How the iPhone Got Tail Fins—Part 2 of 2

10/20/11Follow @sgblank

(Page 2 of 2)

keep competitive. GM would shut down all their manufacturing plants for a few months and literally rip out the tooling, jigs, and dies in every plant and replace them with the equipment needed to make the next year’s model.

GM had figured out how to take a product which solved a problem – cheap transportation – and transform it into a need. It was marketing magic that wasn’t to be equaled until the next century.

By the mid-1950s every other car company was struggling to keep up.

Mass Marketing

Starting in the 1920s and continuing for the next half century, automobile advertising hit its stride. Ads emphasized brand identification and appealed to consumers’ hunger for prestige and status. Advertising agencies created catchy slogans and jingles, and celebrities endorsed their favorite brands. General Motors turned market segmentation and the annual model year changeovers into national events. As the press speculated about new features, the company’s added to the mystique by guarding the new designs with military secrecy. Consumers counted the days until the new models were “unveiled” at their dealers.

Results

For fifty years, until the Japanese imports of the 1970s, Americans talked about the brand and model year of your car – was it a ’58 Chevy, ’65 Mustang, or ’58 Eldorado? Each had its particular cachet, status and admirers. People had heated arguments about who made the best brand.

The car had become part of your personal identity while it became a symbol of 20th-century America.

After Sloan took over General Motors its share of U.S cars sold skyrocketed from 12 per cent in 1920, until it passed Ford in 1930, and when Sloan retired as GM’s CEO in 1956 half the cars sold in the U.S. were made by GM. It would keep that 50 percent share for another 10 years. (Today GM’s share of cars total sold in the U.S. has declined to 19 percent.)

How the iPhone Got Tail Fins

Over the last five years Apple has adopted the GM playbook from the 1920s – take a product, which originally solved a problem – cheap communication – and turn it into a need.

In doing so Apple did to Nokia and RIM what General Motors did to Ford. In both cases, innovation in marketing completely negated these firms’ strengths in reducing costs. The iPhone transformed the cell phone from a device for cheap communication into a touchstone about the user’s image. Just like cars in the 20th century, the iPhone connected with its customers emotionally and viscerally as it became a symbol of who you are.

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The desire to line up to buy the newest iPhone when your old one works just fine was just one more part of Steve Jobs’ genius – it’s how the iPhone got tail fins.

It’s one more reason why Steve Jobs will be remembered as the 21st-century version of Alfred P. Sloan.

Steve Blank is the co-author of The Startup Owner's Manual and author of the Four Steps to the Epiphany, which details his Customer Development process for minimizing risk and optimizing chances for startup success. A retired serial entrepreneur, Steve teaches at Stanford University Engineering School and at U.C. Berkeley's Haas Business School. He blogs at www.steveblank.com. Follow @sgblank

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  • Jered Floyd

    Great retrospective of the change in cars from transport to fashion. I just purchased your book on a recommendation and look forward to reading it.

    I agree that Apple does this sort of thing frequently. They’re very interesting in the mobile phone industry. They’re the only vendor that has consistently updated the software on older phones (with Android it’s hit-or-miss by vendor, but getting better), but on both mobile and the desktop they’ve done feature segmentation that is entirely separate from capability. Nothing in the iPhone 4S, for example, enables Siri… it all runs server-side. Yet, it’s not available on the older phone models.

    There’s one aspect of the iPhone model that differs greatly from the car upgrade model, and recent policy changes will show if the iPhone Next (I’m betting on a shift away from numbering, perhaps it will be the iPhone LTE) will have quite as massive a launch. I’m talking, of course, about the US model of the business distorting handset subsidy.

    An iPhone really costs around $750, but you only pay $200 for it because of a tradition in the US of getting a subsidized phone in exchange for being locked into a contract with the provider. Until April, AT&T would allow a fully-subsidized upgrade (for high-value, i.e. iPhone users) every 12 months in exchange for a renewed 2-year contract. This is a big part of what drove early adopters like myself to upgrade every year.

    In April, this changed. AT&T will now only fully subsidize upgrades every 20 months. That means that those of us who just upgraded to the 4S will not be eligible for the inevitable next iPhone shipping in a year. I bet you most of us aren’t going to pay an extra $300 for a semi-subsidized upgrade, and instead will start skipping a cycle.

    The every year upgrade model was unsustainable anyway, but it will be very interesting to see how this change affects the next launch.

  • Billy Bob

    @ Jared

    Have you not seen any of the documents showing the cost of a shipped iphone to be around $180 USD?

  • Jered Floyd

    @Billy Bob: I’m referring to the purchase price, not the manufacturing cost.

  • Chris Noble

    Fascinating story. Detroit is now an industrial wasteland, a testament to how the US auto industry almost destroyed itself at a huge cost to the US economy and blue-collar communities in its focus on wasteful consumption rather than value creation. I think Steve Jobs’ legacy will be more positive! But Jered’s comment above about Apple’s “planned obsolescence” strategy should be a cautionary tale… Wall Street is expecting continuously-growing earnings from Apple… I feel a bit sorry for Tom Cook.

  • Shashi P

    There is a fundamental fatal flaw in this analogy, and that is an automobile is something that takes you from point A to point B. Even over the years you could as a driver at most listen to the radio as an added task, nothing more. No new tasks can be integrated into the driving of the automobile – you can’t cook your lunch or shave your face.

    On the other hand, a phone is no longer just a phone it is continually integrating new tasks that were previously external to it- web search, navigation, assistance and in the future payment ewallet. This is a fundamental difference. Integration of tasks is creating obsoleteness of a previous more limited set of tasks.

    What you seem to have confused are the “features” of the car vs “features” of the phone (as you try to set it up in Part 1). It is not features that should be compared between next generation of phones but tasks.

    The two paths of evolution are completely different. As Siri might say ‘Are there other tail fins out there?’

  • Shashi P

    @Chris Noble
    You seem to have no grasp of the lines of thinking or vision in the whole information technology space. Detroit died trying to churn out commodity cars at high cost of living while globalization was occurring with no innovation at its base.

    If you are able to see anywhere into the future you will understand that we are traveling at high speed toward a Star-Trek tricorder future. Just think of how much innovation can be squeezed out between todays phone and the tricorder! For example your phone in the future can scan you and tell you that you have a specific type of bacterial infection. That is where we are headed.

    Steve Jobs changed the road of innovation in some profound ways looking into the future. He set the path to making reality what only the futurists dreamed possible one day.

    I think those who are unable to imagine the future will look at the wasteland of the past to find a reason to stop moving and sit by the wayside and fret about the state of things.