A business school professor of mine once did an entire class on companies that plan their product lines’ obsolescence. These firms proactively anticipate when their products will no longer remain competitive and therefore include a road map for phasing them out. Having an obsolescence plan can help a firm navigate the really tough decisions involving when and how to change, especially when the incumbent product in question is a hit.
Following Apple’s annual developer conference this past week, called WWDC, I’ve been wondering about its obsolescence plan for the iPhone. Apple unveiled that plan, and it looks like a challenging road ahead.
That’s because of all the mobile phone manufacturers, Apple has the most to lose if it botches the transition from its current operating system, iOS 6, to the one announced this week, iOS 7. The iPhone ecosystem, a term now used in many industries to encapsulate the interactions of every stakeholder in a firm’s operation, is vibrant. It has matched millions of device owners with hundreds of thousands of apps, millions of songs, books and videos, and even more mobile-friendly websites.
Any ecosystem is also fragile, and we can see that following the announcement of iOS 7. At first glance, the design and feature changes coming to this latest operating system seem modest. Apple has preserved the basic, logos-on-a-grid interface that it first introduced in 2007. Icons will deliver a cleaner look. The OS offers the appearance of dimensionality as it presents users some information or screens in layers. It promises to remove unnecessary icons or buttons. The new functionality, such as the ability to run multiple apps at once, brings the platform to par with its chief rivals.
Going into this year’s WWDC, I asked some colleagues of mine in the business if Apple could get away with creating an iOS 7 that essentially would be completely recognizable to people who bought the first generation iPhone in 2007. We now have our answer: a definitive “yes.” In American football terms, Apple went for a chip shot field goal on fourth and goal, rather than try for a touchdown. Given its performance to date, to be fair, Apple probably didn’t have to stretch any farther than it did this week.
Yet, this still represents a big risk for the Apple’s ecosystem. The new OS apparently won’t support iPhone 4 devices, so those users will have to buy a new phone to enjoy these benefits. More worrisome for Apple, though I suspect not terribly so, is the collective effort these changes will require of its developer community. Every developer who has ever published an app for the iPhone will have to evaluate iOS 7 and determine the cost of the makeover their app will require to take advantage of these new features. Developers of apps yet to come will have to calculate the tradeoffs of working with the new OS on the one hand and not being able to target older device users on the other.
Here’s one economic view of the impact these changes could have on the iPhone ecosystem. Let’s say that on average, it will cost a software developer $10,000 to upgrade an existing iPhone app to support iOS 7. I don’t know what the actual number is, but I can imagine for some, it could be more, while for others, less. Apple claims to have about 900,000 apps for iOS. Upgrading all of them would amount to a $9 billion tab. For all the money Apple claims to have paid developers, it has put itself in a position to claw a lot of that back. Additionally, this new OS hasn’t found a single retail customer yet, so developers have to consider these costs knowing there is a possibility, probably small, that consumers may not like it or the new iPhone device to which it will be tethered as much as they did iOS 6 and the iPhone 5. Finally, we hear that for all the hoopla about iOS 7, significant changes to it could still happen. so it’s possible that what we saw isn’t even the final product.
I wouldn’t bet against the next iPhone and iOS 7, but its success is not guaranteed. Some people see opportunity in these changes. Here’s a good article that acknowledges the challenges optimistically. While customers shouldn’t have to worry about what all these changes mean to the things they love to do with their iPhones, mainly downloading and using apps, developers do. Apple has just given them something to worry about.