How To Respond To The iPhone?

from the Insight Community by Joe Hunkins

The iPhone is clearly poised to be a successful product and very likely to set a powerful new standard for hand held devices. The extremely innovative touchscreen user interface and navigation of the "real web" and not just the mobile web was particularly insightful.

The bar has now been set very high for high-end mobile devices making both of these two responses likely:

1) Embrace the iPhone. Apple's iPhone will clearly set a new standard and for other companies, which can now save years of prototyping. As reviews come in minor changes should be made to accommodate user needs and concerns, but clearly the iPhone is meeting a powerful need at the high end mobile phone market. Maximizing the size of the viewing screen without adding weight and bulk is a key challenge of mobile devices and this area could be ripe for innovation as screen technologies improve. An interesting accessory for the iPhone would be a way to expand the screen size several times, perhaps using new thin plasma technologies, although initially this approach seems extravagant, and far more likely are simple cheap "iCopycat" approaches that will in some ways be analogous to the legion of MP3 players that are much cheaper than the Apple iPOD but somewhat less elegant in design and functionality. iPod has remained the key MP3 player standard thanks to Apple's initial powerful hardware and marketing play. The iPhone has the potential to do the same thing in the mobile phone space though I'd predict it will be harder for Apple to dominate this far more complex and lucrative space.

Treo and Blackberry, as the current leaders in the high end phone market, are potentially most threatened by the iPhone. Both are certainly watching the response to the iPhone carefully. They will be collecting extensive hardware and consumer behavior information before making significant changes to their existing successful formats. As a Treo 650 owner I don't plan to switch to the iPhone immediately, but I'm extremely impressed by the *dramatic* superiority of the iPhone user interface to the Treos. Especially compelling is the large screen for internet browsing. I certainly hope Treo copies Apple's brilliant functionality in future phones. If they do not I, and certainly many other Treo users, will switch to the iPhone or other devices that better accommodate the need for quality surfing. The Treos limitations as a browsing device and it's failure as a viable laptop modem have been extremely disappointing to me and I suspect to many other users. The best advice to mobile makers right now is "Copy the iPhone!". A killer device would have iPhone functionality but cost much less. Although it seems highly unlikely that a phone maker could create most of the iPhone features yet offer it at a price in the mobile sweetspot of $150, this move could immediately threaten Apple's market. Cost and size appear to be the only two serious roadblocks to the iPhone capturing a huge segment of the mobile market in a short time.

2) iGnore the iPhone and "feature hungry" users and focus on those who just want basic phone functionality - calls, pictures, and text messaging. Much of the mobile market remains unlikely for at least the next several years to require and be willing to pay for devices that show video and take videos. Web surfing and email are close to becoming standard features but they are not quite there yet, thus there is still some room for simpler devices though this market is likely shrinking and is spread across a large number of companies and phone makers.

The huge advantage of dispensing with these iThings is that you can obtain a very small form factor. Thus there is a limited amount of room for innovation in the "just a phone please" space along the lines of lighter, thinner, more stylish phones, though there currently exists a rich assortment of phones and it seems unlikely a company could create a "breakthrough" simple device that was significantly better than those that are available now. Possible significant improvements would be along the lines of *better voice quality*, *high camera quality*, and *longer range* all in the small form factor.

Summary points:

Apple's iPhone has set a new standard for high end mobile phones with an extraordinary interface and rich feature set. Competing with the iPhone will require similar features and rely on the advantages of observing the reactions of users and markets to the iPhone.

Treo and Blackberry should consider the iPhone a "shot over the bow", and offer significant innovation in their own devices to avoid a potential rapid loss of market share. Customer loyalty will extend the period they have for iPhone-like innovations but it will not eliminate the need for those innovations.

The market for lower end devices is likely to shrink but not quickly, so current makers should continue to innovate in this space to capture the many users who are not in the market for high-end phones.

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