Product Innovation, Process Innovation and Competitive Lessons from Consumer Electronics Industry

With the introduction of iPhone, Apple reinvented the mobile phone industry and set new standards in how the smartphones of the future should look like and what should they be capable of. It was at the time considered the pinnacle of smartphone layout and capabilities. As time has shown, it was in a sense quite the opposite, a beginning of the new cycle of product innovation. With first iPhone, Apple has set the design standard for all the future smartphones. As the product innovation gradually subsided, process innovation has increased. Future generations of iPhones have featured, on average, less and less product innovation, especially in product architecture but an increase in the performance of previous features. Additionally, new competitors have started to enter the industry with branded smartphones that in appearance have mimicked the standard set by Apple iPhone. In order to raise barriers to entry and shield off the competition, Apple shifted the competitive battlefield from the devices itself (already exhausted possibilities for product innovation and process innovation) to the (eco)system level. This paper analyses the development of Apple ecosystem and its main challenger Android ecosystem and explores competitive implications of their rivalry.