Why people have the wrong expectations for smartphone growth and innovation.

Around midnight last week, we turned on the Seattle local New Year’s Eve broadcast, sponsored by T-Mobile, and happened to turn it on just a the moment the T-Mobile executive was using their sponsorship time to talk about how 5G was going to change the everything for everyone. He gave examples of how 4G had made Uber possible, and a variety of other examples of why the future was going to be wonderful here in Seattle with T-Mobile.

A few days later Apple issued its earnings warning with iPhone in China as the cause behind the miss in earnings. This caused a variety of people to talk about how boring iPhone is and that no one is buying smart phones anymore. Ignoring the macro-economic factors in China, and whatever is going on with our spray-tanned trade warrior in chief. I think there is a lot of confusion about what actually makes iPhone special within the larger smartphone ecosystem, and what innovation will mean in that business.

First, it’s important to remember that we are basically only 10 years into the seiesmic shift of smartphones and mobile devices as primary computers. Technology evolution moves much faster than how we as human beings change, so when a device that’s so personal and personalized to us and our behaviors emerges it’s easy to see those initial versions of a new product and the significant change between them as major innovation. In reality, when building a complex new product, especially one with both hardware and software complexity, you are always making major compromises. Compromises driven by power, form factor, time, cost and more. It’s one of the most difficult parts of product development, but dealing with those constraints in a way that still leaves you with something interesting to sell is the magic.

iPhones are an innovation that is borne of a significant number of pre-existing technologies, being managed together into something that’s significantly different than what came before. Innovation in materials, software, design, and more abounds; but at the core the first iPhone was a computing paradigm shift for consumers. Moving your phone from an appliance to a general purpose computer. Every other smartphone since has copied or improved on that core innovation.

Since the first iPhone, a ton of improvements have been added. Screens and cameras have gotten bigger and better, finger print readers, depth sensors, processors, materials, batteries, wireless tech, you name it. The worlds most valuable real estate (whatever’s in your hand) became economically viable for development, and many people have invested hours and billions in making things that take advantage of the still new fact that basically everyone who can afford to participate in the developed world economy can buy a device that puts a computer, communications, the worlds information, and endless wonder in the palms of their hand.

These new technologies have improved the usability and usefulness of the smartphone in amazing ways. The device I hold in my hand today is substantially different and better than the device Apple launched in 2007. However, in the big factors it’s hard to see any single change Apple made as anything other than an improvement and refinement of their initial innovation. One of the most powerful parts of the core innovation with iPhone was just how immediately obvious it was that we were looking at the future. A million apps were born in the minds of creators in those first few years. You can still pick up an iPhone of 10 years ago and see the hints of the future, and the family resemblence today.

A lot of that has to do with a simple fact. We have hands, we use those hands to hold and tap our portable computers. Our hands have a range of sizes but it’s not that big, these factors aren’t changing, so as long as we are talking about a handheld device with a particular interaction, it’s going to trend toward a fairly narrow range.

People talk about changing the notch to be a pinhole sized front facing camera or similar minor changes as innovation when the come from handset makers that aren’t Apple. It isn’t innovative, we all know that the eventual destiny of the phone is a full uninterupted front screen of some type. Improvement yes, valuable yes, innovative not that much.

The next big innovation in hand held computing is likely to come from when one of the core factors of the smartphone has the opportunity to change. For people to recognize that change as real innovation, it’s almost certain to be related in some way to physical form factor changes. Which are closely connected to human factors which aren’t changing. This kind of innovation is far slower, and requires that big leap that only comes along once every decade or two. Maybe something like foldable screens, or some sort of micro projector.  Something that breaks the intrinsic association between smartphone and human hand.

Until this major shift comes along, the kind of evolutionary changes and improvments we see year to year in iPhone and other manufacturers products are actually what we should expect and be excited about. I remember when I switch to iphone from a Blackberry and I went from having to charge my phone once every other day to twice a day. Sure I was doing more, but man… battery life sucked. Ten years later, and I use my phone more than ever but most days I plug in before I go to bed and still have 15-20% charge remaining. In the first few years of iPhone I felt compelled to buy a new one as soon as I was able. Sometimes the screen broke, or some other problem hit, but because the early iPhones were brilliant products full of compromise we all bought them as soon as we could.

Now we are all able to keep our phones longer. That’s a good thing. A two or three year upgrade cycle is healthy in a mature product, and even with the higher ASPs we see the per day price of a much better product dropping down pretty substantially. That’s great news for consumers. It’s what lets the total market for smartphones become much more accessible without becoming a commodity. A device that costs $750 and needs replacing every year is accessible to a much smaller slice of the world market. A “boring” device that costs a thousand dollars and lasts for 5 years, is something that can achieve ubiquity and we should all be looking forward to.

There are still billions of people out there who don’t have smartphones. They have been adopted incredibly rapidly, and yet billions don’t have them. There are just about as many TV owning households in the world as there are households. About 1.8-1.9B, there are slightly more smartphones out there with somewhere between 2-2.5B depending on who you ask. The TV took almost 90 years to reach this kind of ubiquity, and thats for a device where many households only need one. We don’t know how long it will be before a major innovation that makes your iPhone as obsolete as your (awesome) Motorola Star-tac is today, but if we want to see the five billion non smartphone owners buy in, it will absolutely be to a low total cost of ownership, high value, long lived, robust device. Unlocking that market will take years, but there is a lot of money there for the kinds of devices that aren’t “exciting” every year.