Tuesday, June 26, 2012

Planned Obsolescene at Apple?

There's a serious marketing decision when implementing innovations - do you try to maintain backwards compatibility with earlier versions, or do focus on maximizing the new, at the cost of limiting compatibility.  There are advantages in just moving forward - it can open up new opportunities, and allow for maximizing the impact of the innovation, and usually helps to keep the direct costs of innovation low.  On the other hand, abandoning backwards compatibility means that all of the ancillary devices or products designed for the earlier systems are no longer usable with the new.  This can impose additional costs for innovation, as shifting to the new version also means that you need to replace some or all of the related products that are no longer compatible with the new version.  And that can also backfire somewhat on the innovator, as making adoption more costly will slow adoption. 
  More problematic is when the innovator purposely makes the new version of the technology incompatible with existing standards, or with their prior standards.  Then you have something called planned obsolesence.
  Apple has a long history of choosing to push their own standards rather than adopting more general industry standards.  As an equipment manufacturer, they've designed hardware that requires Apple operating systems to operate, and major upgrades in their operating systems are often incompatible with earlier versions of software (and in some cases hardware).  Sometimes, when Apple is an early and dominant innovator in the field, they can establish their standard as an industry standard - for example, the iPod/iPhone/iPad docking connector.  That's become a default component of associated hardware and accessories like speaker systems.  One of the aspects of Apple's success in that market is that myriad Apple mobile devices (and latter upgrades) all used the same connector, making the purchase of related equipment or upgraded devices relatively simple - consumers knew that they would also work with prior accessories.
  However, several recent announcements by Apple suggest that the company is planning for some major obsolesence.
  First came the announcement that Apple was closing its MobileMe webhosting service, in favor of its new iCloud service.  One of the main values of MobileMe was its ability to backup and synchronize contact and calendar files across multiple user devices.  Those same features will work in iCloud - but only if you have the newer Apple OS, and the new OS won't work on many older devices, so you might also have to buy new hardware if you want to continue keeping your contacts list and calendar in the iCloud.
  Then came the news that the newest iPhone5 (to be introduced later this year) will abandon the old 30-pin connector and replace it with a new 19-pin version.  For Apple, the stated concern is that as they seek to make smaller and sleeker devices, the old connector just takes up too much space.  Anyway, the consequence is that the iPhone5 won't be able to directly dock with any current accessory or power source that uses the 30-pin dock, and it's quite likely that the same change in docking connectors will likely occur with subsequent major upgrades in other mobile devices.  And that means that newer accessories are likely to start including the new docking connector as well, and most will replace the older with the new rather than try to engineer multiple docking options - meaning that newer accessories won't work with older devices.  Making things worse, or at least more expensive, are the reports that the new docking connector will include a proprietary chip that will prevent its use with unlicensed accessories.
  Some analysts wonder if this is the time to make such a move - raising the costs of switching to the newer devices just as Android OS based smartphones are becoming increasingly competitive (some arguably better and cheaper than the current iPhone).  If you're going to have to replace all accessories anyway, consumers might chose to shift to an Android-based device rather than stick with Apple.  As one analyst concluded:
You feel that, Apple? Those are the winds of change. It may be temporarily profitable for you to force your customers into spending on upgrades, but a little thing that we call customer lifetime value means that it's stupid to annoy your customers in an increasingly competitive marketplace.

Sources -  iPhone5: Every iPhone Accessory You Own Just Became ObsoleteForbes
Apple's Planned Obsolescence: Customer Revolt Brews,  InformationWeek

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