Apple transformed the mobile telephony consumer market by changing the basis of competition. Through the new basis of competition which elevated the industry, Blackberry and Nokia were destroyed. Apple became the industry category-king and the world’s most valued company.
Apple did that through pioneering innovations via products like iPod, iPhone and iPad. The world responded. Apple saw glory and triumphed. The stock price went through the sky. Legends were made. Steve Jobs became a demi-god with disciples from the Himalayas to the Kilimanjaro, and from the Mississippi to the Shinano.
Then Apple started incremental innovation. The bold disruption is gone. When that happens, we can return to agriculture, picking a lesson from the law of diminishing returns:
Tekedia Mini-MBA edition 14 (June 3 – Sept 2, 2024) begins registrations; get massive discounts with early registration here.
Tekedia AI in Business Masterclass opens registrations here.
Join Tekedia Capital Syndicate and invest in Africa’s finest startups here.
In economics, diminishing returns is the decrease in the marginal (incremental) output of a production process as the amount of a single factor of production is incrementally increased, while the amounts of all other factors of production stay constant.
The law of diminishing returns states that in all productive processes, adding more of one factor of production, while holding all others constant (“ceteris paribus“), will at some point yield lower incremental per-unit returns
In most agricultural science examples in Nigerian secondary schools, fertilizer was always what was to be added while the land was always held constant. What the law means there is that there is a limit that adding more fertilizer to a piece of land can continue to improve your farm yield, In other words, after a time, despite adding more fertilizers, the yield impact will be negligible.
For Apple, adding more of incremental features on iPhone will get to a level where the impact will be negligible in the stock price. The incremental feature is the fertilizer here and wowing users is the land. The output is the stock performance. (There is a negative return in Apple stock over the last few weeks, and not just flat. When the law of diminishing returns is extended for a long period, the marginal output is always low. But again, negative return over a short time does not say a lot of things. For Apple, it is negligible). Fortune Newsletter has a good summary on this:
Shares in Apple hit an eight-week low after a report suggesting weak initial demand for the iPhone X. Fortune‘s Don Reisinger dissected that specific story skeptically, but market sentiment has clearly turned cautious since the launch of the X and iPhone 8, amid fears that they will cannibalize each other’s sales and, more specifically, that the X’s $999 price tag is too ambitious. At a little over 17 times trailing 12-month earnings, the stock has a curiously old-economy feel to it all of a sudden
But do not bet against Apple yet, it has a record of turning this diminishing return into an abundant return.
In the end, the iPhone 7 turned out to be a big seller, and Apple ordered the remaining supplies a couple of months later.
In other words, Apple’s iPhone X component strategy, as reported by Digitimes, wouldn’t be unique. It could merely be a strategy that it has followed in the past, and that Apple just wants to avoid forking out too much money for parts
We do hope for iPhone X to find success. iPhone 8 has been unable to start the carnivals for the Apple fans. Where iPhone X also fails, then you can be talking of a diminishing returns.
---
Register for Tekedia Mini-MBA (Jun 3 - Sep 2, 2024), and join Prof Ndubuisi Ekekwe and our global faculty; click here.