Kagan: The mistake Apple made with the iPhone X

Hate to say I told you so, but the iPhone X is not the roaring success Apple hoped it would be. The reason is as obvious as the nose on your face. However, I wonder whether Apple executives really understand the problem. Let me explain my thinking and see if you agree.

Just like many politicians living in Washington DC don’t understand the people they represent any longer, Apple execs are trapped in their self-absorbed world where everything is all about the iPhone. Times have changed, but they seem stuck in the world they created ten years ago.

First things first. Apple is a public company. And public companies need to grow to keep their shareholders or owners happy. That’s why they are always focused on short and long-term growth. That’s totally understandable. It happens to every company, but there is a cost.

Focus first on worker, then customer, then investor

There is an order that companies should follow for strong and long-term success. First, they need to focus on their workers. Next, their customers. Then if both are happy, it will do well in the marketplace and reward investors. This business strategy has built many success stories.

Too often, companies mix up the order and focus first on the investor. This means workers and the customer are often unhappy. Is that what is starting to happen at Apple? Is that the reason battery-gate happened in the last few months? This is a bad short-term focus.

The thing is, today people and companies can no longer hide things. The truth is always exposed sooner or later. That’s when the embarrassing moments happen. And it eventually, always happens.

This is just one example of many where Apple went wrong. There are others as well.

iPhone battery-gate is hurting Apple brand

So, what is the reason Apple is cutting production of the new iPhone X? Why are sales slower than expected? What signs did they miss that are causing them to cut production from 40 million to 20 million in the first quarter of 2018?

Apple should look at other companies that rode the success wave up and down again to gain perspective. There are plenty. Let’s just look at the wireless handset business. The smartphone sector of the wireless industry dramatically changes every decade. It started with leaders like Motorola in the 1980’s and 1990’s.

Then the network shifted from analog to digital leaving Motorola behind in the dust. That’s when Nokia and Blackberry took the leadership position for the next decade. Then ten years ago the first iPhone and Android hit the marketplace and they took the lead, sending Nokia and Blackberry to the back of the line along with Motorola.

Now, 10 years after the launch of the iPhone and Android, what can we expect? A decade ago, wireless carriers like AT&T Mobility, Verizon Wireless, T-Mobile and Sprint created the wonderful world of apps and other features to attract users. It worked. The app world grew from a few hundred ten years ago, to well over a million in a few short years.

Today, customers choose based on carrier because all sell same handsets

Yesterday, each carrier had different devices. Back then customers chose the carrier they wanted to use based on the phone they chose. In the last ten years, everything changed. Today, every network carries the same iPhones and Androids. So, the customer chooses based on the network, not the phone.

That means every carrier must focus on improving and providing the best service or lowest price. Customers love this freedom of choice. However, over the last few years there really hasn’t been anything spectacularly new, so handset growth has slowed and that is a threat to Apple with their shareholders.

That’s one reason JD Power survey results keep showing all networks are excellent and very close to each other with regards to customer satisfaction. The results are good for customers.

However, in order to keep the growth engines revved up and the investors happy, Apple embarked on a new direction. They did this several years ago as well with the new look to the iOS on the iPhone. That was a new look, but the phone continued to operate the same way. So, while it wasn’t necessary, it didn’t hurt growth.

Reason for weak Apple iPhone X demand

However, this time it looks like Apple may have bit off more than they could chew. This time users of the new-fangled iPhone X have to learn new ways to use their device. And that’s the mistake Apple made.

Sure, the Apple customer group is like a big pie with lots of slices. Sure, some users are interested in a new design like the iPhone X. So, introducing this new design is not the problem. The problem was assuming the entire Apple world would embrace it. That’s not the case.

Most users like what they are used to. Sure, they like innovation. Who doesn’t. But that means innovation to the existing model. They don’t want to have to learn new rules for using a new device. They want what they are familiar with. And the iPhone X is too different.

The good news is Apple kept the traditional design with the iPhone 8. Users are familiar with the way this device works. The bad news is many customers who were enticed into trying the iPhone X are simply not happy. They say they prefer the design they are familiar with and now they wish they bought the iPhone 8.

Why do iPhone users want what they are familiar with?

Why is that? The reason is simple. Ten years ago, there were no Apple iPhones. People did not have a pre-conceived notion of how these devices work. They didn’t have a favorite smartphone because most didn’t use a smartphone. So, they took time and learned this new iOS and loved it.

Today, 10 years have passed. Today, things are different. Today, users know what an iPhone is and how it works. Today, they are comfortable with it. Today, they no longer want to take the time to learn something new. Especially when there is no real benefit to doing so.

Apple’s mistake is thinking their customers will follow them wherever they lead. That may have been true a decade ago, but time changes everything. Their customer base has grown up. Matured. While that may have been true in the past, it is not true any longer.

It may still be true for one slice of the Apple pie today. But the rest of the customers don’t want to be led. They don’t want to follow. They want to lead their own lives. They just want a device they know how to use. They are very busy people.

The truth Apple ignored with iPhone X

By not understanding this simple truth, Apple is stepping on its own feet and creating a drag on its own growth. True, there is a place for the iPhone X for certain users. So, it’s OK for Apple to start that new direction. Perhaps, over time, this is the new direction. However, Apple wants to change the market overnight, and things don’t happen like very often.

So many of their users are more traditional and like what they are already familiar with.

Going forward, Apple should continue to market these two devices. If they do this, they will continue to grow. The customers will realize the difference and make their decision going forward.

Apple must no longer think they can control the marketplace simply because they get bored or want to increase the size of their own company. Users will not tolerate that any longer.

Remember, first focus on your workers. Keep them happy. Then make sure your customers are happy. Then, if you do both of those things right, your investors will be happy because you will own the marketplace.

Users want to make their own decisions under the protection of the Apple umbrella of course. If Apple executives don’t realize that, they will only hurt themselves. The sooner executives understand this fact, the sooner they will get back on the two separate growth paths for the iPhone X and iPhone 8. Apple is still a solid growth company. Hopefully they will stay that way. But as always, it’s up to them.

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