This Is What Happens To Gold Standards

This is what happens to gold standards when a new, annual revision is announced and sold.

Apple PR:

Apple® today announced pre-orders of its iPhone® 5 topped two million in just 24 hours, more than double the previous record of one million held by iPhone 4S.

AT&T PR:

AT&T* set a sales record with iPhone 5 over the weekend, making it the fastest-selling iPhone the company has ever offered.  Customers ordered more iPhones from AT&T than any previous model both on its first day of preorders and over the weekend.

The iPhone As The New Standard

apple_iphone_5_precision_cameraIt’s iPhone 5 launch week, and as can be expected, there will be nonstop news about the new wonder-phone and all that it can do, can’t do, and how it compares to the competition.  Here’s the thing though, the only people who really care about that, by and large, are journalists, tech pundits, and competitors like Samsung and Google.

Why? Because the iPhone is now the standard. It is the baseline. The norm. The default option. That is both amazing and boring at the same time.

Ever since the iPhone 5 announcement last week, countless journalists have come out saying how boring and how disappointing the iPhone 5 announcement was?  But does anyone really care about that?  Fact is, the iPhone 5’s industrial design was leaked months ago, and this itself takes a bit of air out of the announcement.  But that doesn’t make it any less new.  The iPhone is also nothing but a paperweight without iOS.

In 2007, Apple shocked and stunned the world with the iPhone.  The announcement in January at Macworld, followed by the launch in June signaled a major shift in the industry.  Apple had made its move beyond MP3 players and into a new major industry: not smartphones, not even phones, but mini personal computers disguised as phones. While the first edition was groundbreaking, it still lacked an immense amount of features. These features would need several years of revisions and refinement as the technology slowly matured.  While it can be argued that some launches and introductions were larger than others (ex. iPhone 3G, iPhone 4), the fact is that each revision was merely an evolution of the preceding version.  While many people loved their iPhone 4, the 4S contained significant improvement in the camera and performance department that it was a significant upgrade, even though it looked the same from the outside.

While the iPhone iterates and grows, it increasingly becomes that “one thing” that everyone has with them.  Due to their industry exclusive feature of free, annual OS updates, users feel more than comfortable keeping a handset for 2+ years.  I purchased my 3GS in 2009, over 3 years ago from today, yet two days from now it will receive the brand new iOS 6.  That’s an intangible that Samsung and Motorola and Nokia simply can’t compete against.  You see more old iPhones running around than any other brand of smartphone.  This isn’t just perception.

So what has this brought us to?  We now find ourselves with the sixth generation of iPhone being largely feature complete, now with LTE and a larger retina display while still delivering great battery life.  Could it be better?  Sure! Apple could have included NFC and joined an already immature, increasingly crowded and confusing market, but to what end?  That’s not Apple’s style.  They didn’t include copy-and-paste until it was just right.  They didn’t included multi-tasking until it was great and didn’t kill battery life. But by and large, the iPhone has grown so mature that the industry of mini personal computers has itself grown boring.  And in boring markets, you usually have a standard; a default choice. Consider the iPhone 5 the gold standard. It may be boring, but it’s pretty as hell and most people can’t wait to get their mitts on it.

Beautiful Tribute Music for Steve

If you haven’t yet had the chance, I highly recommend watching the “Celebrating Steve” event that Apple held on October 19th at their corporate campus in Cupertino. You hear from Tim Cook, Jonny Ive, Bill Campbell, and Al Gore. Jonny Ive’s comments are particularly poignant. But if you want to hear some amazing music that might bring you to tears, listen to the last song sung by Norah Jones, which is “Forever Young” by Bob Dylan. One of my very favorite bands, Coldplay, also sings a great rendition of “Fix You”, which was also very fitting.

Don’t miss it if you have the time.

Where were you when you heard that Steve died?

We’re probably getting to the point of Steve Jobs memorial overload, but I thought it prudent to share just one bit of reflection on his passing. Much has been said and much will continue to be said about Steve’s accomplishments and his life. The recent release of the Steve Jobs authorized biography by Walter Isaacson has shed much public light on his sometimes very private life.

While Steve was a very flawed individual, it’s hard not to feel a connection to him as he brought into the world such amazing products that are meant to make an emotional connection. Consumers want to love their products. They want to do amazing things with them and do it easily. When devices give average people the power to do amazing things very easily, they start to have an emotional attachment to those devices. Steve was the face behind those devices, even though there was countless others behind the scenes that put their blood, sweat and tears into the work as well.

I remember where I was when I heard that the Challenger exploded. I remember where I was when OJ was acquitted. I remember where I was when the towers fell. And now I remember where I was when I heard that Steve died. All tragic events of varying magnitude to be sure. Why is it we remember so many events of tragedy and yet fewer of triumph? What amazing world events do you remember that are of triumph and joy instead of tragedy?

Smartphones, Market Share, and the Definition of Success

As some of my may know about me, I’m currently enrolled in the full-time MBA program at the University of St. Thomas in downtown Minneapolis.  It’s an amazing program and after only one semester, needless to say, I’ve learned quite a bit.  In one of our classes in the first semester, within our teams of four, we engaged in a business marketing simulation known as LINKS. My team did quite well, but it was interesting how many teams took different approaches to attaining their definition of “success”.  To some it was market share, by attaining the most sales, regardless of profit, that was their goal.  To other teams it may have been high levels of customer satisfaction without industry leading market share or profit.  On a weekly basis they tended to rank us in order of quarterly profit, while disregarding such measures as market share, debt, and customer satisfaction.

To me, it really does beg the question, “what is success”?  How do you define success and what does an industry leader look like?  Smartphones right now are all the rage and if you listen to a lot of the chatter out there, either you’re an Apple fan and you believe that the iPhone will continue to be the bestselling smartphone or you believe that the Android wave is inevitable and will squash the iPhone into minuscule market share like the Mac.  To me, it all goes back to different definitions of success.  Apple store employees are sometimes reminded of the old 5-95 adage (or sometimes 8-92, basically saying that the Mac has 5% market share down, 95% to go), but is that really what they want?  What’s so bad about dominating the most profitable segment of personal computers?

I believe the iPhone is similar in this respect.  Remember way back just over four years ago when Apple unveiled the original iPhone.  At the announcement press conference, Steve Jobs mentioned how the mobile phone market was so large and all they wanted was 1%.  It’s been four big years for the iPhone and currently the iPhone is accounting for just over 4% of all mobile phone sales and just over 17% of all smartphone sales. Those are impressive numbers to be sure.  What Steve joking when he said he only wanted 1%, was he simply trying to temper expectations, or did he actually believe that 1% was the best they could do?  I have a feeling that he was simply trying to set the bar low enough so that he didn’t come off overly confident and take the buzz away from the product itself.

But does market share really matter to Apple?  If it does, they’re doing ok.  Go ahead and ask Google and they’ll be happy to point out how the Android is now the dominant mobile smartphone OS.  Talk to RIM and they’ll tell you about how they’re dominating in emerging markets (i.e. not the US, Canada, or Europe).  So if we draw a dangerous correlation line from personal computer market share to mobile phone market share, we realize that the percentages aren’t that far off (4% for phones and around 8% for computers).  But the shocker comes when you look at profit.  Apple’s measly 4% market share accounted for over half of all mobile phone profits.  Think about that for a moment:  One company that is responsible for only 4% of all mobile phones (i.e. all mobile phones, not just smartphones) sold accounted for over 50% of all mobile phone profits.

I know one thing:  If my LINKS company had industry statistics like that, we would have set a record of some sort (though to be honest, I don’t think there’s any way the simulation would allow anyone to have that much control, assuming real competition).  While other companies are playing the market share game, Apple is playing the profit game, and they don’t seem to slowing down.  When you’re raking in the kind of cash that would make Scrooge McDuck blush, how bad do you really need market share?  It all depends on your definition of success.