Today I will Do What Others Won't
So Tomorrow I Can Do What Others Can't

Apple’s new iPhone is the start of the decline as apple descends into a bloody red ocean of competition

What the new iPhones now represent:

·        The new iPhone’s offer nothing of additional value (Outside spec increases)

·        The new iPhone’s do not reduce end user cost (They increase it with required accessories)

·        Apple is now copying its competition and charging more for the privilege (a lot more)

What I Predict Happening in the next five years

·        Smart phones will now spiral down into a price competition market

·        The iPhone X will be the lowest selling iPhone ever

·        There will be a growth market in “Build your own device” OEM type assembler

·        The smart phone market will resemble the now commoditised PC market.

Apple has completely strategically missed the mark

I would call Apple’s release of the new iPhone’s the strategic faux pas of the century. They have shown that by releasing a phone that basically copies the competition they have lost sight of what a strategic blue ocean shift is. As a result, they have created a product that has no additional value and it costs you more money!

You see in order for products to be great and break free of the competition (or as W. Chan Kim and Renee Mauborgne put it “sail in in a blue ocean”) you have to redefine the boundaries of your offering. Then once you have done this you need to deliver more value to your customers at less cost (not necessarily less price but less total cost). Your goal is not to out compete the competition; your goal is to make them IRRELEVANT!

If you cannot do this, you are just doing the same thing your competitors are doing, and in doing so, squarely pitting yourself against them and in this market there are only two things that shrink.

1.      Price

2.      Your profit (same costs, less RRP)

Because all of the apple features are easily copied and they have no exceptional value to the end consumer when compared to other products, they are now only competing on one thing and that is the price. This is the basic law of supply and demand, the supply of these features are easily available with all competitors, with demand now unable to outstrip supply, the price must come down.

Apple is nothing new, something borrowed and it’s not blue!

1.      The iPhone X is basically just a copy of Samsung

2.      The iPhone 8 is just a 7 with better features

3.      A better camera is predictable

4.      A faster processor is predictable

5.      Facial recognition is not a game changer, it’s not even a feature most people care about

Contrast this with the first iPhone that gave us far more value than any other product in the market place at a much lower cost:

1.      The entered a time where blackberry dominated

2.      They pioneered apps

3.      They gave the common user email without the need for a blackberry server (Blackberry servers were horrendously expensive)

4.      They natively connected to all mainstream mail servers (including exchange)

5.      They had us eating out of the palm of their hands

What could Apple have done to create a new ocean of demand

When I think about reasons to change when I have a perfectly good functioning phone there needs to be a really compelling reason as to why I would throw away $1200 and spend another $1400 – $2000 on a new phone. The reality being that the change would have to create a large upswing in value and a considerable lowering in total cost for me to move (I’m not talking fans here, I’m talking the majority of the market that are practical consumers).

Something that jumps to mind is that Apple could have created a product that significantly reduced our data consumption across cellular networks through advanced compression techniques. By reducing the data consumption, it reduces the price of the provider plan we need to be signed up to and could be done in such a way that the savings over 3 years would well exceed the price of a new phone and in doing so Apple could have created value at a reduced cost for us as consumers.

I am sure if we sat down and thought about it there are many great ideas (that are hard to copy) that could be created to drive up value for consumers.

Final thoughts

I acknowledge that there will be an initial upswing in sales from fans, there always is, just like Samsung, Huawei, etc etc. I’m also sure there will be lots of hype about how much is sold in the first few weeks, but initial fan purchasing hype is not a sustainable business model.

Sure Apple has Billions in the bank, but so did Sun Microsystems (who by the way had a similar cult following) and look what happened to them… What Apple has done with their make it or break it release is they have forgotten about the original dream of creating value for the customer and instead copied the competition. They are now a red ocean competitor.

I’m sure the race to the bottom price will be interesting and fun to watch (not to mention great for consumers) but what I’m now watching for is who is the next great tech company that is going to create a blue ocean of demand by increasing value and lowering total cost in the mobile device market.

Have a great week!

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