Hardware as service

The other big piece of news coming out of the Apple event was the hardware as service offering presented by Apple's iPhone Upgrade Program where the company is using its balance sheet to make it easier for people in the US to get iPhones. Despite not generally liking the idea of credit for disposable goods, this one is a great idea for three reasons.

First, the high end of the US market is saturated and requires some prodding to stimulate more replacement. Making the latest iPhone cost effectively $3/day is a great way to do this.

Second, it will really remove the lock that carriers have had on the purchase decision via their handset subsidies. This was already underway for many other reasons but if I were a carrier, I'd be very afraid that this is ultimately more damaging to my customer relationship than the prospect of Apple launching an MVNO (Mobile Virtual Network Operator) ever was.

And finally, to the degree that the company is using its balance sheet to make any part of this work (unclear as Citizens Bank is currently involved), this is a great way to use that $200b on the balance sheet (I've long since thought their dividending it out is a horrible idea). It bundles in a very high margin service (AppleCare+), stimulates demand, makes the primary customer relationship really be with Apple, and leads to further strategic opportunities where Apple is uniquely advantaged.

It will be super interesting if they do indeed put the gas pedal down on more of this kind of go-to-market innovation.