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In the same way China innovation was a recurring theme for me in 2017, I’m seeing that business reinvention is a subject I’m going to come back to repeatedly this year.
When Apple reported better-than-expected earnings recently, reinvention was the key. Services, as opposed to devices or software, increasingly are becoming a larger percentage of the consumer technology giant’s revenues. Thursday The Wall Street Journal published an impressively comprehensive article detailing an imminent tie-up on credit cards, of all things, between Apple and blue-chip investment bank Goldman Sachs.
It’s a story of reinvention for both.
For Apple, payments are part of its services story. Apple Pay is leap-ahead technology that turns a phone into a credit card. Apple is plugging away at the market, more like the way the iPod and iPhone ramped—in other words, slowly. (Samsung, Google and others are in the electronic “wallet” dodge too.) Apple’s payments ambitions are of a piece with its music and app sales and subscriptions business: Charging a few cents or a few dollars to the owners of each of its billion-plus devices is a large opportunity.
Goldman, too, is reinventing. In the financial crisis it became a bank, in part because regulators forced it to. Now it’s really behaving like one, offering consumer banking services through its Marcus brand, a nod to its founder, Marcus Goldman. (Reinventing while being mindful of history makes for elegant branding.)
If Goldman (GS) and Apple (AAPL) aren’t obvious partners in offering credit cards, what they share is pedigree, wealth, and a clearly demonstrated appetite for change.
Incidentally, there’s a connection to China innovation here too. The two biggest digital payments players in China are Alibaba, whose Ant Financial affiliate owns Alipay, and game-and-messaging giant Tencent, whose WeChat Pay has been coming on strong due to the ubiquity of WeChat itself. The advent of the credit card revolutionized consumer behavior in the west but didn’t eliminate cash. China’s innovative approach has taken things to another level, making cash all but obsolete for a large chunk of the population.
So far those worlds haven’t intersected much. The rules of reinvention suggest eventually they will.
