Can Apple Lose The Mobile Innovation Game?

The big story this week is the record number of iPhones, iPads, iPods that Apple sold in Q4, 2011. Great news for Apple and it’s shareholders – their stock got a 7% bump on the news – but, with stellar growth in the number of users of the iPhone, what’s the achilles heel that slows their march on the market? I think it’s innovation. It’s something I’ve been doing a bit of thinking about on my own blog, and here’s my case, I’m interested in your reasons for agreement or disagreement.

“Apple needs to either revisit its heritage as the hardware and feature innovator or Android will eat away at Apple’s share of mobile OSes, especially outside the US”

Innovation has not been Apple’s strong suit in mobile as it has been elsewhere. While the company was the first to equip its laptops with goodies like Firewire, Thunderbolt and even WiFi, and being the first of the PC majors to dump optical media for its OS, Apple was uncharacteristically shortsighted in its early deal-making for its mobile devices. Exclusivity resulted in a very long tail of carrier relationship growth. Who knows what their device volumes would look like had they pushed for a larger number of early relationships and quickly ramped the number of Phone carriers in market. Add to that the fact that they’ve owned the market due to novelty, in terms of trendsetting product design and a winning approach to expanding device function, the app store. These are not long-term, sustainable differentiators. At a certain point, Apple playing “us too” on hardware and OS features  is going to leave premium-paying users wanting.

  • Standard features leave iPhone in the dust:  NFC and touch will be available in every new BlackBerry Bold and many Curve devices RIM offers from here on out. Yes, RIM, the company many are saying can’t do anything right.  Contact exchange via NFC is standard in blackBerry OS 7. Google has developed an entire payment infrastructure – Google Wallet – around the NFC chips in its Android handsets, though it’ll take a while for that network to reach critical mass.
  • “Coming Soon” wont’ cut it. Voice recognition? Siri is neat, but voice interaction is here, now on Android (and has been for a while, though arguably not as interactively) and, using it outside the phone OS? Windows Mobile makes use of voice to interact with home theater via devices like the XBox that you can use today. NFC from Apple? Coming soon. Interaction between iOS and your TV, well, some of it is there with Apple TV today but Siri’s rumored features in development are the real story, and also… coming soon.
  • The App Store model is great, but devs like options. Apple did a smart thing with the launch of the App Store in 2008, by inviting in a number of developers to create experiences – via apps – for a wildly popular handset, they were able to quickly scale the use cases upon which they have successfully marketed the product. Leaving innovation on the platform to third parties was a smart move to put distance between iOS and other mobile OSes, but the natives are getting restless. As the percentage of devices running Android tops those running iOS, for how long will developing for just iOS make sense? Those unique experiences? Coming to an Android handset near you soon, if they haven’t already.

Neither NFC, full voice control nor expansion of applications beyond single-purpose tools and ‘gee whiz’ geegaws is going to deal the Apple juggernaut a fatal blow today, but these “nice-to-have” cutting edge features are just the things that users have traditionally bought premium priced Macs over black or beige PCs in the past. The mobile device is the new computing platform for an increasing percentage of the population. Trailing in innovation now means a game of catch-up later, which could put Apple behind the 8 ball based on competitors’ speed-to-market exhibited to-date.

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Nielsen Data Showing 60% of New Mobile Acquirers Choose Smartphones, Source: Nielsen Blog Jan, 18, 2012

At a certain point, Apple playing “us too” on hardware features and outsourcing unique use cases  is likely to fatigue its loyal fan base.  The company needs to either revisit its heritage as the hardware and feature innovator or other platform players – that pool largely being limited to Android at present – with its myriad options and breakneck release cycles will eat away at Apple’s share of mobile OSes, especially outside the US where the price sensitivity for devices is much more receptive to low-cost options.

Comments

  1. Sounds like a list of 3 things you want your next iPhone to do. None of these suggestions are actually innovations. They would be alternative technology adoption decisions.

    Keep in mind that same Nielsen post also showed us that Apple is gaining a higher percentage of new smartphone purchasers while Android is gaining a lower percentage.

  2. Chris Silva says:

    Thanks for your comment, and I see your point, but have a different view. The Nielsen data does show that Apple _has_ gained a larger percentage of new acquirers but this took place in a quarter following one where sales dropped off amid speculation around upcoming offerings. The shift in data shows a change in what folks are buying, I don’t think it presages a linear shift in what’s going to be the top seller going forward. This is a long race and we’ve yet to see the full compliment of worthy alternatives from other vendors. While it may not be _anyone’s_ game, it’s certainly not a fait accompli for Apple.

    As for the technologies lacking in today’s Apple offerings, I disagree that they are simply features. Things like NFC and voice control are gateways to ecosystems that will fundamentally change how we use our devices. They’re elements that will take our devices from passive computing tools to items that expand how we interact (thinking of extending voice control to other devices via our mobiles and the use of NFC by companies like BMW to authenticate with our vehicles and more) with our daily environment. I see them as key elements of remaining relevant as our smartphones become far more to us than they are today.

    Of course, all that said, the innovations that matter can surely change over the next 12-18 months as is the whim of technology trends.

  3. Jon Helge Stensrud says:

    The big difference between Apple and the other players, is that Apple will bring something to market when it’s ready. That’s also why Apple always gets attention, because when they release new products, their innovations are relevant to the user. That doesn’t mean Apple doesn’t do a lot of research and innovation within their secret labs. Who really cares if their phone has NFC, if you can’t use it anywhere? Why waste the battery on premature 4G chipsets if the networks can’t offer a good coverage?

    I’m an app developer myself, having done several apps for both iPhone, iPad and Android. In my experience, it’s very hard to make good use of the Android innovations, because most users have old phones with old OS versions on them, and the small market share of the latest OS versions can’t justify the extra development cost. The same applies to handset features, as screen size, screen resolution, advanced graphics, NFC etc. You mostly end up making an app based on common hardware and software to reach the largest audience. On iOS, on the other hand, Apple has made this extremely easy for the developers. Of course, there are less handsets to optimize for. On the software side, even the iPhone 3GS, released mid 2009, runs the latest iOS version, so the app developer can utilize all current features without worrying about excluding potential customers. Also, all iPhones have the same screen sizes, and when they released the iPhone 4 with retina display, the resolution was exactly a quadruple, making it easy to provide backwards compatibility. If the rumors are correct, the same thing will happen to the next iPad. Also, the integrated and moderated App Store makes the user feel safe to try out apps, not having to worry about security, malware or battery life. Consequently, iPhone users buy way more apps than Android users. (4x revenue, according to some sources).

    Concerning carrier rollout, you probably know a lot more than I do about that. But at least the iPhone is amongst the very few devices where the carrier does not control the software on the device. They can’t preinstall anything or delay software updates. All iPhones are equal, with the same software, the same default browser, the same default search engine, no commercials, no try-before-buy software. This was probably very hard for them to achieve, and may explain the slow rollout.

    I don’t know if Apple will win in the long run. Probably, they will lose some of their market share. But my guess is that it will be for other reasons than lack of innovation. Price and device variety being the two most important reasons.

    But who knows? Apple’s track record is unparalleled. Why criticize a company which makes more money that any other, sells more devices and has a huge and loyal fan base? If they feel threatened, they surely have the means to ramp up their innovation, if that is what it takes.

    • Jon,

      All very good points and interesting to hear your take from the developer side. I had not considered that, in fact, many of the innovations being put on new devices can act as a penalty to developers capitalizing on them if they up resource consumption on the device. It is true that Apple is one of few – if not the only – player that provides an event playing field for developers across its devices. To be clear, I don’t think that the potential fall from grace that Apple may face is imminent and, in fact, they’d have to miss the mark on the next iterations of products to truly damage their position, but it will be interesting to see what Cupertino’s new leadership brings to market from here forward and how it affects Apple’s market position.

      As for “why criticize a company which makes more money than any other,” I look at the post not at criticism but as challenging the conventional thinking which is that Apple is the anointed winner in mobile devices, which is the role of analysts, provided we can ground our thinking in fact and market dynamics.

      I’m interested to hear more about your take on where developers will end up being most successful as Android begins the process of “norming” with the launch of Ice Cream Sandwich as uniform platforms across multiple device types.

      • Jon Helge Stensrud says:

        There are 250.000.000 Android devices out there. Most of these will be around for a long time, and will never get the Ice Cream Sandwich update. So, what should a developer do? At what point is it ok to leave a quarter of a billion potential customers behind? My guess is that it will take a long time before anyone can justify such a decision, and at that point ICS will be outdated. That doesn’t mean ICS is pointless. Google has done a lot to unify their OS and developer interfaces, making the platform far more mature in many ways. But as of now, I haven’t even considered studying the new features in detail.

        Honestly, I don’t really know if apps is as important as it used to be to the end-user. At least on iOS and Android phones, there is a sufficient supply of apps. Windows Phone adoption might be slowed by low app availability. The same can be the case for Android tablets. On the iPhone vs Android phone war, my guess is that there will be other factors at play.

        Apple’s strategy is their integrated eco-system, with iTunes, iCloud, App Store, iBooks, AirPlay etc. Google’s and the Android vendors’ strategy seem to be device variety, price, hardware features etc. It’s very hard for Google to compete with Apple on the eco-system, because of its open nature. But it is interesting to see the Kindle Fire being such a success. It’s got far from the best hardware, but has the Amazon eco-system tightly tied into it. To me, this tells me that service- and content integration is important to the end-user, more than tech specs. Ironically, the Kindle Fire is completely out of Google’s control and makes the app developer’s situation even harder.

  4. Ecosystem wins the day, for sure, and marketing that ecosystem experience over speeds/feeds or other spec has been at the heart of what’s served Apple so well. See blog post here: http://makemobilework.wordpress.com/2011/08/25/lead-different/

    I would say that Google has built an ecosystem but it’s in search of its users, piecing together a device with Picasa, Gmail and Google’s recently revamped Google Music presumes that single users are taking advantage of all of their services, similar to an Apple or Amazon customer, when in fact, they’re not.

    As for the platform fragmentation that’s happening on Android devices, another aspect of the carrier control you referred to earlier, thankfully device half lives are short here in the first world.

  5. Celestine Smith says:

    Thanks.