Is Apple innovating or not? Is the company even capable of it anymore? The launch of the iPhone 5S and Apple's latest mobile operating system, iOS7, along with a just-released conversation between Apple's leaders and Businessweek, has reinvigorated this debate. But it's possible that it misses the larger issue. Apple isn't competing with other technology giants like Google; it's locked in a symbiotic relationship from which neither Google or Apple can extract itself.
The new iPhone and its software is a hit…
Apple makes experiences, and its chosen medium is hardware that fits into your hand, and the software that runs on it. Deep dives into the technical specifications of the iPhone 5S reveal that it is easily the most powerful smartphone ever unveiled. Positive reviews of the mobile operating system that runs on it, iOS 7, suggest that Apple has no problem staying ahead of rivals in terms of the human elements of its design—things like three-dimensional transitions that make the contents of the iPhone feel like real world objects rather than flat interface elements built out of pixels.
But even the world's most beautiful and functional combination of smartphone hardware and software is an empty vessel without the internet services on which we've all come to rely. And here, Google dominates.
…Which means little without the might of Google
Apple's relative ineptitude in consumer "cloud services" exists only in comparison to Google, which does nothing but, and is easily one of the greatest concentrations of raw talent in Silicon Valley. Apple is not about to produce a search engine or become a dominant provider of email services or cloud-based productivity software, and it shouldn't—that's the route to becoming a company as diffuse and ineffective as Microsoft.
Google, on the other hand, isn't about to produce the next iPhone, and its debatable whether or not one of its hardware partners can. Android will continue to outsell the iPhone in most markets on account of price, consumer preference for devices that are more customizable than the iPhone—almost every list of ways that Android is better than iPhone comes down to flexibility—and the ability of regional hardware manufacturers to use Android (free of charge) and adapt it to local markets.
So what's an iPhone for? Apple's app store continues to make more money for app developers than Google's, and as long as that's the case Apple has on its side the might of countless programmers the world over. The degree to which that matters as companies find themselves obligated to develop for both the iPhone and Android remains to be seen.
Android is in conflict with Google's advertising business
Google could differentiate Android further by making more of its services effectively Android-only, and the company has done that by accident or by design with its personal assistant Google Now, which is front and center on the new Android phone but is buried under the Google app on iPhones, in part because Apple's rules for apps mean they can't integrate as deeply with the iPhone as those apps do on Android. But to what extent is that a convenient excuse?
As long as Google's key services—search, email, file storage, and the Microsoft Office-like spreadsheet and word processing service known as Google Apps—remain accessible through apps and web browsers on the iPhone, it remains the best hardware on which to access the Google services on which so many rely.
Presently, there is a tension within Google between how the company actually makes money and the desire within Google for Android to "beat" the iPhone. Google's leaders profess no explicit desire for Android to eliminate the iPhone, but when you visit Googleplexes on either coast, you can tell there's a healthy competitiveness driving Googlers, who either proudly brandish their Android phones or sheepishly admit they're using an iPhone. The problem is that if Google limits its services to Android in order to make it more competitive against Apple, it might pass up opportunities to make money off of people using iPhones (not to mention invite the anti-trust scrutiny of the US Federal Trade Commission).
If Apple and Google could acknowledge their competitive advantages, Apple's failure (or not) to "innovate" wouldn't matter so much. Apple and Google could forge ahead by accepting that Apple is best-positioned to produce the vehicle for Google's cloud services. Together, the combination would keep Google honest and Apple striving.
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