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Focusing on Product Depth Still Works Wonders for Apple, Inc.

By Evan Niu, CFA - Feb 21, 2018 at 9:40PM

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This strategy has been a key to Apple's success for years.

One of Apple's (AAPL -1.80%) greatest strengths has long been its emphasis on product depth over product breadth, focusing intently on developing a handful of things extremely well instead of spreading itself too thin across a large number of products. Consider the iPhone lineup, which incredibly grabbed over half of global smartphone revenue in the fourth quarter. The company released three new models last year. That's it.

Earlier this week, Fast Company placed Apple in the No. 1 spot on its 2018 list of the World's Most Innovative Companies, thanks in large part to iPhone X, AirPods, Apple Watch Series 3, and the tech titan's big push into augmented reality (AR). The outlet also just released an exclusive interview with CEO Tim Cook.

Woman wearing AirPods

AirPods have been a huge success. Image source: Apple.

Product depth is alive and well

A lot of things have changed at Apple under Cook, but the emphasis on product depth isn't one of them. In discussing product strategy, Cook notes that Apple still works on a relatively small number of products (emphasis added):

But in the scheme of things versus our revenue, we're doing very few things. I mean, you could put every product we're making on this table, to put it in perspective. I doubt anybody that is anywhere near our revenue could say that. You have to make sure that you're focused on the thing that matters. And we do that fair­­ly well. 

In terms of other companies that are "near" Apple's level of revenue -- think Berkshire Hathaway or ExxonMobil -- none are really product companies. The fact that Apple's revenue base (nearly $240 billion on a trailing-12-month basis) is driven by just a handful of products that can fit on a table is remarkably impressive.

"Stock price is a result"

Echoing Steve Jobs' approach, Apple still focuses on products above all else, trusting that the financials will take care of themselves. Cook doesn't seem all that concerned with Wall Street's machinations though, saying that the market "has little to no effect" on Apple.

The chief executive also believes that investors tend to focus too much on quarterly earnings results, arguing that the "90-day clock is a negative." Foolish investors will certainly appreciate Cook's next statement: "Why would you ever measure a business on 90 days when its investments are long term?"

Cook says, "Stock price is a result, not an achievement by itself. For me, it's about products and people."

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