Friday, July 16, 2010

The “i” vs. the “Phone”: Why Apple Will Not Recall iPhone 4

By Dr. Hari Bapuji.

I am tempted to predict what will happen in the Apple news conference today, though as Nassim Nicholas Taleb (author of The Black Swan) says, it is indeed difficult to predict business phenomena.

First, Apple’s news conference at 1 pm ET will be covered widely by the media of all hues. Second, Apple will not “recall” its iPhone 4 but will offer some fix. In the same breath, let me also say that what Apple does today is going to reveal whether it will remain the company of the future or not.

It is clear now that Apple’s iPhone 4 has a problem of signal interference. In layperson terms, it does not work as a phone when it is held in a certain way. It has also been established by now that it is a design flaw, which is integral to the features of a product as opposed to a deviation from design specifications, which would have made it a manufacturing flaw. The solutions offered by others for this range from wearing gloves while using the phone to covering it with duct tape.

Apple’s reaction to the reports of this problem was far from generous – Steve Jobs asked consumers to “stop holding it that way”, while the company said the problem is perceived because the bars indicating signal strength are not accurately representing the actual signal strength. So, they offered a software fix. Obviously consumers were not convinced because they were not reporting fewer observed bars (a matter of perception), but lost reception (an actual problem faced). This strategy of dealing with consumers is what makes me wonder if Apple which overtook Microsoft only recently is on the way to losing it. The reason I think so is because of the kind of problem that occurred in iPhone 4 and the manner in which Apple is dealing with it.

When it was launched, iPhone 4 garnered record sales because it could do a number of cool things, including making it easier to take pictures of oneself. It wasn’t surprising at all that Apple would equip its newest gadget with fancy features because it prides itself on its design excellence. This is reflected in the facts that Apple is perhaps the only company which prints on its products “Designed in California; Made in China.” At some level, Apple seems to have taken design to be more about fancy features and looks. That is, they seem to have focused more on form than functionality. Or, simply put, Apple perhaps forgot that iPhone is first a phone and then all other things. Otherwise, it is unfathomable that a company would not conduct enough tests to make sure the primary function of its product is well in place.

That Apple perhaps gives more importance to form than function is also a reason why it was unable to accept the problem in the first place – the problem relates to iPhone’s metal antenna which distinguishes it from earlier versions (by looks) and is supposed to contribute to its looks. So, Apple could not have compromised on this feature by admitting a problem with it and thus making changes to it.

While the problem is one thing, the reaction of Apple is another even more important issue. It has not been open to admit the issue, let alone discuss it. This is very typical of Apple – secrecy is a necessary ingredient of their strategy. However, a surprise is good only when it is pleasant. Likewise, secrecy is fine only when everything goes well; but openness is needed when thing are not going well. This where Apple seems to be missing the point. If we were to go to our marketing fundamentals, Apple’s handling of its customers’ concerns would likely be called “product myopia” and our experience suggests that it does not work, at least forever.

No matter what Apple does, it is not going to be called a recall simply because the Consumer Product Safety Commission (CPSC) will not be involved in it. The CPSC gets involved only in cases where the flaws in a product pose danger to consumers, but not when the product doesn’t meet quality expectations. Therefore, Apple will not “recall” iPhone 4, but will offer some fix.

The nature of fix that Apple will likely announce is important because it will tell us whether Apple will respond to its consumers and make the “Phone” work better or if Steve Jobs would simply say that “it is a phone because I say so.” In other words, it will be interesting to see whether they will focus on the “i” or the “phone” in the iPhone. That focus will give us hints about whether Apple will maintain its leadership or not.

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