In praise of the iPhone with some rough seas ahead

  • There are very few products that can capture the interest of people like the iPhone did, one of them was the iPod.  Doing this is incredibly risky, as a result, but I believe it is better to try to create amazing products and have a few problems, than it is to just tread water and avoid the issues associated with this excitement.   

    Over the next few weeks, Apple is likely to experience problems from class action law suits (most of which will likely be thrown out of court), breaking issues, and a lot of folks whining that they didn’t get the near religious experience they expected. Put in perspective though, Apple did something amazing and, for a generation one product, this was actually a job well done.  

    Now, while I still think you should wait for Generation 2, or better 3, if you want a phone that will both seem new for some time and be much less expensive to buy, I’m still impressed with what Apple accomplished and how well they did it.  

    The stormy seas of generation one

    We have now moved into week one of a mammoth launch, up until now Apple has been able to largely contain reviews to those they believe will write positively about them.  However, now the gloves have come off and with millions of folks getting these things most of whom probably never actually have owned a smart phone before, there are likely going to be a big upswing in complaints. It looks like about 20% of the buyers came across from either a RIM BlackBerry or a Palm Treo and, I expect, a large percentage of that group is really missing the keyboard right about now.  

    This is different than the iPod, which ramped to market more slowly and powered into a market that was emerging.  People have had cellphones for a decade or more and have firm opinions on what they like and don’t like.  In addition, we typically don’t get this much excitement outside of game consoles at Christmas, most of which won’t be opened until weeks after purchase by kids who got a great product for free.  

    This isn’t Christmas, these things generally aren’t gifts, and adults tend to be vastly less forgiving of problems.   The only other tech product I can recall getting this much excitement was Windows 95, and it was huge, until folks got it home and had bad experiences.  The iPhone appears to have worked just fine, but when a million folks try to use something, even a fraction of a percent of breakage is a huge number.  Microsoft clearly wasn’t prepared for this and Windows 95 isn’t exactly remembered as a great product as a result.   

    We are already seeing reports of people who can’t get hooked up with AT&T timely and we are likely to see reports of incompatibilities and breakage as this phone soon. I’ve seen some folks whose phones still aren’t working and neither Apple nor AT&T have been much help (once again it’s AT&T, Apple doesn’t own or maintain the network).   Wait until these folks find out they will have to ship their phones in for new batteries and be without them for a week at just about the time the generation 3 phones show up.  

    For the most part, I think the Apple faithful will ride this out, but the majority of folks buying these phones aren’t part of the cult of the Mac and are likely to be vastly less forgiving. In about two weeks, all of this initial pain should be over and the support organizations will be able to respond to people timely, but during the next two weeks we are probably going to see some really vocal and upset people. Launching during 4th off July week was probably not a great idea as support staff numbers tend to low in this time of the year.

    Getting Perspective   

    This is the combination of a generation one product and a massive initial sales wave.  There is going to be pain associated with such an event no matter who builds the darned device. This is part of the price of going first.  That’s one of the reasons I typically don’t buy generation one products in general and would typically avoid the first wave of one that was really hot.  

    So, for next time, just remember, if you don’t like this pain, just hold off a couple weeks after the launch or until the fully cooked product comes out.  Particularly in the latter case you’ll be able to point at all of the folks with the first generation and make fun of them.  

    In any case, by this time next year, all of this will mostly be forgotten, we’ll have a 3rd generation product coming which would have never happened had there not been a first generation product.  Birthing is painful, and this birth will likely be more than most, but Apple will have done something amazing that few other companies in any industry have done, they will have changed a market that had become incredibly boring.

    Even with the pain would you rather be Apple or Motorola, Nokia, or Palm today?   They didn’t take a chance and bled market share; only RIM looked ok and even they lost some share. For vendors in a mature market with substantial warning to still be hit like this, you have to wonder what they think they are getting paid for.  This is like a high school football team showing up at the Superbowl and beating both Pro teams.  

    In praise of Apple

    Companies just don’t take the kind of risks Apple takes.  Even Apple doesn’t do it that often, it’s simply too expensive.  The iPod was a massive risk, and even they weren’t convinced it would be successful, but they took a chance and, had they not, there wouldn’t be the change we are now seeing.  This change will be amazing.  

    You see, we’ve had phones that would do virtually everything the iPhone does for years, few have bought them and even fewer have used the media features.  I’ll bet most, who have high end feature and smart phones, don’t even know they could play decent music, do videos, and browse the web.  Granted, in many cases the features are hard to get to and painful to use, but that’s not true of all phones and yet people just don’t use the features.

    But people also don’t go around bragging they have these features as well and that just changed with the iPhone.  How stupid would you look if, after you bragged about your iPhone, someone asked you to demonstrate how you listen to music and watch videos and you didn’t know how?  Folks now have a “learn how to use this phone or else” problem and, once folks learn these features, they are likely going to want more and better just like them.  

    Looking off into the future

    It could also change the phone industry in the US which is now largely carrier driven.  That means the carriers, or the folk like AT&T dictate what kind of phone you are allowed to have and often have some of the most interesting features turned off.  Apple was able to bypass this problem with their phone with a special contract and it is widely expected that they will find a way to dump AT&T in the near term future and do something like Disney did on their own.   

    But, overall, this argues strongly for the kind of system that much of the rest of the developed world has which separates the phone from the service and allows the sale of unlocked phones. One of the big problems the iPhone is having right now is with AT&T and I’ll bet a lot of politicians are either experiencing this first hand or vicariously through a loved one. This sets a foundation for change, and change, in this case, could be very good.  

    If we fast forward about 5 years into the future, we should see massive change that resulted from this little product.  It could include the end of Notebook computers as we know them, and it actually validates the concept of the UMPC as Intel envisions it (the iPhone is more computer than phone and even runs a UNIX derivative).  

    Did the iPhone meet expectations? I doubt that was possible, but the better question is:  Did Apple change the world?  That they appear to have done that and few companies and employees get the opportunity to do that.  

    Hats off to Apple for having the guts to make a difference, a huge raspberry to the other phone companies and carriers who were, after substantial warning, caught napping.  The only company that got a competing product to market in time was HTC and they too are new to the market.   

    That’s more than embarrassing.  

    We are at the beginning of a change that likely will seem much more obvious at the other end of it, Apple may not even be the primary company that benefits, but one thing for sure is you and I will benefit from this change and for that I thank Apple.   (And I still think you should wait for the 2nd or 3rd generation iPhone).  

    Rob Enderle is one of the last Inquiry Analysts.  Inquiry Analysts are paid to stay up to date on current events and identify trends and either explain the trends or make suggestions, tactical and strategic, on how to best take advantage of them.  Currently he provides his services to most of the major technology and media companies.