OPINION:APPLE'S PRE-ORDER sales figures for its iPhone5 were impressive, with more than two million people pre-ordering the smartphone in the first 24 hours after its launch last month.
For most companies, sales figures like these are the ultimate sign of success. But for Apple, it may not be enough; the iPhone 5 is a failure at its heart. This is about pride, reputation and loyalty, not just money. The magic is over.
Some cracks are already beginning to show in the idea that Apple can always sell expensive, under-featured hardware on the back of customer loyalty.
The record sales of iPhone 5 were based on expectation from past performance, but its reservoir of reputation may be drying up. It was a disappointment to consumers who expected another revolutionary and visionary product from Apple.
In its heyday, Apple was a religion, Steve Jobs was God, and the iPhone was a status symbol. Religious faith requires no evidence. Trust does.
For a loyal Apple fan, product choice was never about quality or price, but about an emotional association and pride. Today, Apple consumers are increasingly comparing technical specification and price, just as with any other commodity product. They might still trust but many have lost faith.
Apple’s iPhone 5 is on thin ice as an innovative market leader. Steve Jobs reportedly declared war on Google and the Android phone-makers, as they were viewed as Apple’s stolen products. But that description did not do those products justice.
Jobs thought seven-inch tablets would be dead on arrival, and he ridiculed Samsung’s first Galaxy tab. However, a rumour suggests an iPad mini is on the way.
The Samsung Galaxy phone’s large screen led to increased market demand for larger phones and eventually forced Apple to make the iPhone 5 larger than it originally wanted to.
The decision by Apple to ditch Google Maps in favour of its own Apple Maps was premature, and led to Apple chief executive Tim Cook formally apologising to customers, something Steve Jobs would never have done.
This was followed by a 2 per cent drop in Apple’s share price.
Apple’s culture does not allow for a failure. Jobs once said to newly appointed vice-presidents that “leaders don’t make excuses. Rubicon is crossed when you become a VP. You have no excuse for failure, and it doesn’t matter what you say.”
The Apple way was all about pride, and that seems to be lost. Silicon Valley investor and start-up guru Guy Kawasaki, the man who helped establish the cult of Apple, has slammed the new iPhone 5, saying its controversial new connector cables are proof the company has become arrogant, as consumers are forced to buy them.
Apple co-founder Steve Wozniak says he doesn’t think that Samsung Galaxy’s Android smartphone is a stolen product, and that the quality of the Samsung product is superior to that of the iPhone. He also disagrees with the recent US court decision that Samsung infringed Apple’s patents. Both Kawasaki and Wozniak are users of the Samsung Galaxy 3 phone.
Apple’s lawsuits with its competitors are a zero-sum game. Sun Tzu’s The Art of War is instructive here. Apple might do well to lose a few lawsuit battles, or at least stop further lawsuits, in order to win the war.
It is also worth noting that the iPhone 5’s keen price would not have been possible without Foxconn’s workforce in China.
Since the first iPhone was released in 2007, Apple’s share price has gone up by 650 per cent, whereas Foxconn’s share price has decreased by two-thirds. The assembly cost at Foxconn is already very low. Customers will not pay more for competing phones. And Apple may not have much choice other than to share some of its profits to improve working conditions in China, the earlier the better.
If the iPhone 5’s failure is repeated with iPhone 6, pre-order sales and long queues on launch day may be less visible.
Apple is a great brand created by a great leader who inspired many people. We would like to be reminded that the Apple way is about innovation, not greed.
Rosa Chun is professor of global leadership, reputation and responsibility at UCD Smurfit School of Business