Failure is fascinating. Failure highlights our limits, our strengths, our mortality. My ‘explorations in failure’ will this week examine the iPhone 5c. At the very moment Apple was about to slice deep into the Android behemoth, offer the world a glorious low-cost iPhone, it fell flat on its face.
How could this happen?
I don’t have all the answers, of course, but I think there is much to divine by piecing together the iPhone 5c detritus.
The scale of Apple, its global supply chain, massive retail footprint, market valuation, the popularity of its computing devices, these all reveal a company that rarely makes mistakes. Apple’s iPhone 5c has been a striking failure, however, selling far fewer devices than Apple expected, likely dampening overall iPhone sales, and, if well-placed rumors are correct, very soon to be no longer of this world.
It all began, of course, with so much promise. The iPhone 5c — aka the “cheap iPhone” — was, we were convinced, going to be the aggressively priced new iPhone, ready to dismantle Android throughout the developing world, possibly beyond. It would (quickly) add tens of millions, ultimately hundreds of millions of new users into the Apple/iOS ecosystem.
This was not to be. As Tim Cook stated during the company’s most recent earnings call, 5c demand “turned out to be different than we thought.” While Apple sold an astounding 51 million iPhones total in the last quarter, Cook admitted that “our North American business contracted somewhat year over year.” Cook placed the blame squarely on the iPhone 5c by bravely reminding us that Apple “actually sold more iPhone 5s’s than we projected.”
Here’s the bottom-line: not only did iPhone 5c fail to sell in the numbers Cook calculated, the company suffered unnecessary expenses and pinched revenues by wrongly estimating the 5c/5s sales mix.
In a rather harsh assessment to the 5c’s poor showing, USA Today noted that Tim Cook refused to address the device by name. The publication went on to state that:
Sales of Apple’s iPhone 5c have been so disappointing that the consumer technology giant will likely cut the price of the device soon or even scrap the model altogether.
Count me among those that doubt iPhone 5c will reach its first birthday.
After all, the iPhone 5c, as it presently exists, is frankly inexplicable. It’s one of the highest-priced smartphones on the market, nearly as pricey as the 5s, yet with shockingly lesser hardware and camera features. Oh, and it doesn’t have the same look as the iconic iPhone 5s.
Go on – do your best sales job with that.
How did Apple so badly misread the market? In fact, there are several reasons.
Failure 1. Losing the Narrative
The most obvious failing of the iPhone 5c may be in how badly Apple lost control of the narrative. Remember the build-up of buzz before the original iPad? A full touchscreen tablet, built on iOS! The only downside, it was going to cost about $1,000.
We happily got that wrong. iPad turned out to be Apple’s most reasonably priced personal computer ever.
The 5c was the reverse of this. For example, as speculated in Daring Fireball: “(Apple’s) three pricing tiers for the next year would be a new iPhone 5S at the high end, today’s iPhone 5 in the mid-range, and the new 5C at the low end.”
Sadly, no. Worse for Apple was that we all believed the rumors. Not simply because of their persistence, no, but from the fact that the market was so obviously ready for that awesome low-end device that we were convinced Apple was capable of delivering.
Perhaps we should not have convinced ourselves. As I have said here many times: it is extremely hard for any company to shift gears and go down-market, or, for that matter, to reverse its low-price strategy and go up-market. Apple is no different. All corporations have unique strengths, unique brands, unique positions within the larger marketplace. With the 5c, we learned this the hard way. Nonetheless, Apple PR must do a better job of controlling the narrative of its upcoming products.
Failure 2. Anti-Apple design
A second failure is that the iPhone 5c altered the familiar design cues of the highly popular iPhone line. The 5c is “unapologetically” plastic and offered in several bold colors. This is the Nokia design template — and they’ve been doing it far longer than Apple. Apple offered up absolutely nothing new.
This is not to suggest the design is bad. I actually prefer the look and feel of the 5c. Not surprisingly, my go-to device is a Lumia 1520, with its bright yellow casing made of sturdy polycarbonate. The iPhone 5s feels much too light, much too fragile for my taste. Whether others feel the same is not the issue, however. Rather, the world knows at a glance what an iPhone is, and the 5c forks from this.
Unless Jony Ive and Apple are set to unleash myriad models of iPhone in numerous shapes, colors and price-points, iPod-like, then the 5c design stands out for all the wrong reasons. If you want the world to know you have an iPhone, the 5c states this with a whisper, if at all.
Failure 3. Devaluing Hardware
The most egregious, most confounding failure of the 5c, and the one I think will haunt Apple, is that the 5c effectively declares to all the world that one or all iPhones are radically overpriced. I am at a loss to understand how Apple allowed this to happen.
There is a measly $100 suggested retail price difference between the iPhone 5c and the iPhone 5s. For that extra $100, the iPhone 5s buyer receives the following additional hardware, services and benefits:
- A7
- M7
- TouchID sensor
- Lighter weight
- True Tone flash and larger 8 MP sensor
- Slo-mo video
- Enhanced imaging features
Explain this: A 16gig 5c retails for $549. A 16gig 5s retails for $649. Why?
We know what that extra $100 gets us, and it’s awesome. What are we getting for that first $549? I now have no idea. The very existence of the 5c, priced so high, calls into question the entire pricing scheme for all of iPhone. Either the 5c is priced way too high or the 5s way too low. With the 5c, Apple has brought pricing to the forefront, and in a bad way.
Putting a positive spin on the 5c’s failure, Tim Cook stated that:
“I think the 5s, people are really intrigued with Touch ID. It’s a major feature that has excited people. And I think that associated with the other things that are unique to the 5s, got the 5s to have a significant amount more attention and a higher mix of sales.”
In this case, I think it would have been better had he not spoken.
The 5c was passed over because people want Touch ID? Where are these people? I watch iPhone 5s users on a daily basis and TouchID is of scant importance to them, and certainly not the primary deciding factor between 5c and 5s.
There is simply no justification for either the 5c’s price or the 5s’s price, maybe both. Which is it, Apple? Why even allow this question to be raised?
Failure 4. Peeking behind the iCloud curtain
A final concern, one pointed out to me by reader iDawg, is that Apple may have intended to legitimately price the 5c at the mid- or low-end, but were prevented from doing so, possibly just before launch, because their services — Siri, iCloud, streaming media, data synching, etc. — weren’t yet ready to support a massive influx of new users.
“The real reason Apple doesn’t sell more phones: fear of choking Siri (and online services) to death.”
Thus, as the 5c neared completion, this theory goes, it became apparent that Apple’s various services weren’t ready to effectively meet the anticipated numbers of new users. Raising the price, and thus limiting demand was the only realistic option to prevent every user, not just 5c users, from rage-inducing crashes and failures. This is a bit hard for me to fathom, though if true, ought to place Eddy Cue on the hot seat.
5c We Hardly Knew You
As I wrote a mere fortnight after its release, Steve Jobs would never have approved the 5c. I stand by that assertion. Jobs had a near-religious fealty to focus and function, and the end result was hardware honed to near-perfect clarity. The 5c, on the other hand, is muddied, the result of varied and competing interests. The 5c doesn’t know who it is nor who it is for.
Let’s count the ways the 5c fights with itself and with what Apple is best at:
- An alternative design which denotes newness and low-price versus the iPhone design is iconic and beloved
- Lots of new Apple customers versus we must provide the best service to all our customers
- A low-cost device versus we must protect our margins
- We can make a great smartphone at any price versus we focus on the premium market
Is the iPhone 5c Apple’s canary in the coal mine? A telltale sign of near-term headwinds and divergent internal factions? Possibly, though given the company’s track record, I’m inclined to think of this as a minor self-inflicted wound, like how Disney spent far too much on that movie, John Carter.
That said, the failure of iPhone 5c is well-earned. This was not a case of technology before its time. Rather, of botched execution and that rare placement of profits before customers. Apple’s leadership, Tim Cook and Jony Ive, in particular, blew this one. That’s the most troubling aspect of all this. Tim Cook has scaled Apple to once-unimaginable heights. The iPhone 5c, however, reminds us that no company and no CEO has a perfect batting average.