of other functions — setting timers, telling you the weather and controlling your smart lights and other home devices.

HomePod also lacks a lot that the Echo has perfected. For now, it seems bound to Apple’s ecosystem. Apple said that it connects to its own subscription music service, but declined to specify whether it would let you play songs from Spotify or other services, or whether there was a way for third-party developers to create additional voice-activated functions, which is one of the best features of the Echo. Alexa can order an Uber for you; HomePod may ask you to try using your phone. And obviously, HomePod lacks the Echo’s deep integration with Amazon’s online store, which, to many users, is a killer feature: Running out of dish soap? Alexa will order it for you, but Siri can’t.

Yet many of these are omissions that you’d expect in a new device, and Apple will most likely add improvements in updates. What will matter most, at first, is how reliably HomePod can perform the basics.

If you’re a longtime Siri user, your skepticism is warranted. The best thing about Amazon’s speaker is its reliability: Say something from far away, even in a noisy room, and most of the time it will at least recognize what you asked it. Once you get an idea of the kinds of requests it can handle, Alexa begins to seem like a completely natural interface to computers. It responds so quickly that it starts to seem like a helpful member of the family rather than a computer in a can.

Can Siri in HomePod do that? I can’t tell you yet for certain. I got a chance to listen to HomePod — but not use any of its voice-activated features — after Apple’s keynote. As the company promised, it does sound much deeper and richer than a Sonos Play 3 or an Amazon Echo, closer to what you might hear in a high-end home stereo system. But the true test for such a device is how it works in real-world conditions, handling the multiplicity of requests that you might think up during a day — and for now, we have no idea how that might work.

Yet I am cautiously optimistic, mainly on the basis of the many other computationally difficult features that Apple showed off on Monday. Many of them are versions of features that rivals like Google have spent years perfecting.

For example, Siri will now translate languages for you. Like a true assistant, Siri is also now more predictive — it aims to spot common computing problems and offer to help. (If it notices that you’ve been chatting about a coming appointment, for instance, it will offer to add it to your calendar.)

Best of all, Siri is finally a single unified personality that sits across all of your devices. In the past, Siri on your iPad was different from Siri on your Mac — one would learn that you’re traveling to Iceland, and the other might never know. Now, similar to other assistants, Siri knows you and can anticipate your interests on whatever device you use.

There was more, too. Apple is letting developers create apps that can perform machine learning tasks on its devices. It’s also diving heavily into computer vision. Developers can now create augmented reality features, meaning they can add virtual objects overlaid on images from the real world.

If you follow the tech industry you know these are all hot topics that other companies are investing in heavily. Apple is still a laggard, and I wouldn’t expect it to beat Google in an A.I. contest anytime soon.

But it doesn’t need to. All Apple has to do is stay competitive — it’s got to invest just enough in the A.I.-driven future to keep its devices compelling. There’s no mistake, now, that it’s doing so.

NYT

Amazon to Buy Whole Foods in $13.4 Billion Deal

By MICHAEL J. de la MERCED and NICK WINGFIELDJUNE 16, 2017

Photo

Customers at a Whole Foods Market in Manhattan. Credit John Taggart for The New York Times

Amazon said on Friday that it had agreed to buy the upscale grocery chain Whole Foods for $13.4 billion, as the online retailer looks to conquer new territory in the supermarket aisle.

For Amazon, the deal marks an ambitious push into the mammoth grocery business, an industry that in the United States accounts for around $700 to $800 billion in annual sales. Amazon is also amplifying the competition with Walmart, which has been struggling to play catch-up to the online juggernaut.

For Whole Foods, the deal represents a chance to fend off pressure from activists investors frustrated by a sluggish stock price. Whole Foods last month unveiled a sweeping overhaul of its board, replacing five directors, naming a new chairwoman and bringing in a new chief financial officer. It also laid out plans to improve operations and cut costs.

With Amazon, Whole Foods gets a deep-pocketed owner with significant technological expertise and a willingness to invest aggressively in a quest for dominance.

Amazon has designs on expanding beyond online retail into physical stores. The company is slowly building a fleet of outlets, and much attention has been focused on its supermaket dreams. It has already made an initial push through AmazonFresh, its grocery delivery service.

The e-commerce giant has been testing a variety of other retail concepts. It has opened a convenience store that does not need cashiers, and has explored another grocery store concept that could serve walk-in customers and act as a hub for home deliveries.

Under the terms of the proposed deal, Amazon would pay $42 a share for Whole Foods, a 27 percent premium to Thursday’s closing price. After the deal was announced, shares of Amazon rose as much as 3.3 percent while other major retailers, including Target, Walmart and Costco Wholesale fell sharply.

Whole Foods, which was founded in 1978 in Austin, Tex., is best known for its organic foods. The company built its brand on healthy eating and staked its reputation on fresh, local produce, albeit with a high price tag.

But the company has increasingly faced fierce competition from rival supermarkets. National retailers like Costco, Safeway and Walmart have begun offering organic produce and kitchen staples, forcing Whole Foods to slash prices.

Whole Foods has been feeling the heat to bolster its stock for more than a year.

John Mackey, a founder, took over as sole chief executive last year, in a bid to revive the company. Money managers, unhappy with the pace of the turnaround effort, have pushed for more, taking aim at the board, its grocery offerings and its pricey real estate holdings.

The activist hedge fund Jana Partners raised the pressure in April, announcing that it had become the second-biggest shareholder in Whole Foods. Almost immediately, the stock spiked.

In a defensive posture, Whole Foods, a few weeks later, revamped its board and replaced its chief financial officer. Gabrielle Sulzberger, a private equity executive, was named the company’s chairwoman. Ms. Sulzberger is married to Arthur O. Sulzberger Jr., the chairman and publisher of The New York Times.

For Amazon, the deal represents both a major pivot into bricks-and-mortar stores and one of the largest categories of retailing — groceries — that it has just barely made a dent in through its online efforts.

The company has increasingly experimented with physical stores, opening a small chain of book stores across the country. In Seattle, it recently opened two drive-through grocery pickup locations for customers who order their items online.

But those efforts are nothing compared to the number and size of stores they will acquire through the Whole Foods deal. The grocery chain encompasses more than 460 stores in the United States, Canada and Britain with sales of $16 billion in the last fiscal year.

“The Whole Foods acquisition provides them more physical locations,” said Mikey Vu, a partner at the consultancy Bain & Company who is focused on retail. “They’re going to be within an hour or 30 minutes of as many people as possible.”

The deal immediately raised questions about how Amazon planned to use technology to update Whole Foods stores.

In one of the internet retailer’s more notable bricks-and-mortar experiments, a convenience store in Seattle called Amazon Go uses a combination of sensors and cameras to automatically keep track of the items shoppers put into their baskets, letting them simply walk out of stores without the need for cashiers.

Amazon has no plans now to use the technology it developed for Amazon Go to automate the jobs of cashiers at Whole Foods, said Drew Herdener, a spokesman for Amazon. No job reductions are planned as a result of the deal, he said.

NYT

Whole Foods Deal Shows Amazon’s Prodigious Tolerance for Risk

By DAVID STREITFELDJUNE 17, 2017

Jeff Bezos, the founder of Amazon, at the Space Symposium in Colorado Springs in April. His embrace of risk and experimentation has included the development of reusable rockets. Credit Nick Cote for The New York Times

Joke all you want about drone-delivered kale and arugula. Amazon’s $13.4 billion bet to take on the $800 billion grocery business in the United States by acquiring Whole Foods fits perfectly into the retailer’s business model.

Unlike almost any other chief executive, Amazon’s founder, Jeff Bezos, has built his company by embracing risk, ignoring obvious moves and imagining what customers want next — even before they know it.

Key to that strategy is his approach to failure. While other companies dread making colossal mistakes, Mr. Bezos seems just not to care. Losing millions of dollars for some reason doesn’t sting. Only success counts. That breeds a fiercely experimental culture that is disrupting entertainment, technology and, especially, retail.

Mr. Bezos is one of the few chief executives who joke about how much money they’ve lost.

“I’ve made billions of dollars of failures,” Mr. Bezos said at a 2014 conference, adding that it would be like “a root canal with no anesthesia” if he listed them.

There was the Fire phone, for instance, which was touted as being crucial to Amazon’s future. It was one of the biggest bombs since New Coke. At one point, Amazon cut its price to 99 cents. That did not help.

Amazon Is Trying to Do (and Sell) Everything

The company’s $13.4 billion deal for Whole Foods is the latest signal of Amazon’s ambitions to have a hold on nearly every facet our lives — like the computer servers that power our favorite websites and the food we eat.


For any other company, this would have been a humiliating experience with severe repercussions. Wall Street did not blink, even when Amazon wrote off $170 million related to the device.

“If you’re going to take bold bets, they’re going to be experiments,” Mr. Bezos explained. “And if they’re experiments, you don’t know ahead of time if they’re going to work. Experiments are by their very nature prone to failure. But a few big successes compensate for dozens and dozens of things that didn’t work.”

It is an approach baked into the company since the beginning — and one that is difficult, if not impossible, for competitors to emulate. Consider how Amazon Web Services began as a small internal cloud computing project to help Amazon’s core business. Then the company started selling excess cloud capacity to other companies.

Before Google and Microsoft realized it, Amazon had created a high-margin multibillion-dollar business that was encroaching on their turf. They are still struggling to catch up.

If the cloud computing business just grew, Amazon Prime was a bold bet from the beginning, the equivalent of an all-you-can-eat buffet for shoppers: Pay an annual fee and all shipping costs for the year are covered. Amazon’s shipping expenses ballooned, but revenue soared so much that no one minded.

“When you have such a long-term perspective that you think in decades instead of quarters, it allows you to do things and take risks that other companies believe would not be in their best interests,” said Colin Sebastian, an analyst with the investment firm Robert W. Baird & Company.

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The Fire smartphone by Amazon. At one point, Amazon cut its price to 99 cents. Credit Krisztian Bocsi/Bloomberg

Amazon began, for those too young to remember, as a discount internet bookseller in 1995. In the headiness of the late-1990s dot-com boom, it became the symbol of how this new invention called the World Wide Web was going to change everything. Then, like many of the leading dot-com companies, it blew up. The world wasn’t quite ready for Amazon. It came very close to going under.

Mr. Bezos redoubled his focus on customers, largely closed the company off to the media and got to work doing some serious experiments. Amazon developed, for instance, the Kindle e-reader, which for a time seemed likely to kill off physical books entirely.

One thing the retailer did not do was make much money. In its two decades as a public company, Amazon has had a cumulative profit of $5.7 billion. For a company with a market value of nearly $500 billion, this is negligible. Walmart, which has a market value half that of Amazon, made a profit of $14 billion in 2016 alone.

Huge profits at Amazon were always put aside so the company could invest more. This has tended to drive both skeptics — there are still a few, even now — and competitors crazy. “Did Amazon Just Jump the Shark?” was the headline on an article on the investing website Seeking Alpha on Friday.

But the tens of millions of customers do not care whether Amazon is hugely profitable. They care if it is making their lives easier or better.

“Jeff Bezos is making shopping great,” said Chris Kubica, an e-book consultant and software developer who watches Amazon closely. “He’s made me come to expect better from every checkout counter. Oh, I can scan my entire shopping cart full of groceries in one go, without stopping, as I roll into the parking lot? Yes, please. Where do I park?”

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Amazon Prime, in which customers pay an annual fee and all shipping costs for the year are covered, was one of Amazon’s successful bets. Credit John Taggart for The New York Times

After the company’s disastrous foray with the Fire Phone, Amazon could have done what many other also-rans in smartphones do and keep putting out devices that most people ignore in favor of Apple and Samsung devices. Instead, in 2014 it released Echo, a speaker that looks like a small poster tube. The Alexa intelligent assistant, which runs on it, can play music and tell jokes, and now Google, Apple and Microsoft are copying it.

“Bezos is ahead of the game, always,” said Sunder Kekre, a professor at the Tepper School of Business at Carnegie Mellon University. “Be it drones or Amazon Go” — a grab-and-go shopping experiment that eschews human cashiers — “he is able to craft smart business strategies and position Amazon quite distinctly from competitors.”

As Amazon pushes on with its ceaseless experimenting, however, it risks being seen as less of a cute disrupter of the old and as more of a menace. It has hired many workers for its warehouses, but it is also betting heavily on automation. Amazon Go, after all, is an attempt to drain the labor out of shopping.

“Amazon runs the risk of becoming too big,” Mr. Kekre said.

Some Amazon critics would like the Whole Foods deal to be the trigger for reining in the company. The Institute for Local Self-Reliance, a frequent foe of Amazon, noted that the company is “rapidly monopolizing online retail” and that both Prime and Echo “are strategies for locking in consumers and ensuring they don’t shop anywhere else.” Amazon declined to comment for this article.

Where will it all end? Mr. Kubica has thought about this. Amazon can be understood as a decades-long effort to shorten the time between “I want it” and “I have it” into as brief a period as possible. The logical end of this would be the something Mr. Kubica jestingly called Amazon Imp, short for “implant” and also “impulse,” Mr. Kubica said. It would be a chip inserted under the skin.

“The imp would sense your impulses and desires,” Mr. Kubica wrote in an email, “and then either virtually fulfill them by stimulating your brain (for a modest payment to Amazon, of course) or it would make a box full of goodies for you appear on your doorstep (for a larger fee, of course).”

Every desire fulfilled. “I am sure that Amazon even now is building it,” Mr. Kubica said.