The Critical Path #82: Adding Rows

The Apple Q1 financial performance review with a short look at the impact of warranties on gross margins. The growth question: why financial analysis cannot offer insights into new product creation, and why makers of things think different. Finally, a new installment into Asymcar: why the process of car making is over-integrated, over-serving, and over-concentrated.

5by5 | The Critical Path #82: Adding Rows.


  • berult

    There can only be one iPhone. The iPhone. Just as there can only be one Apple. Apple. There ain’t no cut-rate engineered iPhone just as there ain’t no tiered Apple; one for ostentatiously grand designs…and another for tier-two modesty.

    iPhone condenses 21st Century inspirations into one readily identifiable vector of creativity. Priceless, aspirational, and utterly invariable as the quintessential intersect of technology with the Liberal Arts…as Jobs would have it, and would have had it.

    In terms of branding, iPhone is all by itself, way above and beyond iPod, iPad, Mac, or any other sub-brand at Apple. With the possible exception of iTunes, which comes the closest to hitting a sweet spot in brand awareness. But no dice, …iPhone carries the Apple Brand into a 21st Century über competitive landscape on the sheer spell it casts on people’s imagination.

    There’s obviously room for a minimalist, all encompassing communication device. Call it the ‘iWear-able/iTether-able’, or whatever, …and bear in mind while doing so what central character inhabits the ethereal landscape between Apple’s economic agency and the fantasy tapestry it has woven out of a man’s non-tiered inspiration.The iPhone.

    • Steve Setzer

      Beautiful and thought provoking, Berult.

      iPhone is truly all by itself as a brand, and for now really is that central character in the ethereal landscape. But I believe iPad will take center stage one day.

      As an experience, iPad far surpasses iPhone (to me anyway). I used an iPad for two years before I ever used an iPhone; during months last year when I had an iPhone but no iPad, the iPhone felt cramped and stifling. Now I have an iPad and a feature phone — my perfect mobile combination.

      We’ll see what the iWhatever brings.

    • JohnDoey

      The same thing used to be said about iPod.

      From 2001–2003, the word “iPod” referred to just one device that was about the size of a deck of cards and was made out of white plastic and silver metal and had a grayscale screen. But starting in early 2004, the word “iPod” changed to mean a family of music players. “iPod mini” was released, and then the next year, both “iPod shuffle” and “iPod nano” were released. Later, we even had “iPod hi-fi” and the original iPod was renamed “iPod classic.” And consumers asked for an “iPod phone” in 2006, which somebody shortened to “iPhone” many months before Apple released a product with that name in 2007. And of course there is iPod touch also, a phone-less iPhone.

      Today, we have “iPhone 5,” “iPhone 4S,” and “iPhone 4,” so you are already wrong. iPhone is already a family. But Apple could certainly follow the iPod lead and create a larger and more diverse family of iPhones. Putting a 3G rig in today’s iPod touch is a no-brainer, creating a half-price iPhone 5 for users who don’t value 4G or a very high quality camera. Putting a phone into iPod nano would make the best feature phone ever.

      The thing is, iPod mini and nano were surprising, but iPod shuffle was outrageously surprising. An iPod without a screen and scrollwheel? It did not seem like an iPod. But Apple was that dedicated to providing an entry level low-cost music player and that dedicated to removing the price umbrella. So I wouldn’t bet against a full line of iPhones. If they will do iPod shuffle they will do anything.

      The Mac also referred to just one boxy desktop computer for the first few years. Then it expanded to a family that included notebooks. Same with iPad, which is a family now. It was a single device for only one year and a single screen size for only 3 years.

      If you are an enthusiastic iPhone user today, then for you, the high-end iPhone may always be THE iPhone. But in 5 years, the iPhone nano may be the most popular, especially if many people have iPads as their main PC’s. Once you are using an iPad all day, the need for a high-end iPhone recedes. Many people may want the smallest possible phone for the rare times when they are without their iPad. Or people may want an iPad and a wrist device. In 2003, we thought there would be 6 billion full-size iPods pretty soon, but that is not what the world wanted. Some people required for iPod to get smaller, some required it to get a phone, some required it to become a PC (iPad) and some required it to be a little clip-on for the gym. A family of products is needed to serve everyone. One size won’t fit all.

    • obarthelemy

      Reminds me of the sales pitch I got once when buying an outrageously expensive watch for a friend’s bday. Duh ? It’s a watch. It, you know, tells time. Ditto for phones and tablets. They show me the Internet.

      A technological device made in chinese sweatshops and headed for the scrap heap after less than a handful of years doesn’t get me all lyrical, sorry.

  • John Willis

    Horace – I’m aware that the cycles of product devlopment is many years, but if iOS is on a yearly devlopment, and it has been a while since Tim Cook shook up the oeprational chart and Jony Ive got placed as a head of both hardware and software design. With a new iOS coming out – where all the apple software engineers go all-in to get the new version out the door – perhaps the changes that Ive has brought to iOS require a lot of time. You’ve talked about how apple is organized as a functional company – perhaps the changes to to product release cycle have been adjusted as they are working hard to deal with the changes in software, along with having all their refreshed products wating for an update (and the new building and growth point to something interesting going on as well, as you noted).

    Could the combination of all these very large events explain this hiccup in release dates and Apple being a bit more of a puzzle lately?

  • Mark

    Horace noted that Apple has not significantly expanded its carrier base this year. But I don’t recall that he speculated on why that might be. I thought the plan was always to destroy the carrier model since Apple would be the largest beneficiary if consumers could choose their plan independent of carrier influence. And even if they weren’t, I suspect they hate the unnatural situation anyway. So phase 1 was to co-opt carriers and divide and conquer to get their devices sold. Could we be seeing the calm before some planned phase 2? What if they really do have a low-cost iphone in the works that is intended to disrupt the carriers as well as penetrate the third world? Iphone profits would plummet, but is Apple really as worried about that as the analysts are? Isn’t that one type of innovator’s dilemma that Jobs would not have hesitated to blow-up when the time was right knowing that if he didn’t and they became dependent on the carriers it would corrupt the company in the end? In any case, does anyone have guesses as to why they didn’t they expand their carrier base in the last year?

    • It is one of the most captivating mysteries of our time.