iPhone strategy? Build a product ecosystem.

by Andrew Watson on 14 July 2009

With the release of the iPhone 3GS, it’s got me thinking more about Apple and IP again, especially as my neighbour down the hall at ipVA towers just acquired a new iPhone and I helped him get it set up. As you’ve no doubt figured out, I’m a big Apple and iPhone fan, which is why I often use Apple as an example when discussing IP / business strategies. This article awhile back from InfoWorld “Why BlackBerry still beats iPhone for business users” sums up the iPhone strategy nicely:

The reason the iPhone has been a success is as much about it being part of a computing environment and ecosystem as it is the phone itself. There are things that make the iPhone so difficult to compete with.

IP plays a significant role in putting together and protecting Apple’s role within the iPhone product ecosystem. Consider:

  • The iPhone requires users download and install iTunes – Apple’s copyrighted software – to manage the device;
  • iTunes has its own store and numerous content deals (based on copyright) that allow for iPhone users to access the movies, TV shows, and music in the store on the device;
  • Users are restricted by carrier unless they pay full price for the device and unlock it to work with other systems;
  • New apps (unless your phone is “jailbroken”) come via the iTunes store, and Apple controls what goes into the store through its agreements with developers;
  • Technological measures make it hard for you to unlock or jailbreak your phone to get apps from other than the iTunes store. These technological measures not only are digital locks that can be difficult as a practical matter to go around, but can also be protected through civil and criminal law; and
  • Certain features only (AFAIK) work only with other Apple products, such as the “locate my phone” feature which can tell you where your phone is if lost or stolen but requires you to have a MobileMe account.

Apple exudes a sort of paternalism over their ecosystem as well – as in they say things like “we make sure bad apps that do bad things with your data don’t get through”. It reminds me a bit of AOL in the early days – it had no spam problem because all communication on AOL was between AOL users. AOL policed their walled garden well, but eventually had to open it up to the rest of the world and engage in the same kind of anti-spam tactics as everyone else. Building this kind of ecosystem seems pretty linked to providing some other kind of advantage to the user as well (rather than just locking them in), which in the iPhone case is sold as security, reliability, and better integration with other products.

I wonder if in the face of other OS systems such as Android, how long the full iPhone ecosystem can last. But certainly they’ve made a very formidable ring fence around the iPhone by building such a robust ecosystem.

{ 3 comments… read them below or add one }

Iphone Annoyance 08.20.09 at 10:38 pm

I fully agree with all of your findings. But I am pretty sure, that Apple will not succeed in the long run. The internet is all about openness and widely accepted standards. This is what was not the idea of Microsoft in 90′s, which has initially caused a lot of trouble for them. Now Apple with his Ubersteve tries to ride the same dead horse, at least for a couple of miles. But still the market forces will require an more open and less restrictive system than what we have right now. Actually it is rather sad that such a wonderful hardware has all that red tape attached to it.

JS Hatcher 08.27.09 at 8:24 am

Thanks for the comments — you have an interesting site on the iPhone (and I hope it leads to some improvements by Apple!). While I think that there is a solid argument around trends towards more openness with the ‘net:

- the iPhone and smartphone market is not the internet
- 2g/3g/4g/LTE, especially in terms of standards and IP, is not the internet either (though it could trend more towards the internet type of open standards model with less IP around the comms infrastructure).
- open hardware is still very early stage in terms of business models. Google gets to experiment in this space because its model is based on cross-subsidizing handset development to get people to search using Google so that they can increase ad revenue. Apple doesn’t have that kind of cross subsidy action.
- saying that Apple won’t “succeed in the long run” using this strategy assumes that Apple would blindly stick to their current strategy moving forward. It has clearly been successful for them now, and all they have to do is slowly ratchet up the level of openness of their hardware/software/platform/ecosystem as the market and their strategy dictates.

Thanks

Sylvain Allard 05.16.12 at 8:27 pm

How funny, I bumped into this article from 2009. Back then BlackBerry sales was fairly strong and they were dominating the business users arena. How things changed in 2012: non-iPhone users are pretty much made of kids and teenagers (now BlackBerry core users) and most businessmen and smart people go around with iPhones…

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