Every business needs to reinvent itself continuously, now more than ever. (Product plug: It’s why Fortune is launching the Brainstorm Reinvent conference in Chicago in September.) Big, slow-moving companies focused on dominant but mature product categories find the notion of reinvention particularly terrifying.
Consider, then, the spectacular renewal story unfolding at Apple, a gigantic, fast-moving corporation that reaps 62% of its revenue from one product, the iPhone. Apple declared a few years ago that “services,” by which it means subscriptions and online apps, would become a growth driver. In an earnings report Tuesday that exceeded recently reduced expectations, Apple showed the dramatic results of this effort.
Apple, the ultimate device company, reported services revenue of $9.2 billion, a respectable 15% of the total. That’s up six percentage points from three years ago. More impressively, services grew 31% year-over-year (versus 16% overall) and were the only Apple category to grow from the previous, holiday-juiced quarter. (iPhones, iPads, Macs, and “other” products make up the balance; services are larger than Macs.)
This reinvention may seem like an obvious strategy, but it wasn’t always. Apple long has prided itself on packaging clever software with gorgeous hardware. Customers bought new gadgets when Apple gave them something new to buy. That’s a still-important—but more problematic—business proposition as computers of all shapes and sizes last longer. So Apple has made a virtue of its 1.3 billion phones and other devices in the wild, all delivery mechanisms for its services.
For Apple to keep up its torrid growth—for an enormous company, that is—it will need whole new device categories and a phone more mind-blowing than the pricey iPhone X. In the meantime, a non-trivial fillip like a basket of services that includes Apple Pay and Apple Music is the mark of a company with an eye to the future.
Quickly, please have a look at this troubling essay by historian Jay M. Smith about a giant business—big-time college sports—that hasn’t reinvented itself in years. For proof of this issue’s timelessness, peruse this 1990 article about a famous magazine piece, “Gate Receipts and Glory,” that decried the pernicious effects of moneyed sports on academic life—in 1938.
Xerox Chief Out
Xerox's CEO and most of its board are heading for the exit to settle a suit waged by Carl Icahn and fellow shareholder Darwin Deason. The pair won a court order blocking a merger with Fujifilm Holdings. So CEO Jeff Jacobson is out and former Novitex boss John Visentin will take his place, according to the settlement. One issue though: Fujifilm will fight both the settlement and the merger-blocking court ruling. Reuters
Snap's shares cratered yesterday, falling 15% after reporting disappointing revenues. Analysts expected $244.5 million for Q1; the Snapchat maker delivered $230.7 million. This is largely because of Snapchat's poorly-received redesign, which separated the feeds of celebrities and brands from those of regular users. User growth was just 2% quarter-over-quarter, and Snapchat had 191 million daily active users in the quarter—analysts wanted 194.2 million. Fortune
Chinese state media has warned the White House that it should not expect its counterparts to give in to all of President Donald Trump's demands, ahead of a meeting that's supposed to settle trade tensions. "Washington had better not expect that its trade-war stick will force Beijing to take whatever the U.S. delegation offers," said the Global Times state mouthpiece. The meeting will take place tomorrow and Friday. CNBC
Harold Bornstein, the Trump physician who famously told the world that his patient's "physical strength and stamina are extraordinary" at the outset of Trump's presidential campaign, now says Trump himself dictated the letter. "[Trump] dictated the letter and I would tell him what he couldn't put in there," he said. Bornstein is out of Trump's circle now, and alleges that former Trump bodyguard Keith Schiller and another "large man" raided his office in February 2017, to retrieve Trump's medical records. CNN
Around the Water Cooler
President Trump's current legal team doesn't have the security clearances they would need to discuss issues related to Trump's potential grilling by Special Counsel Robert Mueller, Bloomberg reports. The only one who had a security clearance was John Dowd, who's gone now (and who, according to AP, was the one who revealed that Mueller is considering subpoenaing Trump.) Bloomberg
United will resume allowing passengers' cats and dogs to travel in its planes' cargo holds, after reviewing pet transport rules. The review was precipitated by a dog's death in an overhead luggage bin. United said it will only carry certain breeds in its cargo holds, and it won't fly animals to or from certain airports in summer, Las Vegas being one example. Wall Street Journal
A British inquest into the death of a former soldier was told that BMW had failed to recall thousands of cars in the country, despite a government agency warning it of a fault. Narayan Gurung crashed into a tree on Christmas 2016 after swerving to avoid a BMW that had stalled due to an electric fault. The Driver and Vehicle Standards Agency had apparently been sending vehicle safety defect reports to the automaker from 2011 on. It was only after Gurung's death that BMW told its customers about the flaw and recalled 36,000 cars. Times of London
Blockchain experts have been testifying to the British Parliament about the technology, and it doesn't seem like they're hugely confident in its supposedly world-changing potential. As the Financial Times (whose writer also testified) reported, a diamond-registration blockchain exec noted that the system was "garbage in, garbage out," and a researcher designing blockchain-based voting systems said the technology would only be useful for recording final results, rather than validating individual votes. Conclusion? "It sounds like the pixie dust is starting to wear off." FT
This edition of CEO Daily was edited by David Meyer. Find previous editions here, and sign up for other Fortune newsletters here.