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Apple proves: It pays to be late

...And ignore the mobile networks

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This week Apple threw the kitchen sink at its iPhone/Touch software stack (details outlined here), removing most of the most irritating nuisances at a stroke. It's a stunning achievement.

So Apple now finds itself where everyone else in the mobile handset business wanted to be 15 years ago. Large companies full of clever people devoted years of planning and expenditure to fail to get here. If the iPhone continues to flourish (see below for the many obstacles en route) - then both rival manufacturers and the networks have to tear up some long established strategies.

For the established handset competition, if Apple takes the lucrative high end, that leaves them scrambling around for gimmicks in a cutthroat market that's increasingly low margin. For the networks, they'll need to find devices that people actually want - or pray that Apple drops its carrier exclusivity policy and partners with any network that wants to sell its gear.

So how did someone with no track record in a notoriously difficult business find itself walking away with the laurels? What can explain this paradox?

For Apple, coming late to the phone business has actually been a huge advantage. The success of the iPhone is down not just to great engineering, but profiting from several years of desperate and outright stupid behaviour by the mobile phone networks, who set the terms for the manufacturers. The received wisdom of the industry - that you had to know the wiles of the mobile networks to succeed - turned out to be completely mistaken. And to explain this we find another paradox, which looks like this.

The mobile phone business is actually the most "customer friendly" or "customer responsive" in the world. This might seem a strange thing to say. Have a read of Brendon McLean's splendid rant from two years ago - Why we hate the modern mobile phone, for a summary of customer unfriendly business. But it's true.

That's because the customer isn't you or me, or the billion and a half other phone users in the world. Phone manufacturers have only 800 customers, of which only around 200 really matter: these are the gentlemen from the networks. And one of these stroppy customers can demand changes that cost the manufacturer millions, or cause the cancellation of product lines in which tens of millions have been invested.

For example, it's these gents who in their wisdom decided that we're too stupid to use the "butterfly" design Nokia introduced with the 6800. Networks killed the third phone in this line, the E70, leaving Nokia probably just one iteration away from making a classic. The reason? The fold-out keyboard would confuse us. In their wisdom networks have done all kind of similar things over the years - disabling Wi-Fi, for example, or blocking ports. But most of all in their pricing policies for data.

Apple simply ignored all this. Such was its confidence in its own product, and its own steamroller marketing, that it was able to capitalise on the networks desperation. But being late to the party also had another advantage.

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