Of course, that would be a much bigger problem for Apple if the company were in the business of selling products. It’s not. What Apple sells is an ecosystem – an intertwined set of products and services that work together to fulfill a customer’s every need, from the online store where you buy the song to the MP3 player that lets you hear it. The iPhone 5 is but one animal in that ecosystem.
“While the new hardware may not quite stack up against other products expected in market, it is Apple’s ability to create stylish, desirable products attached to a rich set of services that it hopes can still set it apart to create differentiation,” David McQueen, principal analyst at Informa Telecoms & Media, said following the launch of the new phone.
That’s why, despite the more than 50 lawsuits it has launched against its South Korean rival, Apple’s biggest competitor isn’t Samsung. Instead, Apple’s long-term struggle for supremacy is against companies such as Google, Microsoft and Amazon – tech giants that are also trying to woo consumers with multiplatform solutions.
Just as Microsoft’s goal with the Xbox gaming system is to gain a foothold in living-room entertainment and get consumers to purchase media through the Xbox’s virtual store, Apple’s iPhone is designed in large part to convince customers to spend their entertainment money through other Apple services. For the most part, that strategy has worked wonders – Apple now boasts some 400 million active iTunes accounts, each one tied to a credit card number.
That’s why Apple has shied away from the kind of risk-taking that resulted in the original iPhone. To shake up the industry with another unexpected, revolutionary product would be to mess with a larger ecosystem of products that now drives a reliable and superlatively large revenue stream. It is now in Apple’s best interests to improve, not innovate.
The challenge of being No. 1
Of course, in the unpredictable world of high tech, there are risks to being the incumbent. Apple need only look to the company it dethroned in the smartphone industry. For years, RIM dominated with its business-oriented BlackBerrys, and scoffed at Apple’s attempts to introduce smartphones to the everyday consumer. Today, the BlackBerry maker is suffering mightily for playing it safe.
The tech industry is also rife with examples of companies that became too comfortable and were unable to move into new industries. Microsoft, whose Windows operating system once relegated Apple to the sidelines in the desktop wars, was so well-established in that market that it arrived very late to the mobile party, even as more and more consumers ditched desktops for smartphones and tablets.
Now, as Apple occupies in the mobile world the same top spot Microsoft occupied in desktop software, there’s no guarantee it won’t fail to react quickly enough to the next big tech industry transition, whatever it may be.
The original iPhone overturned mobile industry norms, and was even more revolutionary because it came from a company that was not a traditional wireless player. It was the device to popularize touch-screen phones for the masses, and in the process caught RIM – the company that basically invented the smartphone – completely off guard. But with each iteration, the iPhone has become less revolutionary, as Apple settles into a broader strategy of refining existing products.
“Apple is in maintenance mode right now – it’s tweaking its successful model so it can continue to sell tens of millions of these devices,” says Kevin Restivo, a mobile device analyst with global research firm IDC. In Apple’s defence, nobody else in the smartphone industry is currently creating any kind of groundbreaking innovation. In fact, Apple is so convinced that its rivals are simply stealing its own innovations that it is currently taking most of those rivals to court.