What's Apple's AI strategy (Strategy 101)
Strategy is about choosing the big direction where you have comparative advantages over your competitors; by choosing what to do, you inherently also choose what not to do.
The new technology - AI (LLMs):
-LLMs unlocked tremendous new capabilities vs. the previous generations of AI (like classic machine learning, recurrent neural networks, etc.)
-However, the technology inherently has the chance to hallucinate and is vulnerable to prompt injection.
Apple's comparative advantages:
-It owns the platforms (IOS, iPadOS, and macOS) used by billions of people
-It has access to the users' data.
-Its users trust Apple.
-It also has 50 billion cash on hand and the capacity to borrow billions.
Apple's biggest threat:
-If Android is getting so good with LLMs integration, it could provide an exceptional user experience and be enough for people to switch from iPhone.
-Especially Google's Pixel, where Google owns the full stack (TPU, Gemini models, Android, and the phone)
Apple's AI strategy:
Leaning on its comparative advantage, Apple focuses on the specific use cases, leveraging the users' data, that are useful to the users, and where Apple can do it well. It does not position itself as the general problem solver like ChatGPT.
That's why it's "only" spending 5 billion on CAPEX (investment) vs. 80+ billion spent by its peers like Google and Microsoft.
How to get better at business strategy?
Analysing the comparative advantage and threat sounds a lot like the classic SWOT analysis that any business school student would learn. But in tech strategy, you have to know the technology - what's possible, what are the limitations. And that's critically missing in any business strategy framework.
Fundamentally, no framework can give you the right strategy. It's inherently a process of gathering insights, acknowledging the reality, connecting the dots - in short: thinking.
Ben Thompson is the best analyst recognized by many. Emerging in his writing can help form the brain for strategic thinking.
Below is the original writing on Apple's AI strategy.
So what is Apple Intelligence, then? To me the explanation flows directly from Strategy 101:
Apple Intelligence is the application of generative AI to use cases and content that Apple is uniquely positioned to provide and access. It is designed, to build on yesterday’s Article, to maximize the advantages that Apple has in terms of being the operating system provider on your phone; and, on the other hand, what it is not is any sort of general purpose chatbot: that is where OpenAI comes in — and only there…
What this means is that Apple Intelligence is by-and-large focused on specific use cases where that knowledge is useful; that means the problem space that Apple Intelligence is trying to solve is constrained and grounded — both figuratively and literally — in areas where it is much less likely that the AI screws up. In other words, Apple is addressing a space that is very useful, that only they can address, and which also happens to be “safe” in terms of reputation risk. Honestly, it almost seems unfair — or, to put it another way, it speaks to what a massive advantage there is for a trusted platform. Apple gets to solve real problems in meaningful ways with low risk, and that’s exactly what they are doing.
Contrast this to what OpenAI is trying to accomplish with its GPT models, or Google with Gemini, or Anthropic with Claude: those large language models are trying to incorporate all of the available public knowledge to know everything; it’s a dramatically larger and more difficult problem space, which is why they get stuff wrong. There is also a lot of stuff that they don’t know because that information is locked away — like all of the information on an iPhone. That’s not to say these models aren’t useful: they are far more capable and knowledgable than what Apple is trying to build for anything that does not rely on personal context; they are also all trying to achieve the same things.