Apple Maintains The Status Quo With The iPhone 5, But For How Long?

Apple's new iPhone 5 is a case study in incremental improvement. Nearly every aspect of the product -- the CPU, display, cameras, radio modem, size, weight, etc. -- are all improved over the iPhone 4S and at the same $199 price point. No doubt, the iPhone 5 and iOS 6 will sell millions of units, preserve Apple's momentum, and hold off the competition, but significant threats are mounting that Apple cannot afford to ignore:

  • Nokia is delivering Apple-quality innovation. As Nokia demonstrated last week at its Lumia 920 event, Nokia's innovation engine is firing on all cylinders. When the Lumia 920 launches (rumored for November 2), it will outclass the iPhone 5 in key areas such as imaging (PureView imaging, Cinemagraph) and location (Maps, City Lens, Transit) as well as bring wireless charging and NFC into the mainstream. While the breadth of accessories will be nowhere near what the iPhone offers, Nokia gets strong marks for showing Apple how NFC can enhance the accessory experience. 
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iPhone 5: High Expectations, NFC, And Consumer Experiences

A year ago, we stated that despite being only an incremental improvement to the iPhone 4, the iPhone 4S would maintain Apple’s leadership in the high-end smartphone battle.

A lot has changed in a year. Samsung sold 20 million Galaxy S III devices this summer, while Google recently announced that more than 1.3 million Android devices are activated each day — and that it would soon reach the milestone of 0.5 billion Android users. The San José court’s recent decision to fine Samsung $1 billion for copying Apple raised a number of complex questions regarding what exactly innovation means in the smartphone era. While it badly affected Samsung’s brand image, Samsung has a larger portfolio of mobile devices and has also proved it was able to innovate with the Note.

Even more so than a year ago, Apple’s product strategists face an ongoing paradox: maintaining premium leadership with an annual product renewal while tapping the rapidly “mainstreaming” global smartphone market. Consequently, expectations were extremely high — often irrationally so — that Apple would once again truly innovate with hardware design and features.

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What iPhone 5 And The New iPods Tell Us About Apple's Post-PC Vision

If Apple had a motto for its product strategy, it would be, "Don't take anything for granted." The new iPhone and iPods are re-formed from the guts to the skin: Faster processors, faster connection speeds, better cameras, more microphones, new connectors, taller displays, and they're thinner and lighter to boot. iTunes and the App Store are redesigned to feel more modern and help with content discovery. These product improvements are aimed at convincing consumers that there's enough value to upgrade from their current Apple products, as well as growing market share by convincing non-iPhone users that it's finally time to trade in their BlackBerrys, Droids, and flip phones and join the iOS fold. Apple will be successful on both fronts -- not just because its products are well designed, but also because Apple's product marketing is on point. It will be the fastest iPhone rollout ever, available in 100 countries on 240 carriers by the end of the year. Older models of the iPhone will be cheap (4S for $99 with contract) or free (4 with contract)--including on Verizon and Sprint in the US, not just AT&T, which will positively impact market share.

But I think there's a more interesting story to be told than just market share. These products tell us a lot about Apple's vision for the post-PC future. Apple has sold more than 400 million iOS devices through June 2012, and it has more than 435 million iTunes accounts with one-click purchasing, so it will certainly have great influence over the post-PC experience of many millions of consumers. And here's what that experience is likely to be:

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iPhone 5 Strengthens Apple's Leadership In The Larger Competition Among Ecosystems

 

To the surprise of no one, Apple today announced its new iPhone 5. Given that the iPhone 5 is unlikely to solve the European debt crisis or bring peace to the Middle East, it won’t be surprising if we hear a resounding "meh" from Apple's critics, with them dinging the company for a paucity of innovation. Indeed, competitors like HTC and Nokia have already offered some of the features that Apple highlighted today, such as those for imaging. But Apple still outpaces the competition when it comes to the entire package — the new iPhone unites significant improvements in industrial design, imaging, audio, and connectivity, along with the wealth of new capabilities that iOS6 enables. Apple will sell a boatload of iPhones — especially now that both Verizon Wireless and Sprint will have an iPhone (the 8 GB iPhone 4) for consumers' favorite price: free.

But make no mistake, this is not about the iPhone 5 versus the Samsung Galaxy S III or the iPad versus the Kindle Fire HD; this is about customers' attachment to the larger ecosystems that those devices inhabit. Amazon, Apple, Google, and Microsoft all aim to translate customers' investments — of money, information, personalization, and social connections — into a gravitational field of loyalty so powerful that few customers will ever attain escape velocity. This market is still taking shape, but the iPhone 5 will markedly increase Apple's pull, already the strongest out there.