For good reason, a lot of controversy is swirling around Apple’s iPhone 4 problems. With Consumer Reports saying the product’s antenna is defective, and the company admitting there’s a software glitch regarding signal strength reporting, Apple’s newest smartphone release is looking not so smart. Even CNN television was running reports about Apple’s “debacle” and what the company should do this morning – including product recalls, software upgrades, issuing new cases, etc. Recommendations that could cost billions of dollars!
Beyond the cost to fix outstanding customer problems, shareholders and employees have good reason to be concerned. According to MediaPost.com “Quantcast: Android Keeps Gaining Steam.” For the most recent quarter Google is now #2 in phone shipments, exceeding Apple and trailing only RIM. Google has gained 14 share points this year, while Apple has lost 7.7 share points and RIM 5.7 points. There are now 60 Android models on the market.
And Google’s open development platform seems to be picking up steam compared to the more closed/controlled Apple platform. Share of handhelds is less critical than number, and share, of downloadable (and downloaded) apps. That Google’s app base is growing quickly, as is Apple’s, is really the story to watch. But with the iPhone 4 issues, will app developers look closer at Android?
This story is a microcosm of Lock-in and Defend & Extend management. Apple was the big pioneer in pushing smartphone apps, and with only 3.5% of the phone market garnered huge PR, unit sales and profits with its early generation. It’s closed environment, along with sleek style and commitment to AT&T network, were all part of the Success Formula. Apple Locked-in on that, and through 3 generations kept growing. But now we see the kind of thing that happens when a business unit Locks-in. In an effort to make rev 4 the team starts pushing for more, better, faster, cheaper – optimizing what’s been working – and suddenly a mistake happens. A parallel to BP – only happening in “warp speed.” The team is trying to push hard to maintain, even grow, handset and app share – and using D&E management to do so. The risk, as we see, is that optimization can lead to cutting costs (antenna design and implementation), and then getting defensive when you’re caught making a mistake!
Google is still pushing forward in smartphones with largely a White Space team approach. Not yet Locked-in, it is still experimenting with new solutions. New vendors and markets. It is learning how to attack the Lock-ins at both RIM (the enterprise market) as well as Apple. And as a result, it’s share is gaining. This is good for Google – and definitely not good for Apple.
The biggest screaming is for Steve Jobs to quit being defensive and become apologetic, as BusinessInsider.com recommends in “Here’s How Apple Can Recover from the Snowballing iPhone 4 Disaster.” The claim is that Mr. Jobs is so personally magnetic that his mere verbal apologies will keep customers and developers loyal – and keep Apple in the lead.
Not so fast. Mr. Jobs is a good CEO, but if your phone doesn’t work…..
Apple needs to get the iPhone team back into White Space work. Today the iPad is the big White Space project at Apple. The Mac, iPod, iTunes and iPhone have started to lose their edge. As Apple has brought forward new products, in new markets, it has pulled off the big goal of “jumping the curve” – by going from one growth market to the next. It has been able to keep up high growth through new market entries. The iPad is the latest in this series, as it is developing the emerging – and rapidly growing – tablet marketplace.
But as we can see, the risk is that D&E behavior creeping into the other markets becomes risky. Luckily competitors for iPod, iTunes and iTouch have been rather feckless. So locked-in to their old, outdated Success Formulas they have done little to effectively attack Apple. Apple has maintained share rather easily.
But this is not the case with iPhone. Another new entrant, Google, is using new scenarios about the future, a deep understanding of competitors and a willingness to Disrupt itself and the marketplace. In a characteristically Phoenix Principle way, Google is attacking the iPhone by taking advantage of the Lock-in Apple has to its initial Success Formula. If Apple doesn’t change, not only will it continue to make unwise decision errors – such as the antenna problem and the horribly defensive PR reaction to its discovery – but it will rapidly lose its advantage. Apple’s advantage came from understanding the market – not optimizing iPhone capability. And Google looks to be gaining the marketplace understanding advantage now.
Apple has to redesign the iPhone management. The team must push itself back into White Space. Be driven not by its internal goals for iPhone, iPhone apps and capabilities – but driven by future scenarios. The team has to get a LOT, LOT savvier about competitors. RIM and Palm are non-competitors now. It’s about understanding Google and its partners – including Facebook. Apple has to rethink its future scenarios and how competitors will try to do things differently. And Apple has to Disrupt its Lock-in to the original Success Formula in order to develop new innovations that can allow it to not only grow (in a very high growth market) but maintain share!
The iPhone 4 problems should be a wake-up call to Apple. Falling into D&E management thinking is easy. Anybody can become inwardly focused on optimizing historical strengths and capabilities. It’s remarkable how you can lose sight of emerging competitors, hoping your Success Formula will win if you just work at it harder. Apple needs to keep winning with the iPad, as that’s a tremendous opportunity. But it also needs to get the iPhone team back into using White Space to behave like a Phoenix Principle organization for the smartphone business.