Tim Cook, maybe Apple should be paying *me* to use the iPhone X

Why would you not want an iPhone X?

I found myself asking that question a few weeks ago after my venerable iPhone 6 started to act up. I bought it not long after it was released (late 2014, if memory serves) and it finally began to give out – software freezes, battery issues, malfunctioning audio jack – likely the result of one too many drops.

Of course, the Apple store was busy (it usually is), and I had plenty of time to wander around. While I waited my turn, I couldn’t help but browse the multiple rows of multiple variants of the newly-updated iPhone X.

The screens were nice, but not much nicer than what I had. The non-existent home button took a little getting used to, but it wasn’t too difficult. The days of physical buttons are coming to a close, and Apple’s software-based solution seems both reasonable and elegant. The device felt solid and well made. Beautiful, really.

Nevertheless, I wasn’t persuaded, and I couldn’t put my finger on it.

If you find yourself wondering the same thing, I intend to help you understand why the iPhone X(or Xs, or Xr, or Samsung Galaxy s10, or any other “new tech”) may no longer hold much appeal … and what might need to change to make it more interesting for you.

Let’s get started by using a simple feature on your iPhone that most people don’t know about.

Under the “Battery” menu, there is a handy feature that gives you an idea of how much time you’re spending with each function on your phone and how much of your battery it’s eating up.

Here were my personal results over the past 10 days:

  • Mail (27%): That seems to make sense. My iPhone is (primarily) a business tool.
  • Phone (24%): I actually use my iPhone as a phone. Weird, right?
  • LinkedIn (19%): Okay, that made sense too. LinkedIn is a key platform to reach people interested in my writing and research, and I spend plenty of time interacting with people there.
  • Audible (6%): I have irrational love for all books, audiobooks included. And because I listen primarily when I visit the gym, I get a good sense for my level of fitness.
  • MyFitnessPal (3%): Speaking of “fitness,” I use this app to record my gym visits, weight, and a few other health variables.
  • Safari (3%): I guess I don’t spend much time surfing the web on my phone.
  • Messaging (2%): Huh. I thought this would be higher.
  • Skype (2%): Same.
  • Maps, YouTube, Lock Screen, Calendar (all 1%)
  • Every other app (I counted 86 that day) made up the remaining usage*

*I’m a bit suspicious about Apple Pay and Camera…I use those a lot, but I suppose they don’t use up much time or battery. Or perhaps I don’t use them as much as I think I do.

Let’s put this in simpler terms: I am happy with my iPhone 6, but I routinely use only about a tenth of what it can do.

Can you relate?

As I continued to play with the iPhone X in the store, none of the “new” features made a compelling case to crack the top ten list based on how I actually use my phone. I suspect I would use precisely all the same apps and functions in precisely the same proportions – give or take a few percentage points.

What were the iPhone X’s key selling points?

  • The bigger screen? I’m not sure how that helps my Mail, Phone, or LinkedIn experience. The screen isn’t that much bigger, and the user experience did not change on the larger screen. It was simply bigger.
  • No home button? That makes using of Apple Pay harder for me, not easier. I wear glasses sometimes…and not others. When I tried out the facial recognition, it was wonky. That might improve over time, but I despise learning curves without tangible payoffs.
  • A better camera? I come from a family of advertisers and artists, and I have trouble telling the difference between 8- and 12-megapixel cameras on most smaller screens.

Apparently, it’s not just me struggling with the upgrade decision. Lots of people are. You might be too. A couple of weeks ago, Apple made the first announcement in years that it would miss its earnings targets, largely driven by disappointing sales of the new iPhone models.

You can listen (or read) Jim Cramer’s interview with Tim Cook here. Frankly, there is a lot to like. Media interpretations of Cook’s interview (incorrectly, I believe) claim he “blames China” for disappointing iPhone X sales. Yes, he mentions China, but he doesn’t make excuses for Apple. Put simply, China’s smartphone manufacturers (and their products) are improving, leading to higher competition in domestic Chinese market. However, Apple retains a “status product” brand in China that others have yet to match. Nevertheless, Apple needs to step it up, and Cook knows it. His solution seems laser focused on customer satisfaction – in other words, happiness with Apple products.

In the end, will “happiness” be enough to drive a rebound in iPhone X sales?

Unlike many on Wall Street, I don’t know, and I will not hazard a guess. There are too many random factors at play. However, it does seem to me that “incremental innovation” may no longer be enough to drive the average person to upgrade their phone to the newer model … at least not as quickly as Apple would like. My friend (and market innovation expert) Arik Johnson would call Apple’s strategy here an “overshoot” of the customer’s needs. In other words, the engineers can make cool stuff faster than all of us can realize we want it.

It’s hard to disagree.

At the heart of the issue is the difference between “satisfaction” with the iPhone and “urgency” to upgrade to the newer model. I also think Tim Cook knows as much … and said as much in his interview with Cramer. We simply weren’t listening correctly.

“Happiness” truly is the key word. Here why.

 

What Tim Cook really said: The true value of Apple’s innovation is no longer its iPhone, it’s your data that flows through it.

Let’s examine a few of Cook’s statements for evidence:

[A note regarding the conversational language. I am choosing to leave it exactly as CNBC transcribed it. It sounds better than it reads.]

And so when I read the emails and so forth from customers, they’re tellin’ me how the Apple Watch has changed their life. They’re tellin’ me how it motivated them to be more fit, be more active. They’re tellin’ me that they discovered they had AFib. They’re tellin’ me they– found a problem with their heart that they didn’t know existed. And if they wouldn’t’ve reached out to a doctor, they might’ve died. And so these are life-changing things.

Translation:

Yes, I know Cook is referring to the Apple Watch and not the iPhone, but it’s the same idea. Apple is providing a health outcome, not simply a customer experience outcome. And to do that, Apple needs your personal data. The Apple Watch (or iPhone) is simply a measuring device. Ultimately, it is a commodity. The data is the value. Check that. Your data is the value.

By aggregating health data among millions of people, Apple will learn something about atrial fibrillation that even the Mayo Clinic doesn’t know. But if they don’t get our data, the sensor itself has very limited value.

We’ve got machine learning embedded in our silicon in our phone. You know, this allows us– not only the power efficiency to have an incredible performance in a very small package, but it allows us to manipulate this data on the phone, have the transactions on the phone, as opposed to letting them out in the world. And– you know, this– the whole privacy issue forum– we’ve always been on the right side of privacy. But the market is now moving. And so this is an incredible strength that we’ve built.

Translation:

In fairness, this is a technical issue that most people aren’t going to understand, but here is the simple idea: Because you can do more of the “processing work” inside the phone itself (and not need to send data through the internet to a central server location), it’s easier to protect private data. Any time you need to send data from point A to point B, you increase the risk that someone might intercept it.

The technical innovation allows Apple to make a legitimate claim as the “privacy” company. Cook sees the market shifting. Although people may not “care” about privacy today (or at least, not care enough to do anything about it), when they do, the shift will be quick and massive. This attitude tipping point will create an instant opportunity for Apple to capture market share.

I think Apple is not well understood in some of Wall Street. If you, for example, I think there are several people that believe the most important metric is how many iPhones are sold in a given 90-day period or what the revenue is. This goes – this is far, far, far down my list because the point is, if somebody decides to buy an iPhone a little later, if because of the battery – huge discount that we gave – they decide to hold on a little longer, I’m great with that. I want the customer to be happy. We work for them. And so, but the important thing is that they’re happy. Because if they’re happy, they will eventually replace that product with another. And the services and the ecosystem around that will thrive.

Translation:

Apple is playing the long game. Cook is more concerned about happiness with the product and he knows the upgrade will happen eventually. But more to the point, happiness is simply another word for “engagement”, which is another way of say “giving the iPhone your private data.”

Tim Cook knows your data is the key to Apple’s success.

 

Value proposition 101: What’s more valuable, the chicken (iPhone) or the egg (your private data)?

To find out why this shift in power is such a big deal, let’s unpack the “value proposition” for the iPhone. In non-business-school language, when you give Apple $1000 (or so) for a new iPhone, what do you get as the consumer, and what does Apple get as the seller? (Hint: It’s more than just the $1000.)

Let’s start with the basics:

Here is a summary of what you receive when you buy a new iPhone:

  • Use of all the features and functions built into the iPhone (the phone itself, email, music player, GPS, built-in apps, etc.)
  • Access to an “ecosystem” of apps and developers (aka the iTunes Store) who create new functions for your iPhone according to Apple’s quality control rules
  • A “status” symbol – Apple is especially good at creating a desirable brand, and we shouldn’t discount that as part of the value you get for your money
  • Advice and suggestions based on your use of the phone (e.g. screen time analysis, health nudges, etc.)

Here is a summary of what Apple receives when you buy a new iPhone:

  • Retail price of the phone itself less any discounts
  • A cut of the earnings of any paid apps that you download and use
  • A cut of the earnings from cellular carriers (AT&T, Verizon, Vodaphone, etc.)
  • A cut of the transaction any time you use Apple Pay
  • Revenue from other services such as iCloud backups
  • Aggregated usage data from millions of global users (e.g. financial data, purchase/preference data, location data, social data, voice data, image data, video data, and health data)

I am oversimplifying, of course. The value proposition for you specifically is different than the value proposition for everyone generally. In other words, the iPhone as “status symbol” may not be that important to you … but very important to someone else. But even given those conditions, the relative value of those “value exchanges” leads to some interesting insights.

Let’s dissect that exchange of value with just a little more nuance.

Here is a summary of what you really receive when you buy a new iPhone:

  • Use of all the features and functions built into the iPhone (the phone itself, email, music player, GPS, built-in apps, etc.) – As we saw in my example (and I’ll bet yours too, if you look carefully) is that many people use only a small fraction of the total functions of their iPhone. To be fair, that’s true of many technology products, not only the iPhone.
  • Access to an “ecosystem” of apps and developers (aka the iTunes Store) who create new functions for your iPhone according to Apple’s quality control rules – Google has a strong ecosystem as well in its Android ecosystem, and many would argue that their platform offers even more. Apple counters with its “quality” argument. I’d call that a draw.
  • A “status” symbol – Apple is especially good at creating a desirable brand, and we shouldn’t discount that as part of the value you get for your money – Can most people tell the difference between the new Samsung, Apple and Xiaomi phones? They all have great screens, water resistance, responsive touch, and dual cameras. The differences are real, but they are invisible to most people.
  • Advice and suggestions based on your use of the phone (e.g. screen time analysis, health nudges, etc.) – Of all of the value you receive, this is the one that could be truly unique and differentiated. But think about it for a moment, that’s not dependent on Apple’s device necessarily, but rather on your willingness to share data with it. More on that in a moment.

Here is a summary of what Apple really receives when you buy a new iPhone:

  • Retail price of the phone itself less any discounts ­– Apple is good at maintaining its price leadership position (high), but as new similar competitors hit the market, its share could erode.
  • A cut of the earnings of any paid apps that you download and use – As market share erodes, so does the incentive for the developer community to invest in it.
  • A cut of the earnings from cellular carriers (AT&T, Verizon, Vodaphone, etc.) – See above.
  • A cut of the transaction any time you use Apple Pay – See above.
  • Revenue from other services such as iCloud backups – See above.
  • Aggregated usage data from millions of global users (e.g. financial data, purchase/preference data, location data, social data, voice data, image data, video data, and health data) – This data is far more valuable than you think. This is a treasure trove of insights that can lead to the creation of dozens of new spin-out businesses.

To summarize: Of all the exchanges of value, it is the access to your private data that creates the most potential benefit not only for you, but for Apple as well.

But it only works if we all share our data.

 

It’s time to flip the value proposition: Tech should start buying us.

In the near future, the only thing that will make an iPhone truly different in the eyes of its users will be your data and your willingness to share it. That willingness will be based on the benefits you see, personally, in the form of health recommendations, financial advice, and other usable insights.

The technology is simply a mechanism to gather and synthesize your data. And although Cook was able to list off a few examples, the amount of truly valuable “insights” you receive right now is quite low. Apple needs more of your data to build the next generation of products. Those products will include hardware and software, but only as a means to the end of delivering you a better quality of life.

But if Apple’s market share erodes, it will never make it.

Here’s the radical proposition: Start paying us.

Instead of you paying Apple to use an iPhone, why doesn’t Apple pay you according the level of your willingness to share your data? If you share a little, you get paid a little. If you share a lot, you get paid more. Why not provide a mechanism and incentive for you to provide that data? Apple already has a leading position in privacy, so the arguments against sharing data securely will be real, but they will be muted.

There’s even a precedent for this.

When credit cards became commodities in the 1990s and 2000s, they began aggressively promoting cash-back and rewards programs. Why? To keep people using the card. The advertising image of the “Gold Card” didn’t matter as people did more of their shopping online (and no one could “see” that you had a Gold Card). There are plenty of other examples.

The counter argument to this “reverse consumerism” idea is simple, but it’s flawed.

Some technologists will argue that your individual data is not valuable, but rather it is the analysis of many users’ data that creates the value. While it may be true that analysis leads to value creation, DIY artificial intelligence is beginning to commoditize the process of analyzing data, not just collecting it. In other words, anyone will be able to do the analysis … if they have access to the data.

And that access is not a trivial problem. Take the example of the early versions of pothole reporting apps. The data revealed that potholes occur more often in rich neighborhoods. Or did the data reveal that potholes occur where people had the technology and time to report them? To carry forward our Apple example, the people who can afford an iPhone are not necessarily a representative sample of those with atrial fibrillation, and the resulting analysis may be deeply flawed.

Garbage (data) in. Garbage (analysis) out.

Think about it for a minute: Not everyone has $1000 (or more) to buy a new iPhone X, but everyone has personal data … lots of it … of many different types. This could be a way to form a truly meaningful and human partnership between company and consumer based on the next generation of mutual benefit. Your data leads to new innovations that companies give back to you. Think of what this means for the total available market for Apple’s iPhone. You won’t need $1000. You’ll just need to be a human being.

Up to this point, Apple (and everyone else, by the way) was hoping that incremental “tech” innovation would be enough for you to give your data away for free. And up to this point, it’s worked.

But as privacy concerns mount, and technology commoditizes, people will stop sharing their data because they will no longer see the benefits as worth the risks. And if you stop sharing, the next generation of innovation cannot occur.

Here’s the more important question: What company will seize the opportunity to pick up the ball here and rehumanize its relationship with consumers?

If not Apple, who?

If not now, when?

Tim Cook, what do you say?

 

Post Script:

By the way, walked out of the Apple store with an iPhone 8 – the first model Apple made with wireless Qi charging built in, because my car has a Qi charging pad, and because they discounted the price.

 

About Jason Voiovich

Jason’s arrival in marketing was doomed from birth. He was born into a family of artists, immigrants, and entrepreneurs. Frankly, it’s lucky he didn’t end up as a circus performer. He’s sure he would have fallen off the tightrope by now. His father was an advertising creative director. One grandfather manufactured the first disposable coffee filters in pre-Castro Cuba. Another grandfather invented the bazooka. Yet another invented Neapolitan ice cream (really!). He was destined to advertise the first disposable ice cream grenade launcher. But the ice cream just kept melting!

He took bizarre ideas like these into the University of Wisconsin, the University of Minnesota, and MIT’s Sloan School of Management. It should surprise no one that they are all embarrassed to have let him in.

These days, instead of trying to invent novelty snack dispensers, Jason has dedicated his career to finding marketing’s north star, refocusing it on building healthy relationships between consumers and businesses, between patients and clinicians, and between citizens and organizations. That’s a tall order in a data-driven world. But it’s crucial, and here’s why: As technology advances, it becomes ordinary and expected. As relationships and trust expand, they become stronger and more resilient. Our next great leaps forward are just as likely to come from advances in humanity as they are advances in technology.

If you care about that mission as well, he invites you to connect with him on LinkedIn. If you’re interested in sharing your research, please take the extra step and reach out to him personally at jasonvoiovich (at) gmail (dot) com. For even more, please visit his blog at https://jasontvoiovich.com/ and sign up for his mailing list for original research, book news, & fresh insights.

Thank you! Gracias! 谢谢!

Your fellow human.

 

 

 

Jason T Voiovich

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