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Is the iPhone good enough?

We don’t want to just make a new phone. We want to make a much better phone.

- Jony Ive, video at iPhone 5 launch event

Disruption theory has taught us that the greatest danger facing a company is making a product better than it needs to be. There are numerous incentives for making products better but few incentives to re-directing improvements away from the prevailing basis of competition.

This danger is more acute for technology companies. Coupling incentives with the speed of improvement in various technologies (aka Moore’s law) means that over-service can come suddenly and more quickly than warnings from the marketplace. A product can tip from under- to over-shooting the market within one product cycle. One year the product is under-performing and trying to catch up to the competition and the next it’s superfluous and commoditized. The dilemma is compounded by the cycle time of development which can span multiple product cycles.

Therefore, how to tell whether a product is over-serving a market is one of the most important and frequently asked questions I get asked. It’s easy to see over-service in the rear view mirror when looking at a multi-year pattern. The trouble is that by the time you see the data, it’s too late. How do you tell you’re on the cusp of good enough, subject to imminent disruption before you get there?

I consider measuring a product’s absorbability to be a marketing problem. The marketer’s job is to read the signals from the market[1]. Determining absorbability comes down to reading two market signals, both of which must be met before green-lighting an improvement:  (a) a product’s improvements must be used and (b) a product’s improvements must be valued.

If a product’s improvements are not used and the buyer will not pay more for them then they are not being absorbed and the effort to develop the improvements should be redirected.

Now the problem becomes one of measurement. Of the two, utilization is easier. Data can be gathered on whether a feature is being used. Research methods exist to tell if a feature would be used even if it’s not available[2]

The more difficult assessment is that of the value of a feature. You can usually only tell value by trying to price it and watching what happens. For example, you add more speed/memory/capacity and try charging more (or the same) for the product. The acceptance will be measured by sales growth and will give you an indication of whether these improvements are valuable.

If you have to add features and drop prices at the same time then it’s likely that the market does not value the improvement.

But this is extremely risky. You need to wait through a sales cycle and iterate through a development cycle before you have an answer. In a space where competitors are placing opposite bets, the experiment fails even if you get the data.

How can you structure a value measurement experiment without wasting an opportunity?

Rather than dealing with hypotheticals, let’s use the iPhone as a test case. As Jony Ive states, the focus for the latest iPhone was to make it better. Is this improvement absorbable? What happens if Apple’s bet on being better is wrong?

First, we can confirm that the iPhone has been on a trajectory of getting better and that those improvements have been absorbed so far. We can measure the history of performance of the product (roughly doubling every year) and we can also measure proxies for performance as I have in the following charts:

As the product has been improved along these dimensions, sales have increased and prices have held steady (even rising occasionally.)

The question is about the future: what about the latest “5” variant?

The clue to this experiment is the presence of a control group.  We could test the question of absorbability by keeping a version of the product which did not improve (or got cheaper) and measuring whether it performs better vs. the “improved” version.

Of course, this is exactly what Apple does with the n-1 generation products. By ranging products which are older and at lower price points it can measure whether the improvements are valued.

If sales of the n-1 variant were to increase relative to the new version then they can understand when they are at the point of good enough. The experiment is brilliant because the margin on the older products is maintained even at the lower price point.

We don’t have public data on the performance of the old vs. the new but some studies show that, at least in some markets, the older variants have, so far, been a minor part of the sales mix. The CIRP study from early this year showed that about 90% of holiday iPhone sales in the US we for the latest (4S) variant. If this pattern persists globally and for the 5 then the improvements can be said to be valued.

If the new features (as represented by the metrics charted above) also get broad engagement–data which Apple can easily obtain–then the iPhone 5 can be declared not good enough. The company can then comfortably work on improving it further.

  1. Note that the marketer’s job is to listen not to talk.
  2. e.g. contextual inquiry.
  • http://twitter.com/ivovic Milorad Ivović

    Great article. Really.

    However there’s another rogue element that drives sales which has nothing to do with whether advancements are valued or not, and has more to do with whether something is the newest or latest, and whether it offers the holder any bragging rights as appearing to be on the curve, rather than behind it.

    I think it’s fair to say (figures notwithstanding) that given identical software features and very similar device capability, much of the market wouldn’t benefit greatly in real terms from a shift to the new device. That doesn’t appear to slow the market’s desire for a product.

    It’s not clear to me whether one of the additional features which add value to a device is actually simply the newness of it, but I think it’s a point worth balancing against the value of any given inclusion in the hardware spec.

    What most of us take for granted in Technology is the overwhelming number of people doing very simple things with very complex and capable devices. They all want the new one too. I wonder if they could really articulate exactly why.

    • http://www.asymco.com Horace Dediu

      Newness alone does not satisfy the utilization criteria. Products which are valued but not used are vulnerable.

      • http://twitter.com/ivovic Milorad Ivović

        Agreed, but I wonder if psychological criteria are enough to compensate for the utilization being far less than optimum. It seems so, but that does make me worry about the sustainability of a “perfect” design, if a less perfect one becomes cooler.

      • http://twitter.com/ivovic Milorad Ivović

        Also want to add the point by analogy to a product which has been evolving for a very long time. There’s no feature more valuable in a new car, than the newness of it. The newness itself attracts the real premium and is what people appear to be prepared to pay the most for. The other features provide questionable justification for the emotive reasoning and financial outlay.

      • https://twitter.com/#!/azulum azulum

        When you drive a new car off the lot, it doesn’t lose its value because it’s no longer new, it loses its value because the cars that are sold immediately after purchase are either lemons* or simply must be sold. That’s not the premium of a new car, but the discount buyers subtract because it may be a lemon†, and if the buyer-turned-seller has to sell, then he will take the risk-of-being-a-lemon discount — it’s basically liquidation pricing. If the buyer doesn’t have to sell — then he can wait until a suitable offer comes, which might be a few months or a year. Beyond that, it’s mostly just wear-and-tear (mileage and accidents/dents) that’s responsible for the depreciation.

        *For those who don’t know, a lemon is the term used for cars (and I suppose other mechanical/electronic products) that doesn’t function the way it’s supposed to.

        †Some ridiculous Freedomnomics guy has cast aspersions on the Freakonomics guys who posited the lemon-possibility discount. However, in Freakonomics, Hubner and Levitt talk about information asymmetries and how the internet has compressed the difference between the experts, like real estate agents and car dealers, and the non-experts, like you and me. I imagine that the drive-off-the-lot-depreciation was much higher when dealers could really use their knowledge to sell the cars at higher margins.

      • http://twitter.com/ivovic Milorad Ivović

        “When you drive a new car off the lot, it doesn’t lose its value because it’s no longer new”

        Sure it does. The lemon rationalisation is flawed for one simple reason. If you’re looking to buy a very new second hand car, and the price difference isn’t significant… why wouldn’t you walk into a dealer get the colour you want, and the options you’d have chosen? Why wouldn’t you choose to be the first ass on the seat? The price drops immediately for those reasons.

        Many almost-new cars are sold quickly and people don’t take lemon-related risks by buying them because they’re still under warranty, yet the price has dropped by large amounts anyway.

        I don’t think it takes a ridiculous ‘freedomnomics’ guy to see the obviousness of the issue, but we’re not talking about current-model second hand anyway. We’re talking about old vs new.

        In phone terms, buying a 4S now is equivalent to buying a 5 year old car. It’s still fine, looks good affordable… it’s even a wise purchase, unless your needs are bleeding-edge… but it’s not going to have the same christmas-morning freshness as a new one.

      • https://twitter.com/#!/azulum azulum

        To quote myself:

        When you drive a new car off the lot, it doesn’t lose its value because it’s no longer new, it loses its value because the cars that are sold immediately after purchase are either lemons or simply must be sold.

        It’s the needing to be sold that devalues a car. In markets where supply is not constrained, a seller of a brand-new but driven off the lot car has no leverage to command a higher price, particularly when, as you say, buyers can go to a dealer and get the exact options* they want — but that is not what I was talking about with my previous comment. So let me be clear, this is the statement I was addressing:

        There’s no feature more valuable in a new car, than the newness of it.

        I disagree with the notion that it is the newness of a car that is most valuable. Otherwise I might be able to get a good deal on this car. Also, this could never happen:

        Chrysler had decided not to lend them a Challenger, saying that Top Gear had always given them poor reviews. Two hours later, Richard had bought himself a Dodge Challenger off the showroom floor, paying $10,000 more than the list price due to the high demand in America at the moment.

        TopGearBox Episode Guide

        *There is an argument to be made about too many options making the buying choice harder, not easier. But I’m not going to make that argument right now.

      • unhinged

        Cars are “good enough” devices.

    • JohnDoey

      If you want bragging rights with a new phone, iPhone is bad for that since new models look so much like previous models. An Apple Genius who was examine my phone asked me if it is a 4 or 4S.

      • http://twitter.com/ivovic Milorad Ivović

        Of the millions of upon millions of iphone users, many are 14 year old girls (or mid-20s analogues to them) who have absolutely no idea what RAM is nor do they need much of it for facebook. We live in the tech sphere which is a bit of an echo chamber for us sometimes. It’s easy to ignore how many customers are simply influenced by the cascade of our prevailing opinions. Ultimately that is a good thing because it means those who know are followed by those who don’t know… but… it doesn’t mean the product is really valued by each customer as deeply as it might appear. Very few of the twitter-addicted fangirls need the new iphone, but many of them will get one because its the new one, whether it looks any different or not.

        Do they value the device? Yes, more than air… but perhaps only a tiny subset of features it offers, and for no defensible or credible reason other than newness, coolness, and because it lets them stay addicted to the flow of gossip.

      • handleym

        You keep asserting this stuff, but provide zero facts to justify your claims.
        I can just as easily assert that the primary usage of these phones is by 14yr old boys who play 3rd party shooters on them all day and are acutely aware of the need for more RAM, more CPU and more GPU.
        Or I can assert that the vast bulk of the teenage population use hand-me down phones from their parents, and their opinions about what they do and don’t want are irrelevant because they don’t get make purchasing decisions.
        Or I can assert that people really have come to depend on data a lot, and the main thing that matters in iPhone5 is LTE, and that’s what people will be paying for — the rest is irrelevant.

        Assertions without data — lot’s of fun, but not really relevant to a site that’s trying to understand the world, not just to run a college late night bull session.

    • handleym

      We have heard for years the claim that cell phones are “fashion items”, bought PRIMARILY to show off to other people. I have yet to see a single shred of evidence for this claim.
      The only time I think it was close to true was in the waning days of the dumb phone market where thinness (RAZR etc) was marketed aggressively, but even there one can argue that there is real PERSONAL value to a smaller, thinner phone in terms of taking up less space in the pocket or purse.

      Secondly “given identical software features” is not the full story. If those software features REQUIRE the new HW, either to work or at least to work well, then once again current devices are not good enough. It seems that the smoothness and agility of the new maps app falls into this category. It will work on a 4S, but it will occasionally stutter and struggle.

      “the overwhelming number of people doing very simple things with very complex and capable devices.” Do you include Maps in that “very simple things” list?
      I think it’s clear that man many many people love Maps and what it enables, AND that there is still scope for Maps to be improved in a way that requires new HW.
      To give just a simple example, augmented reality has yet to take off in a big way (I suspect it will do so more aggressively with Apple’s Map data allowing for more aggressive utilization of that data in 3rd party apps). But all existing phones have only front and back facing cameras, neither of which are ideal for augmented reality. What one really wants is a 3rd camera, at the top of the phone, so that it sees forward as the phone is held horizontally.

      • http://twitter.com/ivovic Milorad Ivović

        To answer your question, yes. I do include maps… but I don’t believe the glitz of 3D maps factors strongly into why someone buys a phone. People need the utility of maps…. the reason the 3D stuff needs to be so awesome however, is to compensate for the shock of losing google as a map source. There’s a trust chasm there, which they’re trying to smooth over with nice visuals. It will work. People feel good about the change already despite losing buckets of POI information which is more useful than flyovers.

        I do include maps, but I also wager that maps gets much lighter use than facebook or imessage/SMS (which still has a woeful interface IMO) for most customers. I’m convinced the occasional stutter isn’t concern.

        You went on to discuss augmented reality… which has been little more than an afterthought or a technical demo in any application to date. I’m sure it will be huge when it’s in your sunglasses, but until then it’s not going to be a mainstream product that millions of thumb-tapping young women want to buy.

        “We have heard for years the claim that cell phones are “fashion items”, bought PRIMARILY to show off to other people. I have yet to see a single shred of evidence for this claim. ”

        With respect then I don’t think you’re looking hard enough. Young people particularly feel peer envy. Phones are not necessarily fashion items, but they are status symbols in a similar way as a nice watch is to us old-school types (only even worse). On a night out, people see your watch and they can deduce your taste and relative income level. Same with a phone which you’re flashing constantly, being the social magnet that you (or your female counterpart) are.

        What makes it worse, is that the “best” isn’t as expensive as a rolex, meaning that it’s no longer a matter of which phone you have — but the best becoming every socialite’s baseline. It’s a must-have item now. You have to have a nice samsung or an iPhone, or risk people thinking you don’t have any friends, and that’s the reason your phone means nothing to you.

        Obviously this is only true for a particular slice of the market — but it’s a slice with high disposable income, and a very transient fickle nature. They are compulsive shoppers, so their segment is extremely relevant.

    • unhinged

      Agreed, the newness factor should be evaluated for its significance – however it is likely to vary greatly between device categories.

      For something like the iPhone, I would say there is a low significance. Mainly because of the sales numbers. At 20+ million devices sold per quarter, that would mean a very high number of “new-focussed” buyers in our population, and I just don’t see that as being realistic. The pre-order sales of a new model, however (2 million for the latest iPhone), strikes me as a more believable percentage.

      Without data to back this up, I think that fear of incompatibility is a more likely factor. “Windows Everywhere” is a promise that your devices will all work with each other (for a given interpretation of “will work”). Apple has pushed the same message: buy our stuff, it all works together.

      And what about situations where the extra functionality included provides no added benefit? 4G coverage is not widespread; why would I buy a 4G-capable phone if 4G rollout is not going to reach the areas where I live for the next 18-24 months? It was the same with the original iPhone and 3G coverage – it wasn’t ubiquitous, so there was no benefit to most potential customers for its inclusion.

  • Liberty

    I find it interesting that you have not attempted to measure the battery life while playing games. With games the most popular app category by far, it would seem to be an important characteristic for buyers. And as the market for external iPhone batteries shows, there is some demand to improve it.
    With Apple reducing the weight of the new handset, they have made a decision that battery life is good enough, and that making the unit lighter is more important. But what if it is actually the other way around?

    • http://www.asymco.com Horace Dediu

      I don’t have a data set to graph about battery life. I could go with Apple claims for browsing/media/call time, but I think those values are difficult to duplicate.

      • silverlining

        But Apple claims for battery life should be “good enough” data as what we are really looking for is the rate of increase in the past (and in the future). The rate of increase of their claims should closely approximate actual data. Apple is obviously focused on battery life as well as voice interface, so those would be the two options I would think would be most interesting to track. Not clear how best to track the progress on the voice interface.

    • JohnDoey

      There are hundreds of iPhone cases with a second battery in them. They only cost marginally more than a regular case. Only maybe 1% of users ever need them. There is just not enough demand for a double battery to make it standard equipment.

      Keep in mind that when iPhone first shipped, its battery was more than double the size of any competitor. iPhone has a lot of battery in it already.

  • gbonzo

    Last December you said: “Regarding the screen size, I don’t think it will ever change. At least not unless our hands and pockets change.” The point was that 3.5 inches was presumably the largest screen size that can be reached with one hand comfortably. Some other commentators agreed violently with this. I don’t know but it is possible that this claim originates from some one-year-old Apple marketing material.

    Do you still feel that way? Are you afraid that you can not reach all corners of iPhone 5 screen comfortably? Or have your fingers lengthened lately?

    BTW, the iPhone 5 screen size is dictated by the ecosystem. Not widening the screen makes it easier to run old apps. Had there been a way to maintain compatibility, I am SURE that Apple would have increased both dimensions of the screen. Therefore, iPhone 5 screen size and aspect ratio are not strictly optimal for a pocketable device. Optimal is somewhat wider. Let’s not make the same mistake again and think that some current Apple marketing material is the ultimate truth. I think it would be brilliant if Apple would only increase the width with iPhone 6, thus achieving more optimal aspect ratio again, but never badly breaking software compatibility.

    • http://twitter.com/ivovic Milorad Ivović

      apple found a creative way to solve the problem while sticking to their guns. They made the screen a bit taller without making it wider. That is a concession to the market screaming for a bigger screen, while maintaining the integrity of usability.

      What remains to be seen is whether the concepts discussed in this article surface in any of the next devices, once the market decides whether it really wants 5inch phones or not.

      Either way, this is not a concession to opposing arguments. It was apple’s way of doing both (and pretty well I think)

    • http://www.asymco.com Horace Dediu

      I feel the same way. Having seen the launch presentation, it seems that Apple does as well.

      • gbonzo

        I think Apple knows they are lying about usability issues. The real reason for iPhone 5 dimensions (longer, but not wider) is software compatibility. They would love to have it wider with larger buttons in portrait keyboard etc. but then old apps would seem really awkward with borders everywhere. What you see in launch presentation is a result of trying to convince people with untrue usability claims.

      • Nigel

        If Apple wanted to widen the screen, they would have simply added borders on the left and right side as well, as you said. I’m not sure why you think this would have been a problem for Apple when they clearly feel comfortable causing awkwardness with borders on the top and bottom.

        In time this is a non-issue – as with the retina display a couple years ago and the iPad before that, it’s a motivation for app-makers to release updates to support the new screen.

      • vincent_rice

        ‘Lying’? Why on earth would they do that? If Apple though that a wider phone was optimal they would produce one. They clearly believe the existing width is the right one and with some amazing engineering have managed to squeeze more screen real estate out of a smaller phone.

      • gbonzo

        They want to maintain backwards compatibility with old apps. That means that in a sense they are not fully free to optimize their hardware. It’s a tradeoff.

      • xynta_man

        > They would love to have it wider with larger buttons in portrait keyboard etc. but then old apps would seem really awkward with borders everywhere

        Not necessarily true. If Apple kept the aspect ratio, but increased the screen size they could also:

        1) Decrease the pixel density. The screen would still be sharp as hell, yet all the elements would be bigger, including the on-screen keyboard. No need for developers to update their apps.

        2) Increase the resolution in both dimensions, while just upscaling older non-updated apps. No black borders, just bigger on-screen elements in non-updated apps. Trust me, the picture quality would still be more than “good enough”, if the resolution increase would be under 30% (giving Apple the ability to make iPhone up to 4.5 inches) – I’ve tested this myself.

        All of “quality decrease” from picture scaling would be hidden by the high-resolution nature of the retina display (Apple basically already does this on the new MacBook Pro with Retina Display when dealing with its “different resolutions”). While new and updated apps could look different, if their developers wanted it: either utilize additional screen space or just make new UI assets and make the app as sharp as it should be without scaling.

        So, no, Apple wasn’t forced to move a to widescreen aspect ration in the way they did – they chose to do it themselves.

    • JohnDoey

      The 5 screen is the exact same as the 4 screen, except it has a tiny extra strip at top and bottom. If you could reach from home button to top of screen with a thumb on 4S, you can do it on 5. NON-ISSUE.

      If Apple wanted to make iPhone wider, they would do it. Nothing is stopping them. Apps could have borders at left and right as well as top and bottom as they do now. NO DIFFERENCE.

      Look at an iPhone in the hand of a petite woman, look at it in pockets. iPhone is HUGE. You are giving it a pass because it has a PC in it, but consumers do not. They just say “it doesn’t fit in my skinny jeans.”

      The cheap phones have bigger screens because bigger is cheaper in mobile. Apple has more pixels in less space. Apple has color management and quality graphics. Android phones have giant batteries because they have to run full speed to get any performance. Apple is not going to emulate that.

    • http://realboxscore.com/ Juha-Pekka Sipponen

      A good comment. I was also surprised by the display choice (or the fact that leaks were actually true). Like you say “iPhone 5 screen size and aspect ratio are not strictly optimal for a pocketable device. Optimal is somewhat wider”. So they made a compromise choice. Product mgmt is all about compromises (in the right places) but it still felt uncharacteristic to do that in such a fundamental product parameter.

      • unhinged

        I think the trade-off was made because people are watching more video on the devices. 16:9 aspect ratio is better for movies, worse for pocketability.

        Or maybe Tim Cook has bigger hands than Steve did.

  • http://twitter.com/designker designker

    Just showing CPU clock rate does not show the increases that comes from the addition of multiple cores i.e. iPhone 4 was single core, while 4S and 5 are dual core. It also does not show the significant boost that new ARM architectures offer such as the addition of the Cortex-A9 or the recent ARMv7S architecture of the iPhone 5. There are benchmarks such as Geekbench which can better show how much more CPU performance each new iPhone has delivered. The same issue exists for the GPU which again in recent iOS devices provided more power through multiple cores. Again there are synthetic benchmarks that can show the increase in performance better than just using clock rate. Given the important role data plays it would also be interesting to see a chart that shows non wifi download and upload performance rates for each generation. Finally weight and battery life would also show metrics that are important to consumers.

    • http://www.asymco.com Horace Dediu

      Do you think using these metrics would make the post better? Does it need to be better or are the data used good enough?

      • Paul

        What about using average geekbench scores instead of listing cores & clockspeed?

      • dorkus_maximus

        For me as a casual reader I get the point of your article with the examples you use. Whether the data as presented are adequate for making investment decisions is something you’re better positioned to answer.

        But one question I have on that front is this: What correlates better with sales data–is it the information that Apple advertises (e.g. clock speed, multiple cores, processor number, etc.) or information from third parties measuring actual real world performance, e.g. “geekbench score”?

      • Sharon_Sharalike

        The data and specs are not going to tell you. Only the market can do that. For whatever it’s worth, I happen to think this one is *the* phone. They will sell them as fast as they can make them for a long time to come. The coming year will be Apple’s biggest *by far*, and they will make an absurd amount of money. After that the cheaper phones will start to become good enough. Apple will of course still rake in the dough for some time to come, but this year will be when they enjoy the greatest product differential.

        However, the tablets are coming. And the presumed “iPad Air” will also be extraordinarily successful. Parents will buy them for their kids two and three at a time. Finally something they can hand to their children without fretting too much when it breaks.

        2013 is going to be absolutely crazy for Apple.

      • Sigivald

        Apple doesn’t advertise clock speeds or anything really informative about processor number for their phones (they say it’s an A6, for instance, but that’s just a brand name – they don’t describe it in technical terms as a Cortex-A15 equivalent anywhere I can find on their website, let alone in the advertising copy).

        Apple says “twice as fast as the previous one” sorts of things, or… just shows video of it in operation.

        That’s much more meaningful in any case, and avoids telling the mass market things it doesn’t actually care about*.

        I don’t think either one correlates with sales data much; Apple doesn’t advertize anything except “faster!”, and nobody outside of enthusiasts even knows what GeekBench is, to be influenced by it.

        Seeing the phones in the wild (including previous versions) and in the ads, being phones, is what sells them. That and one you’ve used eg. a 4S, and they tell you the 5 is “twice as fast”, you know it’s… not going to be slow.

        Gigahertz? Doesn’t matter.

        (*I build my own non-Apple PCs and I’m a programmer for a living, but I can never remember ARM nomenclature or which is supposed to be better than which. The millions of people who buy iPhones? Almost all of them are less geeky than me.

        Phones and tablets are appliances.)

      • chano

        Tongue-in-cheek question Mr. Dediu, in the context of the marketeer’s dilemma discussed here?

      • normm

        I think all of your discussion only addresses the question of whether the iPhone 4S was good enough. Whether or not the iPhone 5 is good enough won’t be addressed until they try to sell an iPhone 6.

      • http://www.asymco.com Horace Dediu

        What needs to be measured is the split between 5 and 4S. If 5 sales continue to be 90% of the mix then there is strong evidence that the 5 is still not over-serving.

      • normm

        If the iPhone 5 was the perfect phone, which couldn’t be further improved upon, then the sales mix between 5 and 4S would be highly skewed towards the 5. This would in no way indicate that the 5 was not over-serving the market. What you might argue, though, is that if there was a lot of room for improvement last time, then we’re probably not near the peak yet. Nevertheless, you’re still always only measuring whether the previous generation was good enough.

      • davel

        I was watching Bloomberg and a venture capitalist was asked about Apple, Microsoft, Google, et al. He opined that Apple is showing classic signs of monopolistic lethargy. One such sign is the hardware has stagnated. If you look at the 5 what does it do? Faster processor – check, bigger screen – check, LTE – check. All predictable, all incremental, all ho hum. Yes software is a big deal and Apple is creating a few things notably the passport feature, but if you look at the hardware it has stalled.

        I think the 5 will sell because Apple has been behind the curve with LTE and LTE is here on all carriers but one. But 2 years ago it was the rich screen. Last year it was siri and the hardware support for that; much better graphics,camera and dual core. This year just incremental more of the same. Like I say it will sell because of LTE and a slightly larger screen, but the hardware seems to have stalled.

      • unhinged

        Surely this means that the iPhone 5 is clearly not over-serving the market (or at least, that section of the market comprising tech-savvy buyers – disappointment that more features were not offered means the market can absorb more). In addition to Apple’s n-1 comparison data, they can scan the success level of the supposed competing phones running Android. The Android phones have been released differentiating on hardware specifications; Apple’s keenest attention is most likely focussed on what hardware features are providing value to the Android users.

        I suspect that the VC mentioned is expecting a correlation between the ability of Apple to surprise the market and the sales that will be achieved. I would argue that it’s the perceived value of the delivered features (whether separately or as a whole) that influence the sales. Horace’s article is examining the efficiency aspect of delivering enough features to satisfy and pique market demand; deliver too many features and you have spent too much to achieve your sales, deliver too few and your sales will be lower.

        Note also that Apple’s hardware strategy for the past 15 years or so has been to (a) release a product that is derided by the tech press for its lack of features, (b) continually release upgrades that add the most-requested features and (c) keep the price the same or decrease it as appropriate. This happened with the iMac in the late 1990s, with the iPod in the 2000s, with the MacBook Air and with the iPhone. Apple give themselves room to grow with a product and evolve it over time.

      • davel

        @d91f55f9d10a67e0f33490a8d359533e:disqus

        Yes. I understand the argument Horace is making about good enough and the profits this engenders.He makes a good case of the use of n-1 products as a guide for the relative value of the new product as well as covering the pricing gap in the lineup.

        I guess what I am pointing out is that in the past Apple has added hardware features ( accelerometer, gyroscope, magnenometer, etc ) that were initially overlooked that added real value to application designers who were able to create applications unique to the platform.

        Perhaps the phone is mature and there is no new feature you can add to make it more functional. Perhaps the next new thing for communication devices is non traditional shapes and devices that are awaiting advances in materials science.

        If you look at the basic pc what has really changed over the past 30 years? Not much. It has memory, a cpu, a storage device, screen, mouse and keyboard. Apple has played with the mouse or its substitute over the years but this form has been around for decades. Most of the innovation Apple has provided has been in form of the box and the timely exclusion of certain devices ( floppy, cd, etc ).

      • Dilweed

        wifi. bluetooth. flat screens. firewire. thunderbolt. RAID. power management. portability. hibernation. backlit keys. capacitive touch.

        and then there are radical improvements to performance through better and faster CPUs and GPUs, changing vendors and architectures as needed, requiring tremendous engineering efforts.

      • http://www.asymco.com Horace Dediu

        The road to a billion users is paved with mediocrity.

      • http://twitter.com/causticmango Samuel Ford

        I understand the sentiment, but it’s a strange time when we call a marvel of modern mechanical and software engineering and globe spanning logistics and the current pinnacle of handheld, networked computing “mediocre”.

      • davel

        nice..

      • http://www.facebook.com/people/Shameer-Mulji/1685212657 Shameer Mulji

        If the leadership at Apple is truly a believer in the culture established by the late Steve Jobs, then mediocrity is unacceptable. This is Apple, not Samsung.

      • http://twitter.com/MacsFuture Lex McFarley

        That Venture Capitalist has an Ax to Grind against Apple because he heavily invested in Palm which got crushed by Apple. The Bloomberg interview doesn’t point that out. The guy is a competitor of Apple who got burned. He is a dope.

      • davel

        @twitter-68164504:disqus
        Whether or not he has an axe to grind ( and he was pounding the table about html5 which so far is not living up to its billing ) I think his observations were quite interesting and mostly correct.

      • allthingsdave

        Let me guess that the VC in question is Roger McNamee… the guy who famously said every single person who bought an iPhone would cast it aside, at the end of their contract, for a Palm Pre. He actually said that, and believed it. The Palm Pre, that crappy little piece of plastic that would slice open your thumb when you slid it open.

        He warbles the praises of whatever junk technology he has most recently thrown money away on. If you’ve heard from him it means he has skin in the game.

      • DesDizzy

        Horace, remember your mantra “jobs to be done”. Do we require change as novelty or change as improvement. The smart phone does a job. Consumers want: easier, faster, longer, clearer and not much else. They have spoken with their wallets. Commentators/bloggers want wow/specs/novelty. Apple does not sell to the tech/blog community but to consumers.

      • http://twitter.com/designker designker

        It was more about contributing better metrics if there are any future posts on the same theme. For example if Apple are making big bets on gaming, then simply using GPU clock rate would render this bet invisible. Whereas an OpenGL benchmark would better reveal how much more GPU power Apple is delivering each product cycle.

      • Canucker

        Point well made! But relying on the iPhone data alone is isolating. How are the other companies doing? My bet is that their forced focus on specifications is leading to significant over-stretch. The integration of LTE before it was ready (at the expense of battery life and size), the addition of NFC before it offers actual utility, etc. are examples of over-reach. While such features offer bragging rights, they dislocate experience from device. Any wonder the profit margins are lower on the Lumias and Galaxies. Not to mention the obsession with increased girth of screen. Where will these guys go next?

        The much derided recent Samsung comparison advert said it all. The value proposition of a smartphone is not the sum of its parts.

      • aaarrrgggh

        The lack of an independent control group was my first reaction as well. Relative performance to that control group (in terms of market share?) would be useful in better understanding the overall reaction and not just the reaction to upgraders.

      • ernie

        Sounds like someone is a bit under impressed with their iPhone 5 and the 200 “new features” of iOS 6. Instead of outlining how much more other manufactures put into their new phones how about mentioning how little apple puts into theirs. Their only true innovation in was the original iPhone and since then they have gotten greedy and have demonstrated this in their annual release of incremental hardware and software updates. The apple way of squeezing every penny from their poor addicted consumers.

      • cellojoe

        What about the IPad? in the last earnings report, wasn’t it suggested that the iPad 2 is selling better than the 3? Do you think that this could be a major catalyst behind the mini?

      • http://www.asymco.com Horace Dediu

        The iPad 2 is selling in a higher proportion to the iPad (new) than the iPhone n-1 is selling to the iPhone n. The claim can be made because the average revenue per iPad has been decreasing while the average revenue per iPhone has been holding steady or increasing. The iPad and iPod are similar products to the iPhone in terms of technology but they are worlds apart when it comes to market access. The type of market access and pricing distortion that can ensue causes this divergence in value capture.

      • chandra

        I do not understand what you mean there. Is the new iPad already starting to over-serve?

        Recasting what you stated above, some how Retina display plus LTE on the iPad does not seem to be as crazily embraced as in the iPhone. Or you are saying it is not the case of over-serving but the price point of the new iPad is not quite right and that is why iPad 2 is selling well still.

        Asking because, I was under the impression the tablet market is still nascent and has a long way to go but we are seeing something like over-serving, that does not bode well for the tablet market. But somehow that does not sound right.

      • http://www.asymco.com Horace Dediu

        I don’t know the reason why the iPad 2 is more popular. It may be that educational buyers prefer it over the retina version. It might be that buyers don’t appreciate the quality of the display. I would not draw conclusions about the health of the market from the decrease in revenue per unit. When markets expand, it’s natural for prices to drop. See the iPod. As the iPod matured the average price dropped as well. The resilience of the iPhone is the anomaly not the norm. I would even prefer for the average price to drop in exchange for a broader audience. Keep in mind that platform products should be thought of as recurring revenue models rather than one time revenue.

    • JohnDoey

      Ultimately, the ideal iPhone of 2020 would run at 100 MHz (0.1 GHz) yet do laps around any of today’s devices. So yes, clock speed is a terrible indicator of performance.

      Geekbench says a 4S is 700 or so, and 5 is 1600 or so. The 5 has a whole different SoC.

    • JohnDoey

      Ultimately, the ideal iPhone of 2020 would run at 100 MHz (0.1 GHz) yet do laps around any of today’s devices. So yes, clock speed is a terrible indicator of performance.

      Geekbench says a 4S is 700 or so, and 5 is 1600 or so. The 5 has a whole different SoC.

    • JohnDoey

      Ultimately, the ideal iPhone of 2020 would run at 100 MHz (0.1 GHz) yet do laps around any of today’s devices. So yes, clock speed is a terrible indicator of performance.

      Geekbench says a 4S is 700 or so, and 5 is 1600 or so. The 5 has a whole different SoC.

    • JohnDoey

      Ultimately, the ideal iPhone of 2020 would run at 100 MHz (0.1 GHz) yet do laps around any of today’s devices. So yes, clock speed is a terrible indicator of performance.

      Geekbench says a 4S is 700 or so, and 5 is 1600 or so. The 5 has a whole different SoC.

    • JohnDoey

      Ultimately, the ideal iPhone of 2020 would run at 100 MHz (0.1 GHz) yet do laps around any of today’s devices. So yes, clock speed is a terrible indicator of performance.

      Geekbench says a 4S is 700 or so, and 5 is 1600 or so. The 5 has a whole different SoC.

    • JohnDoey

      Ultimately, the ideal iPhone of 2020 would run at 100 MHz (0.1 GHz) yet do laps around any of today’s devices. So yes, clock speed is a terrible indicator of performance.

      Geekbench says a 4S is 700 or so, and 5 is 1600 or so. The 5 has a whole different SoC.

    • colin

      Performance is always going to be difficult to capture. The use of synthetics as data may also be distorted by changes in the benchmark version software and underlying software changes and optimisations within iOS.

      An inaccurate and perhaps controversial number to use might be Apple’s advertised multiplier on CPU performance that they use in their keynotes and advertising collateral. Although not exact, it would represent Apple’s approximate performance gain that they’re willing to advertise and aim for in relation when comparing the new iPhone to the previous generation.

    • kiran bhanushali

      Great points, totally agreed that the cpu clock speed is not a great indicator on face value. Something to also consider is most end users of the device when they decide to buy a phone aren’t running these benchmarks and are following the numbers as shown in ads or on the box the device came on. So maybe using the advertised numbers is a better benchmark to go with? @asymco:disqus @twitter-15309113:disqus thoughts?

      • http://twitter.com/designker designker

        The numbers companies offer and advertise are often questionable or biased. Geekbench is far from being a perfect indicator of real world performance. However it is independent of any of the phone makers and offers a better measure than clock rate.

  • Juice

    Sorry, but the quote is “We don’t want to JUST make a new phone.”

    it’s a huge difference.

    • oases

      No it’s not a huge difference. You’re being pedantic.

      • http://www.noisetech-software.com/Home.html Steven Noyes

        “That’s one small step for man, one giant leap for mankind”

        Miss a word, change the meaning/impact. I wondered for years growing up what that meant until I learned it was mis-quoted.

  • http://twitter.com/antonioalegria António Alegria

    You should’ve used logarithmic scales for some of the improvements (e.g. RAM)

    • Nathan Gallacher

      To echo Horace’s post above…
      “Do you think using these metrics would make the post better? Does it need to be better or are the data used good enough?” – H
      The graphs show a monotonic* increase in a given dimension of ‘quality’. This is sufficient for this lesson.

      *excepting Device Thickness

  • http://www.isophist.com/ Emilio Orione

    Samsung, chosen to represent android phone makers, get marketer’s data selling a bunch of different models, from top to less performance but more or less equivalent models.
    It could be sad that if cheaper models sell more, as they do, than top gamma models, then the top is good enough, since more users do not value its improvements over mid price models.
    The large majority of android models uses android 2.2 and is low priced. Are android models a commodity?
    Is the iphone not good enough since it is used by the more demanding high end of the market, that use its features more and need more improvements than android’s users?
    Is there a two velocity market and apple is not entering the lower price market because it would not value it’s ability to continue improvement of products?

    • JohnDoey

      There is not just one market. Most people who buy Android phones are only offered a choice of Android phones. iPhone is in half the phone markets, maybe.

      • Canucker

        True. For example, the discount carriers in Canada (Wind, ChatR, Public Mobile) have incompatible CDMA bands and only offer Android (and Blackberry) models. Apple seems to have little desire to have a presence in those markets.

      • Stefan Popescu

        Chatr is on the Rogers GSM network, not CDMA. They actually are owned/controlled by Rogers and although Rogers supports the nano sim / Iphone5, they decided not to do so for their low cost brand Chatr.
        Wind, Public Mobile and Mobilicity have poor coverage due to their limited infrastructure and hence few customers. I don’t see the appeal for Apple to build a special phone for these operators when the potential number of customers is low and there is coverage by other operators anyway…

      • Canucker

        Thanks for the correction Stefan. I agree about the low cost providers – but these are likely adding to a substantial number of Android sales. Apple has no interest in a race to the bottom.

  • KirkBurgess

    Great article.

    I wonder if there is another element to the good enough equation: “good enough at the right price”.

    I only say this for 2 reasons:

    1. The entry level iPhone has gone from $375 unlocked to $450 unlocked. If the entry level model starts to sell a larger percentage of the total units, the entry level models price would need t increase to maintain ASP. Perhaps apple has forecast this.

    2. After the iPhone 5 announcement, and the subsequent dropping of prices on the iPhone 4 and 4S – I received half a dozen offers from my workmates to buy my used iPhone 4, and when told I will likely give to a family member those offers turned into comments that they might buy the entry level model new. That’s only anecdotal, but I think there may be a perception that the iPhone 4 is good enough, at least in my country (New Zealand) where the entry level iphone is 40% cheaper than the flagship iPhone (this might not be the same in other markets where the pricing of units is closer).

    • oases

      All I can say to that is look at the pre-orders.

  • JohnDoey

    Another factor with improving iPhone is that with iPhone 5, Apple handed 3rd party app developers a device with more than double the CPU and cellular data performance as last year’s model. Now, those developers will improve iPhone 5 even after it is in the market.

    Also, Apple’s commitment to just keep improving causes both users and developers to commit to iOS as a platform. Microsoft used to have this when they were expected to cripple any competitor with illegal tactics, and were therefore a safe bet for long-term platform investment. Apple is expected now to cripple competitors with better products sold at lower prices but with higher margins and exponentially more user loyalty.

    So their strategy of improving the product constantly pays off in many ways.

  • kiran bhanushali

    @asymco:disqus: Given that the development cycle of a product like the iphone is usually 2-3 years for apple – meaning that there would be teams already working on an iphone 2 versions down the line – how much influence would an experiment like this influence the feature enhancement decisions for those future devices?

    P.S.: I am basing the 2-3 year development cycle based on the comments passed during the release of the first iphone where Steve Jobs had said that they had been working on the device for about 4 years.

  • Dongmin

    Horace, it’s an interesting topic, but your focus on tech specs leaves me wanting. Why not focus on the “jobs to-be-done”?

    I’d say the two big innovations with the first iPhone was the touch-friendly interface and a useable web browing client.

    Then came the App Store.

    The camera on the iPhone 4 was a huge improvement. As was the Retina screen.

    But a lot of other “improvements”, I’d argue, have been subtle. Things like 4″ screen, 4G, etc. are mostly marketing improvements.

    • http://www.asymco.com Horace Dediu

      The question I addressed is specifically about whether the iPhone is good enough as a piece of hardware.

    • handleym

      Horace is looking at the issue as a businessman, not as an engineer.
      The type of question he is interested in is this:
      “I have an iPhone 1. Will I feel it’s worth it to upgrade when iPhone 3GS comes out?”. The answer was pretty clearly, for most people, yes.
      Now change the numbers to iPhone 4 and iPhone 5. Answer is again (apparently) yes — the gap between how I want my phone to be and what it is is large enough that it’s still worth upgrading.

      NOW change the numbers to iPhone 5 and iPhone 6. Still no-brainer upgrades?
      THAT is the question.

      In other computing areas, for example, upgrading long ago stopped being automatic. Most people with an iMac from 5 yrs ago are perfectly happy with it and won’t even consider upgrading to the new (October?) Ivy Bridge iMacs. Their 2007 Penryn iMac really is good enough for their needs — not “I put up with it because I have no choice” but GOOD ENOUGH. Sure the SSD and USB3 and quad core of the new iMac sound good, but these people reckon they aren’t enough of an improvement to justify $1500 or so.
      So iMacs have become white goods items — you buy them, they last ten, twenty years, and when they die you buy a new one.

      THAT is Horace’ question — when do smartphones reach that point, where most users are happy to hold onto them for five years, buying a new one only when the old one falls apart.

  • Simon h

    Excellent post and topic.
    I agree with it mostly, there is just one tricky thing to answer.

    Would Steve have agreed to increase the size of the iphone and bow down to share holder pressure.
    I think not….
    He would have told the board to get f****d.

    • http://www.asymco.com Horace Dediu

      The iPhone 5 design was finalized well before Jobs left the company.

    • vincent_rice

      iPhone 5 is smaller! Only the screen is bigger. There is no such thing as shareholder pressure at Apple

  • http://www.facebook.com/people/Jeff-Silverman/1634666325 Jeff Silverman

    Horace; as always thanks. I wonder (after listening to the last Critical Path and reading this post what you really think about this topic. You seem openly worried that Apple may be in danger on this topic yet at the same time you do point out that Apple keeps older models and would know if they outsold or did well compared to a new phone. You also pointed out that Apple has data on what features are used to determine value etc.
    You do not seem to put a lot of faith into Apple’s “lure” beyond just easy to use (better) hardware like iCloud for example. Two more points and then hopefully you will reply:
    – – Samsung is not likely to be the one who disrupts Apple; they are fast followers and are likely to be out “fast followed” by someone else
    — As for Apple disrupting the iPhone, seems to me the ipod touch is like a trojan horse in one way as the more we have wifi available “everywhere” the more this product; i mean if this product had 4g like an iPad- and we did not need a voice contract?

    thanks in advance

    • OpenMinde

      A new iPod nano with 3G/4G voice/iMessage only and wifi. No browser, no email, no app. Price it low even without operator subsidiary. It will sell hot and cause low end disruption.

      • https://twitter.com/#!/azulum azulum

        Or even an iPod touch with an iPad-like wireless plan

      • OpenMinde

        iPod touch is too big. New generation iPod nano is right size and so cute for ladies. If it happens, it will storm the half of market.

      • https://twitter.com/#!/azulum azulum

        And that is why the HP Veer took the world by storm.

    • http://www.asymco.com Horace Dediu

      I do put faith in brand value, something that is very hard to build. However that’s beside the point. There is a lot of value in services, but they cannot stand alone (just like hardware cannot stand alone). The value is in the _integration_ of all the pieces. Regarding Samsung, I agree. They are not in a position to disrupt and they are more vulnerable than Apple to being disrupted. The iPhone story is multi-faceted and it’s a difficult product to analyze because of the operator (distribution) and ecosystem dimensions. I’ll be looking at the iPod as a “good enough” product separately.

      • http://beautyandthesoftware.blogspot.com/ Adrian Constantin

        What I have always liked about Steve Jobs’ presentations of new products is that he was always exposing Apple’s strategy in very simple words. If you looks at the iTunes introduction, iPod, iPhone and iPad, he made no secret of the Apple’s motivation behind each product. The initial intent behind iPhone was “an iPod, a phone and an Internet communications device”. Since then the iPhone has become also a platform for app developers, a publishing platform, and a service delivery point for iCloud or point of sales for 3rd party services integrated through Siri, passbook, maps, etc.

        The phone function is secondary and it was mentioned just for comforting the consumers, who were probably not ready to use a new name for a mobile computing device. The iPod role has been safely defended by Apple. However, I would argue that Samsung has disrupted the iPhone business of delivering Internet communication devices (think browsing, email, Facebook, Twitter). Galaxy line is good enough in that role and selling very well. Samsung’s tactics have been partly symmetric in relation to Apple, some so indecently symmetric that have been judged illegal by a jury in US. But the company has also used asymmetric tactics to achieve this goal. It had no exclusive deals with operators and it bowed to operator demands. It used hardware power and Moore’s law to improve the usability of its products rather than carefully integrating the hardware and software, thus gaining a lot in product development speed. It created low price variants of its Galaxy line. It experimented with form factors, finding that an important number of users are ready to sacrifice one-hand usability for a bigger screen (which increases the usability of the product as an Internet communication device) and also that there is a market for 7” tablets. It used a strong distribution network in countries where Apple was not willing to put up a fight (e.g. India). It uses a more integrated manufacturing process, insulating itself from component shortages or price variation. In fact, providing components is probably an incredibly useful source of information on competitor products.

        The profits are nowhere near to what Apple achieved, but pointing to profit margins is the refuge of the disrupted.

        I agree, though, that Samsung’s potential is limited. From the low cost end, Samsung is vulnerable to the Chinese manufacturers. As a platform care taker Samsung has not proven much competency. Its efforts until today with Bada and Tizen and the version upgrade policy for its Android devices show lack of expertise in the domain. There is still a chance that the partnership with Google will survive, because both companies seem to need each other for some years to come. In that case Samsung could still compete in the platform wars, albeit through a proxy or as part of a bigger coalition.

      • Tatil_S

        Horace, why do you think being a fast follower makes a company more vulnerable to disruption? Isn’t it easier for a fast follower to change direction and start adopting the changes brought on by the new disrupter, than a company used to leading the charge? For example, RIM was a leader in pre-iPhone world, but it had a harder time responding than Samsung. Intel is still clinging to its x86 architecture despite the unqualified success of ARM in mobile marketplace. MS is still attaching Windows brand name in almost every product, whether related to the actual Windows OS or not.

      • Sharon_Sharalike

        Samsung is more vulnerable because they supply only one piece of the puzzle, the phone itself. There’s not enough “glue” to get people to still choose Samsung even if (when) some upstart produces a better product. Yes, Samsung can be agile and disrupt themselves, but that is not their pattern.

        The Apple and IOS world has by far the most “stickiness.” A non-IOS device would have to be tremendously better to get people to walk away from that. That will give Apple some extra time to adapt as necessary. It will of course remain to be seen if they can both recognize the need and execute the changes, but they will have some leeway that others such as Samsung will not.

      • Tatil_S

        The discussion Horace had with Silverman seemed to imply that there is a specific vulnerability from being a fast follower, independent of whether a company owns the full platform or whether its ecosystem is sticky.

        Let me give you a hypothetical. Let’s say Android manages to match most features of iOS, iTunes, App Store and integrates them in a more attractive package to make it more sticky. It still would not change the fact that Android is responding to iPhone revolution rather than leading it and it would still lag Apple by a year. In this hypothetical, Samsung may even control Android if you think it’ll make a difference. Samsung would still be a fast follower, rather than a leader despite having a sticky platform. In this hypothetical, is Samsung more vulnerable than Apple? Let’s say somebody comes up with wearable computers as the next disruption in computing, which company culture would be better placed to respond effectively? The one that was the disrupter last time around or the one that did not mind quickly switching from Windows Mobile to Android during the last disruption? I am just afraid that leading, successful companies are more prone to “not invented here” syndrome.

      • Sharon_Sharalike

        If people are willing to walk away from Android or IOS, then yes, Apple is more vulnerable. But if Android and IOS are the respective stickiness, then Samsung is *much* more vulnerable, as the Android part is not lost.
        I don’t know, but I sure would bet, that Samsung has strong contingency plans in place if Android no longer makes sense for them and loses (or does not improve) its stickiness. They really ought to take something like Aliyun and try to develop their own entire ecosystem, but that is *really* difficult to do.
        As we have seen more than once, depending on someone else to provide the glue is a long-term road to failure. Microsoft and its hardware “partners,” for example. Counting on Google seems downright foolish.

      • http://www.asymco.com Horace Dediu

        Vulnerability is not a function of being a fast follower or not. Vulnerability is a function of business model adaptation. If value is captured in hardware at scale then Samsung is in a better position than HTC. If value is captured in software, services and integration then Samsung has to adapt to that business model. Samsung copying what Apple does, or what HTC did (or what Nokia did before them) does not mean that they can copy what every company will have to do in the future. Indeed, ZTE looks to me a lot like Samsung of five years ago.

      • Tatil_S

        For every customer value careful integration, there are at least as many who either don’t care about it or cannot afford it. I think there is space for both business models, even though obviously Apple is in the more profitable segment with higher barriers to entry. I cannot say Samsung will be successful in copying the disrupters in the future, but I think its corporate culture makes it easier to adapt compared to many of the leading companies of today. In other words, Samsung may be more vulnerable to copycats, but I don’t think it is more vulnerable to future disrupters.

        By the way, why do you think ZTE looks like Samsung five years ago? Wasn’t Samsung already the second largest phone manufacturer by volume in 2007? The regulatory barriers in its home market gave it a base to build on, as well as experience with CDMA, allowing it to get into the US market when Nokia hesitated to make CDMA phones and Motorola infamously bet on analog cell phones. I remember seeing Verizon and Sprint stores full of two Korean brands in late 1990s and early 2000s. I don’t see ZTE having a similar opening, where the biggest phone makers are voluntarily ceding a large market segment in the west today.

      • http://www.asymco.com Horace Dediu

        ZTE is fourth largest phone vendor today (having come from nowhere). The similarity I see is in the approach to market rather than the circumstances. ZTE is very aggressive in many markets.

      • Canucker

        Apple beats its own drum with annual, predictable releases. Most buyers have a 2 or 3 year contract (wonder what % of purchases are unlocked? Probably low). This must lead many to think that their current iPhone is “good enough” till next year, especially as a new iOS version is released for the previous 2 or 3 iPhone iterations. This, in turn, adds to the perception of value of an iPhone as the expense is amortized. Contrast that to the other two main ecosystems where there is almost constant temptation and obsolescence induced by new devices (not to mention the premature death of WinPhone 7 devices). All smartphones also allow the owner to upgrade their own experience through apps, allowing progress and improvement. I do think that the metronomic rhythm achieved by Apple’s clarity is a major reason for its success – reflected in owner satisfaction and retention. Apple is absolutely looking long term, not to the next forced refresh cycle.

    • oases

      A lot of what makes the iPhone covetable is arcane and ineffable, things that Apple’s competitors aren’t good at.

      Wi-fi in 2012 is light years behind mobile networks in usability and handiness. iPod Touch is really just training wheels for the iPhone.

  • StupidPeopleShouldntBreed

    The biggest flaw of iPhone 5 is how much thicker, slower, and less compelling it is compared to iPhone 6.

    • Jurassic

      The iPhone 6 is old stuff. I happen to be holding an iPhone 7 in my hands right now, and I really enjoy the 3D holographic display, and the fact that the entire phone is now just a pinky ring. ;-)

    • Joe_Winfield_IL

      And I’ll go on record now as saying the iPhone 6 will “suck” to millions of users and cause a “yawn” from millions more. Fortunately, hundreds of millions will still see it as the best available choice when they go to purchase their next phone.

    • dale

      Samsung already slavishly copied the iPhone 6.

      • ernie

        Seems to me that you obviously haven’t used a sgs3 or any other android based device for that matter, as you ignorantly joke that Samsung ‘copied’ apples device. Panoramic photos in iOS 6, seriously, that’s been on android based phones for over 2 years.

      • normm

        Panoramic photos have been on iPhones much longer. Just not in the built in camera app.

      • GeorgeS

        @ernie:

        Sorry, but a jury has already found that Samsung copied Apple–and don’t get into “rounded rectangles.” Instead, actually read the verdict.

      • fiftysixty

        3rd party apps have been available for the iPhone too. If you mean panorama as an integrated feature of the OS, then Android gained it on October 19, 2011 when Ice Cream Sandwich was publicly released, not even a full year ago.

      • fiftysixty

        3rd party apps have been available for the iPhone too. If you mean panorama as an integrated feature of the OS, then Android gained it on October 19, 2011 when Ice Cream Sandwich was publicly released, not even a full year ago.

  • narg

    The first paragraph was a massive rhetological fallacy. That destroys the whole article.

    • http://www.asymco.com Horace Dediu

      Can you be more specific as to what you mean by rhetological fallacy? That is not a word I’m familiar with.

      • gbonzo

        May I try to translate that into your language. I think he means that the first chapter is under-serving the market. And not in a positive way.

      • oases

        If he won’t say which fallacy and be prepared to explain/argue it, he’s best ignored.

  • Hans Christian

    The data you’re presenting is all hardware related. Software has to be a significant part of this evaluation, both in bringing in new users and keeping old. No matter how incredible you’re technical specs are, the software has to be responsive, easy to use and reliable.

    • Hans Christian

      Ahh, but I see in the comment you explicilty are focusing on the hardware specs. Software “quality” is nearly impossible to chart.

  • http://twitter.com/kleptco Karl Klept

    The science practiced here is the science of explaining what Apple just did as being the uniquely brilliant thing to do. Apple is so awesome that they can calibrate their innovation to deliver just the amount needed to maximize their awesomeness.

  • Jeffi

    I think Apple believes the prior iPhone4s had the optimal screen size for a smartphone. The change in screen size (and device height) was a design compromise to accommodate a larger battery necessated by the use of LTE. Some people prefer a large screen device. Apple does not serve this customer as Apple is only interested in serving the 80% that want the smaller optimal size screen in which they deliver.

    • jawbroken

      The battery is about the same capacity, by all accounts, and the phone has a lower volume by 12%. If there was a tradeoff made by increasing the height it was in order to reduce the thickness while maintaining enough internal volume to fit everything.

      • oases

        Good point, and I think the longer screen will be good for maps…especially turn-by-turn.

    • oases

      Are we losing something being going to 4″?

    • MyOtherSelf

      The volume of the iPhone 5 is 87% that of the iPhone 4S while the weight is 80%. The battery should be slightly smaller since it only has 98% of the capacity of the iPhone 4S’s.

    • handleym

      Why this insistence that the usage model for a product remain static?
      We used phones a certain way in 2007. Given those use cases and the costs of materials etc, a certain screen size at that point made sense.

      Five years later, we use our phones very differently, and we have different technologies available to build them at different price points. The size of the human hand has remained unchanged, which puts constraints on the sensible design space, but that does not mean that what was optimal (across the population) in 2007 is optimal in 2012.

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  • http://twitter.com/mikemchargue Mike McHargue

    Every time you post I am more disappointed in my own writing. :)

  • http://twitter.com/jimmortensen jim mortensen

    I posit that the real disruption threat is an extremely low-end “Social Phone”.

    One that does only:
    – Twitter
    – Facebook
    – Yelp
    – All the apps on the 1st iPhone

    Price it at free with 2-year contract, with the contracts being ~$40/mo for Data/Voice/Text, and you have a winner.

    Whether or not that’s possible, I don’t know. But the rumors of a Facebook phone would seem to suggest that it’s at least being investigated.

    • http://twitter.com/RangachariAnand Rangachari Anand

      You can’t really have Facebook without YouTube and then it becomes a slippery slope as more things get added.

    • handleym

      You could call it, I don’t know, the Kin maybe? I predict it should be a MASSIVE hit.

      It’s probably not a good idea to beta whole lot of money on vague hunches, assumptions of how phones re used based on what you see on TV, or the rantings of the most vocal segment of the internet hive mind.

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  • Karthik

    Hi Horace…does disruption has to happen abruptly and suddenly or can jt happen in stages / phases? If its abrupt, we will see a disruption happening but in if its in phases, it might be a case of “connecting the dots” an ‘x’ number of years later….

  • MT

    Thanks Horace for the article. Think you hit the nail on the head. With the level of research, the massive investments and the weird and amazing Apple patents, I am sure they could have created something that would blow our minds – but the world runs on economics, so they will keep stringing us along … and we will be happy to chase after the carrot hanging in front of our faces…

  • dorkus_maximus

    Another aspect to the “good enough” issue is that even when a product is “good enough” there are still competitors out there pushing advancements. Apple may fix its display resolution at x ppi because the eye can’t distinguish anything finer, but that won’t stop Samsung from going to x + 1 ppi to claim a competitive advantage.

    It’s a technological arms race that takes both sides incrementally well past “good enough.”

    • http://twitter.com/WalterMilliken Walter Milliken

      I don’t think Apple will chase specsmanship; they mostly haven’t in the past. And there are real costs to overbuilding things, especially in the mobile space, where those things have a significant cost in power.

      If Samsung builds a “Better Than Retina” display, but Apple’s Retina display allows the phone to run 2 hours longer on a smaller battery, I think consumers will go with the latter. Some specs are more important than others, and from what I’ve seen of the designs, it looks like Apple sees battery life as one of the key user metrics.

      About the only thing I’ve seen people actually note as useful in the display area is physical size, and there seem to be too camps: Apple’s (which seems to be based on “can hold and use comfortably in one hand”), and Samsung and other Android makers, which tout a “bigger is better” marketing message, but it seems that some people do find the improved legibility of a larger display beneficial. So I think we may be looking at slightly different use-cases here.

      Overall, I think the iPhone 5’s performance and display specs are in the “good enough” range now; there aren’t too many applications that demand better. The camera can probably still see some useful improvement, and I fully expect Apple to move in the direction of better battery life as a key feature in future models.

      About the only sleeper I see in the performance specs is if Apple decides to move Siri’s brain from the cloud to the device. There are good reasons to do this, but Siri depends on a lot of data and processing power. Ultimately, I expect Apple will decide to move the main parts of Siri off the cloud for reliability/connectivity reasons. That would drive higher hardware requirements, I believe.

      • unhinged

        Re: Siri, I look at the Mountain Lion implementation (where the raw audio is still sent to Apple for processing) and think that if the processing _is_ going to be brought back to the device, it won’t be any time soon.

        Apple have, for a long time, pushed for “always on” network access with high bandwidth to maximise the value of the nodes and the network. My personal belief is that this derives from the UNIX history of NeXTStep and OS X, and relates to the philosophy of OpenDoc – small, specialised entities leveraging the capabilities of others to create the solution. But you need fast inter-entity communication to make it work, and then you need to solve the complexity problem.

      • davel

        The problem with relying on the wire is that is your weak link. Wireless is notoriously spotty.

        Perhaps the reason for the cloud with SIri is you can make back end improvements without pushing anything to the device. It also makes it more unique as it makes it harder to disassemble and replicate.

  • FalKirk

    I think that this article is addressing the wrong question. The iPhone 5 hardware may or may not be over-serving the market. But the overall user experience of all smartphones – hardware, software, content, apps, ecosystem and the integration of all of those individual elements into a coherent whole – is definitely underserving the market.

    Apple is in no danger of over-serving the market. There is a lot or room to go before smartphone ECOSYSTEMS become “good enough”.

    P.S. This is not meant as a criticism of the article which is focused on a specific question. It just raises the possibility of a new, perhaps more important question that may swallow the initial question whole.

    • http://financial-alchemist.blogspot.com Turley Muller

      I agree. It’s impossible to separate the effects of the OS & ecosystem from the hardware component with respect to consumer demand. I think that the OS/ecosystem dimension may explain why iPhones 1-2 years old are popular and still in demand. May also reveal why Apple is able to sell so many iPhones while competitng devices may have “higher specs.” This takes the pressure off Apple to overserve on the hardware side- like introducing LTE before there is minimal network coverage along with immature LTE basebands that chew battery. Another example is NFC. Other hardware vendors have prematurely thrown those features in, along with others… All in an attempt to make their new phone “better” while few, if any users benefit.

      • FalKirk

        “I think that the OS/ecosystem dimension may explain why iPhones 1-2 years old are popular and still in demand.” – Turley Muller

        Couldn’t agree more with your entire post.

    • davel

      I agree. Apple has a long way to go in improving and extending iCloud, Siri, iTunes, etc.

    • Walt French

      Maybe you meant, “this article uses poor metrics to measure whether the market is over- or under-served.”

      I can certainly see many changes such as a strong Siri interface; a clever way to get low-urgency/moderate-interest Facebook posts separated from high-immediacy/medium-relevance separated from medium-timeliness/high-importance news stories from non-urgent/high-quality pieces like Salman Rushdie’s recent NewYorker article, so your device does triage the way a smart assistant would; or many other system changes.

      I imagine, in fact, that while we MIGHT be using a browser in 10 years, we’ll almost certainly NOT be using any of the other 15 top apps such as email, etc., with the various dividing lines we have now.

      So yes: no danger of over-serving this market, for many years to come. Even if the future hardware only grows at the rate extrapolated from the last couple of years.

      • Chandra

        Since Apple provides software as a free upgrade, what is the motivation for people to upgrade if the current hardware right-serves those needs?

      • Walt French

        I’m in the process of (trying to) upgrade my iPhone4; the 5 looks to be faster, more capable plus I’ll get Siri and one or two minor software features. As a subsidized user with a two-year-old device, it looks like a lot of benefit for very modest outlay. So Moore’s Law type enhancements, plus maybe better targeting of more price-sensitive consumers, will support continuation of current sales growth rates. Just fine.

        I won’t say that Apple is immune to trying to get users to upgrade, but it is ultimately a self-defeating strategy, as it leads to a focus on features/ephemera, rather than Getting Jobs Done. Extrapolating more than a bit, I imagine Apple’s next 3 years of innovations to be in the services area (Siri, aka Answer Central; Travel/Location aka Maps; Photo Sharing; News/Info/Friends updates that go beyond sharing and separate apps for Twitter, Facebook; …) and only every few years creating a dramatic new hardware platform for services.

        Analogously to how Charlie Kindel has recently been reminding people who expect Microsoft to launch its own hardware, Apple advocates should also remember that cloud services are easy, but satisfying users and making money on services is Hard. You have only to look at the Mapgate brouhaha to appreciate that this will require exactly the same level of commitment that breaking into smartphones did.

    • mshipe

      I concur as “good enough” is a moving target concerning smartphones whether it is specs, design or the ecosystem. As their capabilities are augmented so to is the “good enough” standard as user possibilities proliferate.

  • Aladin

    Thanks for graphs. A lot of sites is lazy to make them.

  • Phil Hood

    For Horace: Can a company create an innovation that customers don’t “use” but do “value.” Perhaps a cosmetic innovation or some software that seems desirable but is rarely used? What about innovations that are used but aren’t valued? It seems there are a lot of those that companies are required to invest in to stay competitive.

    • http://www.asymco.com Horace Dediu

      Many companies build products that are not used but are valued. These are products whose value is in their option for use. For example most cars have more horsepower than can be used without ending up in jail. The point is that they are vulnerable to disruption. A competitor can offer “good enough” power for lower price or use a new type of fuel that is more economical. Many companies sell products that are used but not valued. These are commodities. They are most likely already in a state of no growth. The only time a company isn’t vulnerable is when it offers a less than good enough product which means that improvements are hungered after. This is when it creates unforeseen growth and wealth.

  • Karthik

    Hi Horace…Does disruption only has to happen suddenly? or can it happen in phases (n number of years or so). The last disruption event I can think of is the iPod Mini killing. That was abrupt and hence easily classified as a “disruptive” event relative to Apple. The iPhone business is enormously larger (compared to iPod or iPod Mini) – valued at probably $60B +, to have an abrupt disruption. So maybe there will be a new theory on disruption thats a function of economics and a phase by phase disruptoin…will be great if you can shed some light on this..

  • scutdog

    Mind-expanding as always.

    Here’s one more set of data points (from Wikipedia) that may be interesting, especially since the graph trends against value, before suddenly changing at the iPhone 5:

    Device – Weight
    iPhone – 135 g
    iPhone 3G – 133 g
    iPhone 3GS – 135 g
    iPhone 4 – 137 g
    iPhone 4S – 140 g
    iPhone 5 – 112 g

  • richlo

    Ecosystem enhancements can also be part of making a product better especially in the case of Apple. Hardware and software have to be in sync otherwise the product starts falling into the hardware specs war. Such as PC manufacturers that continually add more horsepower that is often overlooked by the general consumer.

  • Iphoned

    Improving processor, graphics speeds and rams size alone has dramatic impact on subsequent user experience and the types of apps that are possible. This is particularly obvious with game apps. So long, long, long way to go before “good enough” is even visible, let alone, reached.

  • Jim Zellmer

    It would be useful, if possible to chart iOS feature and capability changes over time. I sense an increasing emphasis on compatibilty.

  • http://twitter.com/deeje deeje

    is this related to product naming? Does the “New iPad” mean Apple feels that product is serving in balance, whereas iPhone 5 implies Apple sees more underserved needs still TBA?

  • http://twitter.com/WalterMilliken Walter Milliken

    Another piece that’s hardware-related, but not a spec, per-se, is the ability of the iPhone to serve as a platform for new/niche use-cases via add-on hardware, much as the software app platform made iOS devices rapidly fill a wide variety of special application niches.

    I think we’re going to find out that the Lightning port is going to be aimed at 3rd-party add-ons that extend the functionality of the iPhone/iPod Touch as a platform for hardware-enabled embedded applications. We see some of these now, leveraging Bluetooth or WiFI connections to the iPhone, but those are slow and/or power inefficient. Apple would need to develop a way to compartmentalize the device drivers for external equipment so the iOS security model works, but I think this is technically feasible.

    I guess the hardware metric here would be some combination of external port bandwidth and a measure of its flexibility.

    • davel

      To my knowledge Apple did not speak much about the connector as they did with Thunderbolt. Is it simply a new form of the usb connector? If so what can third parties do with this new wire that they could not do before?

      • http://twitter.com/WalterMilliken Walter Milliken

        Apple hasn’t said much directly, my comments are based on some of the rumors from more-reliable sources in the blogosphere, and reverse-engineering some of what Apple is claiming will be available. If half of what they’re saying is true, the Lightning connector is more than just a new form factor for USB 2.0.

        In fact, I can guarantee that, since Apple has stated officially they’re making HDMI and VGA video out adapters that connect to the Lightning port. These would have to either be active devices, or the Lightning port has adaptive use of the pins it does have, switching between several sets of electrical protocols. Both of these things may be true.

        One thing I’m pretty sure of — if the connector allows slave peripherals to be attached to the iPhone (which is itself a USB slave device when attached to a computer), the port is *not* a standard USB interface, since USB doesn’t allow a port to function as both a master and a slave device. The protocol just doesn’t work that way (unlike, say Firewire).

        I’m not sure how Apple’s earlier Camera Connection Kit adapter works, since it attached USB slave devices to the iPhone. It may actually have had a USB master chip embedded in it which had a slave port on each side (to camera and to iPhone). Or they may have tweaked the USB protocol in some way to allow the iPhone 5 to run as master in some cases — a departure from standard USB, and a bit tricky to pull off.

        I rather expect that the Lightning/dock connector and the Lightning USB cables are actually active devices. And a PCIe/USB chip is very easy to get (at least PCIe/USB master), which is why I suspect the Lightning port may in fact be some variant of PCIe, just as Thunderbolt is.

  • ronin

    Great stuff Horace! Very insightful and original approach.

    This is minor but maybe you could flip the “Device Thickness” chart and make it “Device Thinness” with zero at the top of the y-axis instead of at the bottom.

  • http://twitter.com/JohnRMoran John R. Moran

    As noted by several other commenters, it seems to me that the question of whether a product “overserves” customers depends on the job-to-be-done.

    The nice thing about a smartphone (or miniature computer) is that it can address a huge number of jobs. Therefore, if Apple starts to overserve customers at one job, it can shape the functionality (software) of the device to address a different job and again assume a disruptive trajectory against a new set of competitors.

    Witness how the iPhone was at first just the fanciest smartphone, combined with a digital music player. Then the App Store and a series of hardware innovations enabled it to disrupt cameras, GPS devices, many computer use-cases, etc. I’d argue Siri is opening up a new disruptive trajectory as well.

    As Clay Christensen wrote, “Few technologies or business ideas are intrinsically sustaining or disruptive in character. Rather, their disruptive impact must be molded…” So while iPhone innovation appears sustaining and at risk of “overserving” a static target, if you consider that Apple is continually adjusting its targets it’s obvious it can continue to compete asymmetrically in market after market.

  • davel

    can you talk a little bit about the cell bands? I know Apple has incrementally supported more signals but was not aware they went from 10 to 18? in the last release. Is this all about multiple LTE frequencies or is it something else?

    • http://twitter.com/WalterMilliken Walter Milliken

      Different versions of the iPhone 5 support different sets of bands. I believe there are three versions currently: US-GSM, US-CDMA, and an “other” version which seems aimed at Europe and parts of Asia. (The “US” versions aren’t US-only, but aimed primarily at US carriers, I think; that’s my nomenclature, not Apple’s.)

      Which iPhone 5 version you need depends on which bands your carrier uses for various functions, primarily 3G and LTE. Unfortunately there’s no world standard for band use for LTE, and apparently not a whole lot of commonality. There’s even some variation in 3G bands, which is the reason T-Mobile is out of luck in the US currently (they used an oddball 3G band no one else uses).

      So “lots of bands” translates mostly to “works on more carriers in more places”. But by no means all, from what I’ve read, at least for the three known models.

      I believe the band issue is due to the limited choice of components for the radio elements like filters and power amplifiers. It’s hard to make one filter or amplifier chip that handles all the various frequency bands used around the world. The bands may also impact the size of the antenna, or components that tune the antenna to the correct band. (I’m not an RF guy, I stick to digital stuff, which this definitely isn’t…. so someone with more RF knowledge can chime in here.)

      • davel

        Thanks. I have been wondering about the LTE chip. I had assumed Apple found a chip to reach Verizon/ATT bands and had one phone as they always do.

        What you propose is a big shift for Apple

      • http://twitter.com/WalterMilliken Walter Milliken

        My understanding is that there’s one “LTE” chip (the Qualcomm baseband chip) used in all the models, with a different array of auxiliary RF chips between it and the antenna. These auxiliary chips convert the actual radio frequency band down to a standard frequency band (the “baseband”) that goes into and out of the Qualcomm chip, which does most of the heavy lifting.

        Prior iPhones have actually had a GSM-specific or CDMA-specific baseband chip; the latest iPad and the iPhone 5 use a single baseband chip across all models, according to reports. Support for LTE also requires support for more frequency bands that hadn’t been used for 3G (which also has to be supported at the same time, for fallback outside LTE areas).

        So the iPhone 5 line is actually more unified than prior versions, in that one baseband chip is used in all models – the shift is actually towards more unification.

        But the RF bands are a bit too different to make a single RF part that can handle them all, even if the baseband chip can handle all the protocols. My understanding is that the RF chips generally can handle a few bands each, and I think Apple actually uses 2-3 of them in each design to cover more bands. But covering *all* the bands is expensive in component space, and possibly power.

        So we wind up seeing a set of iPhones with different sets of RF chips in them to cover the various frequencies used in different countries. This is partly a reflection of the lack of standardization among carriers on which frequencies they use for LTE. There is some variation even in GSM 3G, but not as much, apparently. The only GSM 3G carrier I’ve heard of which is outside the frequency set Apple covered is T-Mobile in the US, which for some reason (probably competition with VZ and AT&T) wound up using an oddball band for 3G.

        Spectrum use, worldwide, is just a mess anyway — it’s allocated differently in different countries and regions. There’s some coordination at the world level, but there’s a *lot* of fragmentation in the details. Apparently even the US Government doesn’t know what it’s doing with all the spectrum it owns.

        “One radio to rule them all” is *really* hard….

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  • benbajarin

    I tried to read many of the comments so I wasn’t like a child walking into the middle of a movie… But there are so many I couldn’t digest them all.

    This article is very interesting. I have been thinking about this as it relates to the law of diffusion of innovation, specifically around adoption cycles in maturing markets. I have tried to point out in my own columns in various places that a leap in innovation from one product cycle to the next can actually hinder adoption. I think Horace has perhaps discretely nailed the point that more often than not the danger of over innovating comes from those who are trying to catch up rather than the market leader. There are many products I have seen that are just around the corner that will absolutely over shoot the markets needs. This happens like clockwork in our industry.

    I think Apple is taking the right approach by focusing on the relevant features. To which gigantic screens and NFC are simply not at this point in time. Apple is clearly willing to say to people, if you want a bigger screen and NFC, and other key features there are other choices available to you. I don’t think Apple is naive enough to believe they will ever get 100% of this market and we all should hope they never do.

    This I am absolutely sure of.. Apple has a clear and concise answer to the question of who is my customer. They are focusing all their efforts in bringing the right hardware, software, and services, wrapped up into a seamless experience to that specific customer base.

    At some point in time they will wow us again, I am also sure of this. But it will be when the time is right, and the market is ready.

    • http://twitter.com/WalterMilliken Walter Milliken

      I’m not sure how much “Wow” is left in the cellphone market; we seem to be getting a lot of “Gee Whiz” in its place.

      I expect any disruption now is going to be more subtle… e.g. an entirely new and better battery, or, say, the Lightning connector, neither of which is going to excite the average buyer.

      I think the innovation in phones will move mostly to the software side: apps and services, and to hardware tuning and add-ons. Here, Apple has an advantage because they can optimize a design across the entire system (cloud/network/software/device), rather than only working on one or two parts of the system a third party has control over.

      The new A6 processor appears to be a perfect example of this — by controlling their CPU design, Apple can tune power/performance tradeoffs that their competition, limited to commodity parts, can’t make.

      I see three radical new innovations in hardware in the iPhone 5: the custom A6 CPU, the new in-cell screen, and the Lightning port. None of them directly affect the user features, though they all impact indirectly, primarily in size/weight/power, which is what the user will notice.

      • benbajarin

        I’ve seen some things in display company labs and other component roadmaps that I think are pretty innovative and worthy of wow. Who knows if Apple will use any of them or things like them but I still think there are some things that can be truly innovative. Unfortunately I can’t share any details. You just have to take the word of this industry analyst for the time being :)

        That being said, at some point in time, probably not the next few years but at some point in time I expect a UI overhaul of both OS X and iOS. At that point we could see some really cool stuff.

      • http://www.facebook.com/people/Shameer-Mulji/1685212657 Shameer Mulji

        That UI overhaul better come soon, as in the next couple of years. iOS, as nice as it is, looks aged in comparison to Windows Phone 8, the up-coming Blackberry 10, and Google’s Jelly Bean handily beats in terms of their location services (ie: Maps) and Google Now.

      • unhinged

        I finally get a chance to (re)use this line:

        The “wow” is now “meh”

  • Gordon Shephard

    I have the option, over the next two years, of paying $127.57 * 24 + $200 + $35 -$300 Resale for an iPhone 5, or $127.57 * 24 +$99 + $35 for an iPhone 4S – $200 resale for an iPHone 4S. (Subtract the $35 upgrade fee if you aren’t upgrading)

    $2,995.68: iPhone 5
    $2,996.68: iPhone 4S

    That’s the equation faced by an iPhone 3GS/4 user this week.

    Is it any wonder that nobody is purchasing the older models?

  • http://www.winningstack.com/ Adarsh Menon


    If you have to add features and drop prices at the same time then it’s likely that the market does not value the improvement.” The new line of Kindles have added features while dropping the price. Is this a case of them aggressively going after market penetration (since they don’t care about margins on the hardware side) than the market not valuing the improvements?

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  • http://www.facebook.com/Bomuld Tommy Lindegaard Nielsen

    If you are using such argumentation in your bachelor thesis you will either 1: fail or 2: prove your local/national educational level is very low.
    Why?
    You fail to understand the concept of brand loaylity hence the 90% of holiday sales.
    You fail to understand that people do not evovle at the same speed as tech. The i5 may very well be the one iPhone model to have the best sales´, but in terms of competition it will be the weakest because the competitors have stepped up the game. This will mean that the next iphone(called “i5s”) may see weaker sales number than the i5, but the “i5s” could easily have better competition opputunities than the i5. this is due to the consumers delay of embracing new technology – not everyone is Trendsetters, you know.

    And you havent taken the competition into account. Your hypotese will work in North Korea, but be flawed in the rest of the world. You need to add some theoretical work. I suggest you read something about basic branding.

    I’m sorry to be harsh, but I think you need to talk with your supervisor

    Kind regards

    A Master in Communication & Online Branding

    • http://www.asymco.com Horace Dediu

      Noted, and tweeted.

  • http://www.facebook.com/people/William-Donelson/1401480685 William Donelson

    Excellent article, fascinating perspective.

  • Joe_Winfield_IL

    I recently wrote the following about absorbability – but I’m sure I meant it somewhat differently than how you have used it:

    “Apple are very careful to release only a couple major software features with each iteration of iOS. Sure there are hundreds of minor changes, but only a couple really big ones. That way, consumers can absorb and actually take advantage of the new features. The company is deliberate in its marketing, showing exactly how to engage the feature and several practical use cases. Apple also benefits in that iOS features can be rolled out to the entire universe of Apple devices very quickly.

    “In contrast, Samsung throws a lot against the wall. This is their strategy in a nutshell, whether describing the device portfolio, the software feature list on high-end devices, or the marketing. For example, in addition to S-Voice and S-Beam (which supplant perfectly useful stock Android alternatives), Samsung has added features to the S3 like ‘Palm touch mute pause,’ ‘Palm swipe capture,’ and ‘Shake to update.’ Besides the fact that most of the new features don’t work anything like they are supposed to, Samsung is asking users to drink from a fire hose by throwing out so much new stuff at once. Further, Samsung is already handicapped in trying to reach critical mass on software features because it doesn’t own the OS. It cannot roll back new features onto its own older handsets, let alone the vast array of non-Samsung Android phones in the world. Samsung needs to learn that it’s not about what devices CAN do, but about what users actually WILL do.

    “Proprietary features are useless unless widely adopted. Apple’s strategy virtually guarantees adoption of key new features, while Samsung makes its own life very difficult through constant iteration and its own brand of innovation.”

    After reading your post this morning (not sure where I was yesterday), I have more conviction in these thoughts. Apple gains even more by delaying gratification with new features. The company is better able to track the point at which the product is over-serving by measuring the usage of its key new features. Additionally, by metering the new features, the company is able to stretch out the timeline a bit – as long as the phones are not lacking in anything of real import (and Apple plays a key role in dictating which features are truly important).

  • http://www.facebook.com/flavio.teixeira Flavio Teixeira

    What frustrates me is that we are only having this conversation because a South Korean company in partnership with Google blatantly stole Apple’s intellectual property. It’s as if these 2 companies (Sam-pirate-sung and Google) brought the whole stupid “Windows metrics” back where consumers once again start making decisions based on stupid specs because that’s the only thing they (Googung) have a chance at “winning”. Apple wonderfully drawn almost everybody out of that moot debate and brought to the foreground what really matters: the overall experience, the incredible innovation making things never before thought, possible. I sometimes think the only way Apple could have avoided this was to launch a cheaper iPhone version 3 years ago and be more aggressive in having this version available at every carrier. What Apple was able to do with the iPad and the tablet market, it wasn’t able to do with the most important of its products, the iPhone. What it will (hopefully) do with the iPad mini recognizing Amazon’s success, hoping again it’s not too late, Apple was not able to do with the iPhone. Offering a much superior product such as the iPhone 4S at a much cheaper price is not enough. People want the latest, not the recently retired. Apple should have done this with 2 products priced at 2 very different price categories.

  • porker123

    You forgot the competition. Even the phone is good enough, people would buy the one with better specs from a competitors, if they have one. But good point anyway.

    • http://www.asymco.com Horace Dediu

      Having spent four years as a competition analyst I can only hope to have forgotten the competition.

  • http://twitter.com/rodrigofm Rodrigo Fernandes

    Horace,

    How important is the good enough threshold for disruption? I understand the concept of overshooting, and so on, but imagine the following case. Let’s say the MS Office had stopped getting better before it was good enough (maybe office 97?).

    Wouldn’t Google Docs be disruptive to them even in this situation? They would be free against a payed product, it’s quality would be measured in different dimensions, it would be always getting better, and so on.

    What do you think?

    Thanks a lot for you great work. I’ve been learning a lot with you.

    Best,
    Rodrigo

  • http://www.aaplpain.com Travis Lewis

    So far, Apple has been very good at not over-delivering. One example is LTE. LTE is just barely a usable service. If they would have used LTE 2+ years ago like other phone makers, that would have been a huge red flag.

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