This blog first appeared as Jennifer Luo Law's piece for Medium
By Jennifer Luo Law
Apple, lauded as one of the most innovative companies in the world, launched its latest products today in characteristically grand fashion. But the iPhones themselves? They are hum-drum innovation, just more of the same.
Here’s the three-sentence low-down about the new models:
There are three of them. Their names are alphabet soup: XR, XS, and XS Max. They look like the iPhone X — just way larger and way more expensive.
Thought Apple was bold when in November 2017 it dared to ask for four figures for the iPhone X? Now, you can fork over an impressive $1,099 for a bigger screen to scroll through Instagram, a better dual-camera system for amateur food photography, and 30 more minutes before you have to juice up again.
This is not the direction analysts were expecting. After reaching a $1,000 smartphone with the iPhone X, some speculated the company would invest in a more affordable option. But the most “affordable” of the new iPhones released today was the iPhone XR, retailing at a hefty $749. This makes the iPhone 3G, which came out in 2008 at the now-inconceivable price of $199, a distant memory.
Apple is focusing its energy on moving upmarket. It’s premiumizing its already premium offering, throwing in all kinds of features we didn’t even know we wanted. Prices are steadily rising with every new release.
What are they going to do next year, release a $1,199 phone?
Is this a sustainable business model?
It may be for now, but at some point, it will lose its luster. Folks who adore the brand, or are locked into the system, will continue to shell out top dollar for the latest and the greatest. But the higher Apple climbs, the less oxygen there is. And those who aren’t yet in the Apple family will be look elsewhere for reasonable alternatives, such as to Chinese company Huawei which specializes in lower-cost but still high-quality devices.
By pursuing premium customers ad infinitum, Apple is trapping itself at the top end of the market and overlooking a key opportunity to win over a new segment of consumers at lower price points — who can provide great new sources of company growth in future decades.
Apple would have you believe that every idea coming out of Cupertino is life-altering. But what Apple launched today was just incremental innovation — the honing of what it already does very well. These new improvements won’t dramatically change the company’s fortunes, and they will soon be copycatted by smartphone manufacturers around the world.
Instead of ever-fancier models, transformational innovation will come from looking at Apple’s costs and focusing on what really matters to well-defined customer segments. Companies can tap massive growth by creating well-targeted, high-quality, low-cost offerings — such as a fresh take at a $400 smartphone that customers eat up. This wouldn’t have to mean ruthless cost-cutting down to a flimsy device that everyone hates. Instead, Apple could pare down its features to focus on just the functions that are critical to certain types of users — like an older consumer who would never play a phone game and who would gladly trade that feature in for a longer battery life. Or Apple could hook consumers into more services, making money from consumers paying out over time for content they really want.
There are lots of possibilities for Apple. But to sustain its growth, it will need to break with its habit of continually increasing features and prices and pumping out high-end products.