What if this is as good as the iPhone gets?

How do I write about Apple so well? “I think of Steve Jobs, and I take away vision and creativity.” Please recognize that is a bit tongue in cheek, but I do think we are at a turning point where Apple is having a very hard time moving its loyal customers toward continued upgrades, and it is forcing them into unusual compromises.

Runaway success breeds a classical product marketing problem: how to incrementally improve existing products while buying time for a breakthrough innovation. (Don’t get me started on “disruptive innovation”; that can only be judged in hindsight.) Apple behaved as an innovator in mobile devices for most of its history until this point, creating entire product categories. Breakaway innovations – the iPod, the iPhone, the iPad – became stock-in-trade.

When the renegades turn into the establishment, the rules change. Being ahead of customer wants and correctly serving them put an iPhone in many hands. The problem for the iPhone has shifted to one of incremental innovation.

As we chronicle in “Mobile Unleashed”, for many years the battle lines in mobile phones were defined by weight. After the days of the brick ended, there was always a tacit assumption that a phone should fit in a pocket. A gram here or there could make the difference between a hit and a miss. When the industry shifted to touch screens, with a practical minimum height/width, the variable of engineering prowess became thickness.

At first, touch screen technology durable enough for phones was tough. Gorilla Glass and advancements in LCD supply chains made reasonable size phone screens the norm. Then HTC and later Dell tried to bust the categories, creating the “phablet” that could serve as both phone and tablet with a bigger display than the average phone. Users didn’t look too silly leaving those devices on a table using a Bluetooth headset to make calls. Seeking to keep these beasts from gaining a foothold, phone displays started to creep larger, first 4”, then 4.5”, then 5”, and 5.5”.

The Six Sigma craze convinced some Motorolans that marketing could be put into a spreadsheet. A current generation product could be scored on customer acceptance of its features (on the strongly dislike to strongly like scale), then new features based on focus groups and competitive analysis were scored and prioritized, and out popped a specification for an incremental next-generation product.

The thing is, sometimes asking customers and competition gives you the wrong answer.

Apple seems to have fallen victim to not asking the right questions of its customers. One of the biggest statements of yesterday’s marketing hype event was made by product marketing VP Greg Joswiak: “Some people simply love smaller phones.” This is news? I think Apple thought it was doing the right thing with the iPhone 6 and iPhone 6 Plus, allowing customers to choose between big and bigger. However, numbers never lie, and the resulting upgrade sales broke the streak.

So Apple rolls out a smaller phone, back to the past with a 4” display, and cuts its price. It is a big risk – the official story is this is the upgrade path for iPhone 5S users who held off. But, the iPhone SE could completely cannibalize iPhone 6 sales, with the same A9 chip and very similar features, now presenting a choice between small, big, and bigger.

Samsung has been using the scattergun strategy for some time, with an array of models and not so much obsession over whether one sells more than another. Apple may be starting to fall into that pattern with its phones, and the Mac and iPod already passed through that phase. The hope for breakthrough innovation is now the Apple Watch – but in a recent interview with Charlie Rose, Tim Cook was careful to say it probably wouldn’t achieve iPhone revenue levels. “It’s big. (But maybe not huge.) It’s big.”

That leads me to the question: What if this is as good as the iPhone gets? These are some of the smartest people in the industry, but the basic laws of large number marketing are hard to repeal. Apple has to keep iPhone sales going, and that includes not doing things that mess up the upgrade cycle. That means in-the-box thinking takes hold. Some have termed this point “peak iPhone”; I’m not so sure about that. Growth curves usually have two pauses, one after initial adoption and one somewhere midstream, before they go into a plateau and eventual decline.

There is no shame in this. Good large-firm product marketing teams have advanced thinkers given freedom to breakaway and sometimes fail, and detail-oriented types charged with keeping the mainstream stuff moving forward where failure is not an option. We didn’t see anything in the breakaway category yesterday; the introduction of CareKit came closest.

Will the fall 2016 Apple event be different? It’ll be very interesting to see if they carry the small-big-bigger strategy forward, or if they ditch the bigger variant and settle back on pocket-sized phones. As we summarized in “Mobile Unleashed”, smartphone innovation is getting a lot harder these days, and Apple customers voted against the wrong size of innovation by withholding their upgrades.