Monday, September 18, 2017

The New iPhones: Apple's Strangely Wrongheaded Pivot

It fascinates me that succession from a successful CEO to the chosen successor almost always goes badly. This phenomenon isn’t limited to the CEO level — I’ve seen highly successful CMOs followed by handpicked successors who also seem to have no clue as to why their predecessor did so well. I think it comes down to a lack of mentoring combined with misconceptions. People with different backgrounds often think their predecessor was lucky rather than smart.


With Steve Jobs, it was always known that replacing him would be incredibly difficult, because he had a weird mix of engineering and manipulative skills that is very rare. He was like P.T. Barnum and Walt Disney. All three seemed to be able to blend advanced visions with powerful manipulation skills to bring their visions into reality.


The new iPhone launch is a showcase of anti-Jobs thinking, and the fact that it took place in a facility initially imagined by Jobs makes it even more ironic. Apple has drifted sharply from the Steve Jobs ideal with the new iPhone launch, and that may be problematic.


I’ll close with my product of the week: a cool manufactured micro-home that likely forecasts the future of affordable, sustainable living.



It Starts With a Name


What Jobs likely would have launched, were he running Apple, is either the iPhone 10 in three versions (emulating what Microsoft did with Windows 10, skipping 8 and 9) or the iPhone 8 in three versions, with one of the versions being the anniversary addition.


One thing that Jobs really got was the importance of a name. Even though Cisco owned the name “iPhone,” he used it anyway and negotiated after the fact to share ownership. He knew that shifting to the next more likely name, “Apple Phone,” would have gone badly, and the lack of success for the Apple Watch is likely a showcase that he was right.


The new iPhones are the iPhone 8, the iPhone 8 Plus, and the iPhone X (pronounced “10”). This naming decision created a new problem with iteration. What do you call the next versions of both phones? “iPhone 9” will look old next to a then-aging X, or “10.” If Apple follows the X, which is likely, to 11, then it will have a hard stop for the next series, because “10” already will have been used, as well as, by that time, 11, forcing a jump to 12 and 13.


This is a Naming 101 mistake. You always should map out how you will iterate the name in the future, but this naming scheme likely will force Apple to step away from the current naming scheme entirely in one or two years, even though it has worked very well up to now, because it has boxed itself in.


Apple largely exists on an image that Jobs created and anything you do that causes people to think about the company differently is a danger to that image. You don’t screw with the formula surrounding your most successful product — and Apple just did that.



iPhone X = Samsung Note7?


The decision tree that created the burning Samsung phones was one that had Samsung putting everything but the kitchen sink in a new phone. Some of those features required a bigger battery, but Samsung wanted to keep the phone slim. Phone size is a zero-sum game if you are trying to maintain a thin profile.


The reason that the Samsung phones caught fire was that once they got to volume manufacturing, it became evident the tolerances on the battery were too tight. Some phones drifted out of tolerance, causing a battery cell to fail catastrophically. When one cell fails in this fashion, the battery tends to cascade into a general failure, and you have a hard-to-put-out fire. I know this, because a lithium-ion fire nearly burned down my house.


The same decision tree appears to have led to the iPhone X. The OLED display alone would require a 10 percent larger battery to have the same battery life as an iPhone 7. (OLEDs are beautiful, but they are less power-efficient than LCD displays.) This suggests that to keep the phone thin while increasing battery capacity, Apple likely tightened tolerances.


Test phones, which were tested individually against those tolerances — just like Samsung Note7 test phones — no doubt worked fine. However, once they go to manufacturing, it is very likely that Apple is going to have tolerance issues similar to what Samsung experienced.


If defective phones are caught on the line, the only resulting problem will be a lower supply (and I expect and hope that will be the result). However, companies do foolish things to meet sales numbers in the fourth quarter, which is when this phone will be available. (This poses a little less risk for Apple, which is on a fiscal rather than calendar reporting cycle, but that is offset by vacations, which typically cut support staff during this time.)


It would be sadly ironic, but it also is frighteningly likely that Apple will repeat Samsung’s mistake. (I think irony defines this decade.)



The Ugly Choice


People who buy iPhones tend to be more concerned about status than those who don’t. Apple customers are more likely to buy luxury cars and other brand names. As we found with the old iPhone 5c, which underperformed expectations, folks who chase status don’t want to buy the cheap version of a product.


The iPhone 8, which is a decent phone, pales in the face of the X, which qualifies as a halo product. Assuming it doesn’t catch fire, the iPhone X is the phone that will inspire envy.


However, the X is not only shipping late in the quarter, but also will likely be in short supply, due to component constraints on things like the OLED display and battery tolerances. This means that Apple could have plenty of inventory for the iPhone 8, but it will be the iPhone X that people will want.


That could result in excessive inventories of the phones people don’t want, and short supply of the phone customers do want. This is potentially a bigger problem for the people who give iPhones to their kids as gifts.


The shortage will be a problem, but pricing will figure into it too. The kids likely will want the X, but either because of lack of supply or because US$1K is just too much for a child’s gift — particularly if there’s more than one iPhone-toting child in a family — many parents might be inclined to opt for their kids’ second choice. This suggests that instead of sales being deferred to when the desired phone is available, sales will be lost because the money was spent on something else.



Inductive Charging/Facial Recognition


I was a huge fan of inductive charging until I used it. To get the phone to charge on a pad, you must place it just right on the charging coils. If you don’t, you get an uncharged phone. This gets really annoying very quickly. The best inductive charging bases are similar to a cradle that forces the phone into the right position. Therefore, much of the current effort is focused on resonance charging, which allows the device to be in proximity of the charger rather than directly on top of it. Apple did indicate that it is working on better bases, but they won’t be available until next year.


The iPhone X was supposed to have both facial recognition and a fingerprint reader, but Apple couldn’t get the fingerprint reader to work with the OLED screen. Now the technology for facial recognition is a ton better than it once was, and I’ve been using and love Microsoft Hello for some time. On a PC, it misses about one time in five, and since I only log in a few times a day, that isn’t much of an issue. I log into my phone hundreds of times a day, though, and missing one in five would get annoying fast.


The cause of the miss — and the reason it failed on the Apple launch stage — is that if the light is too much or too little, or the angle is too far off from the original scan, you’ll get a false negative and it will fail. It also will fail if you don’t do the initial scanning well.


What is of more concern is that police who want access to your phone will simply be able to scan your face with it. They could hold up your phone, ask if it is yours, and immediately have access. Currently, you can refuse to use your finger to give them access. It is a small thing — but given Apple’s stance on this, it is damaging to the company’s desire to keep the phones secure. (This doesn’t bother me that much, but it has a lot of people who focus more on privacy than I do upset now.)



Wrapping Up: KISS


One of the things that seemed to define Steve Jobs’ success is that he kept things simple. (“KISS” stands for “Keep It Simple Stupid.”) One of his first acts was to reduce massively the number of products Apple had, and the iPod was defined not by how much it did but by the fact that it did a very few things very well. Products that had everything but the kitchen sink in them were common, particularly out of Asia — but not out of Apple during his tenure, and he was incredibly consistent.


He basically used a cookie cutter to repeat the eventual success with the iPod, the iPhone and the iPad. Apparently, Apple buried the cookie cutter with Jobs, and I just don’t think that bodes well for Apple or future Apple products. Breaking what works very well has never been a great strategy, but it just amazes me how often this happens when you get a regime change.


The biggest danger is that investors suddenly realize that Apple isn’t the Apple they used to know, cratering the firm’s valuation and taking much of the market with it. Microsoft had a similar event when Steve Ballmer tried and failed to buy Yahoo, and it never really recovered during Steve’s tenure as CEO. Cook is to Jobs what Ballmer was to Gates, and I remain concerned that Apple is on the verge not only of cratering its own valuation but also of taking much of the market with it. That wouldn’t be good for anyone.



Rob Enderle's Product of the Week


After both Harvey and Irma, I’m convinced we need to come up with a way to manufacture homes that will survive storms centrally so we can both get people out of shelters more quickly and do a better job of preventing home destruction in the first place.


The homes that almost always fail are trailer homes, which are an odd mix of technologies designed to make the things mobile and an implementation process that doesn’t allow you to move them when a storm is approaching. They really, in my opinion, should be banned anyplace likely to be hit by a hurricane, tornado, or even tropical storm — all of which tend to level them.


The Futteralhauser (stands for “case house”) is a minimalist design that creates a very sturdy home with a very small mobile home footprint. It’s designed to be built quickly, survive a storm, and be solar powered, so it would also be better during a power outage (if the solar panels and batteries were included).



Futteralhauser

Futteralhauser



Its complete build cost of around $60K likely could be reduced in the U.S. (currently it is built in Germany) through lower labor costs and government subsidies. At 256 square feet, it classifies as a tiny home, but modules can be added to increase the footage to a more reasonable 1,075 square feet.


It would cost less to heat and cool than a typical home, would be sturdier than a typical home, and would be far more ecologically friendly than a typical home with a heavy use of recycled materials. In its 256-square foot form, it can sleep 4 very friendly people.


The result is a reasonably affordable home to buy, a very cheap home to own, and one that not only can be built very quickly but that is far more likely to survive the next storm than a more traditionally built home. Regardless of whether you believe the cause is global warming or something else, we are getting more and bigger storms, and we need to rethink homes. The Futteralhauser, like Blu Homes in the U.S., which I covered earlier, rethinks them nicely, and it is therefore my product of the week.



Rob Enderle has been an ECT News Network columnist since 2003. His areas of interest include AI, autonomous driving, drones, personal technology, emerging technology, regulation, litigation, M&E, and technology in politics. He has undergrad degrees in merchandising and manpower management, and an MBA in human resources, marketing and computer science. He is also a certified management accountant. Enderle currently is president and principal analyst of the Enderle Group. He formerly served as a senior research fellow at Giga Information Group and Forrester. Email Rob.

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