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Why the iPhone matters: 8 questions for Horace Dediu

John Cox | July 9, 2012
Horace Dediu writes data-driven analyses on a wide range of mobile industry topics.

Operators have benefited as users rushed to upgrade to data-based devices which came with data revenues while they still bundled voice and text. They will face increasing pressure, however, to reduce pricing as saturation is reached. This dependence on "upgrades" to the network value proposition followed by "commoditization" when saturation is reach is a common refrain in all network based businesses.

In your June 19 post, "The Evolution of the Computer Value Chain," you argued that Apple is expanding beyond product design for the iPhone into areas like sales and distribution, services, component design and materials. Why?

Value is profit-producing activity. Markets signal value by paying a premium over the cost of production.

The increasing of integration of the value chain is a natural phenomenon during periods when the product being delivered to the user needs to be improved rapidly because it's not good enough. Conversely, value chains break up into finer slices when a product becomes more than good enough and competition shifts to bases such as customization, convenience or niche exploitation.

I believe Apple acted in a common-sense way to this opportunity. It took some vision to begin early enough but I doubt it planned this 10 years ago. What makes Apple unique is that most competitors have not had the ability to integrate since they've been running in the opposite direction for so long (i.e., outsourcing as much as possible).

To you personally, what is the most remarkable aspect of the iPhone, considered either as an individual device or as part of this larger-value chain evolution?

The iPhone has had such a rapid effect on the market that it has allowed theories that usually require decades of research to validate to be shown in near real time (i.e., years). Most people cannot empathize with changes in computing from the '80s but they see how their lives changed as a result of smartphones as embodied by the iPhone.

To see the change in the market and in competitors makes it much easier to explain what is happening. It sharpens our perception of reality just as time-lapse photography allows us to believe that trees can grow from seeds.

 

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