The recent rumours concerning Amazon’s possible flirtation with launching a smartphone, whether baseless or not, on the eve of Apple’s new product launch, shine an interesting light on a challenge that faces all smartphone manufacturers: where to innovate next?
In the mid 2000’s I oversaw the launch of JupiterResearch’s European mobile research practice and also at Jupiter led countless mobile data and research projects as well as working closely with the leading handset manufacturers. Throughout that time I saw the early days of the emergence of the smartphone sector up close, and the rate of innovation was both often startling and manifested itself in highly tangible ways. Screen sizes got bigger, handsets got smaller, camera megapixel counts grew, and a whole host of new features arrived including video, email and calendar synching, true tones, 3.5mm headphone sockets, MP3 sideloading, PC-synching etc.
Then in June 2007 Apple came along with the iPhone and transformed the mobile phone market forever. Apple had characteristically waited until the smartphone market was ready for primetime before launching the iPhone and then pursuing an equally characteristically disruptive strategy. The last few years of the 2000’s saw successive innovation step changes, with meaningful new marquee features for each new generation of devices. Now though, on the eve of Apple’s next smartphone announcement we are at an unusual place. There is not that much more that a smartphone can really deliver at its core. Smartphones were all about disruptive innovation, now they have become sustaining innovation. Thus the new features that are used to distinguish one product from the next are either evolutionary improvements (e.g. better screen resolution, better camera, better battery life), or bleeding edge gimmicks that are not yet ready for primetime (e.g. Siri, Eye Tracking). The smartphone has hit upon its optimum product construct and thus product changes from here-on-in will predominately be iterative, sustaining innovations rather than disruptive ones.
That in itself is not an inherently bad thing. Indeed it is typical of a mature market, but it also makes the market right for disruption, and if there is less scope for that disruption to be product focused, it is more likely to be strategy focused. Hence we have started to see the emergence of strategies such as Mozilla’s Firefox OS devices aimed at driving open web standards and the rumoured Amazon phone strategy aimed at driving e-commerce and digital content revenues. So the established incumbent players face an innovation dilemma for their flagship devices: do they continue to focus their efforts on packaging sustaining innovations with occasional product gimmick, do they try something dramatically different, or do they try the third way of a disruptive strategy instead?
For a company like Samsung with a plethora of product SKUs it is possible to experiment with bleeding edge innovation on niche devices but it is the flagship devices where marketplace impact is measured. Go too fast on a flagship device and you will alienate your mainstream customers, go too slow and you will be positioned as an innovation laggard. The irony of course being that it is the less-headline-grabbing sustaining innovations that generally deliver the most discernable user benefits.
A perhaps even greater irony is that it is the software that really delivers the differentiation to most consumers. With standard smartphone hardware functionality (cameras excepted) being broadly comparable in the eyes and ears of most mainstream consumers, it is what the software enables that people truly notice. The apps, the content, the features. Thus iOS 7 will transform how iPhones behave yet Apple will still need a marquee feature to sell the next iPhone, even if that is a bleeding edge gimmick. Against this backdrop the third way of disruptive strategy becomes ever more appealing for smartphone companies. Hence Apple’s rumoured intensified push towards lower price segment consumers with a scaled down version of the iPhone.
The likelihood is that whatever phone product Apple launches tomorrow it will probably leave many observers disappointed because it will not be seen to be a dramatic innovation step change. Apple might surprise us and pull a rabbit out of the hat but it is more likely not to because the simple fact is that it is harder than ever to dramatically innovate smartphone products. Though we may not yet have seen the end of the age of disruptive innovation in smartphones, we are certainly in a lull cycle. Which is why Samsung, and quite possibly Apple, are looking to adjacent markets such as smart watches, as opportunities to innovate aggressively in wild west technology frontiers in order to re-earn their innovation stripes.