The iPhone — with iOS and the App Store — has maintained such a dominant position in the mobile industry for so long, it has achieved the status of what’s known as “nonsubstitutable infrastructure.”
Nonsubstitutable infrastructure is something that so strongly holds users, a competitor can’t get them to replace it. It has the following characteristics:
- High switching costs for replacement.
- Total or nearly total standardization within an organization or market.
- Strong third-party and vendor support.
- Functions as a key underlying technology for other services and applications.
The New Jersey Turnpike is a nonsubstitutable infrastructure. I’m not likely, even with the help of a few billionaires building high-speed underground tunnels, to ever stop driving on it. Coke and Pepsi are examples of substitutable infrastructure. I can drink Diet Coke in the morning and Pepsi in the afternoon. There’s no cost for switching brand allegiances (except I always conclude that Coke tastes better).
Apple benefits today from the image of being the “safe choice” for users. It’s created for them a positive-feedback loop that leads its customers further into its infrastructure: They buy other devices designed to work best with their Apple gear such as the Apple Watch and AirPods, along with Apple services such as Apple Music and Apple TV+.
Many say the power of the Apple ecosystem of hardware, operating systems, and services, all tied together with the power of the App Store, is unstoppable. Since no challenger today can topple Apple’s marketplace position, they say it will grow only stronger over time.
Despite this, it’s inevitable that the iPhone and the Apple ecosystem will be replaced by something else.
Empires rise and fall, from the Egyptians and the Romans to the Ottomans and the British to tech empires such as IBM or Microsoft.
That’s an imperfect metaphor, I know. Apple will not cease to exist, nor did IBM or Microsoft vanish. The latter two, however, while both powerful and profitable, do not have nearly the dominant market or mindshare positions they once had. No one is suggesting we break up IBM or Microsoft like they are advocating these days for Apple.
To explain how Apple will fall, I offer a framework for how technology cycles occur, a cycle that has held true for a variety of technical innovations, from refrigeration to audio technologies.
Technology shifts over time and goes through five phases:
- Multiple companies produce differing technologies that serve the same user need.
- Market forces lead to one standard emerging as a nonsubstitutable infrastructure. Often, it is not the best-of-breed technology that wins market adoption.
- That standard is attacked by pseudo-challengers who imitate it but do not effectively displace it, as the pseudo-challengers do not offer enough meaningful differentiation or have different flaws than the technology they attempt to displace. (But pseudo-challengers often have enough value to survive and coexist alongside the dominant technology.)
- The standard reemerge stronger than before and appears invincible to displacement.
- A new and better technology emerges and displaces the existing standard.
iOS is in stage 4. It has achieved dominance and mindshare despite being challenged by the Android operating system and a host of devices from the likes of Google and Samsung.
To supplant the Apple juggernaut, any new technology that comes to market must meet the following criteria:
- It must offer visible and demonstrable value and differentiation that can be directly exploited by end users. One reason the iPhone replaced flip phones was that it had a real browser and touchscreen with a pinch-to-zoom feature. It made using the internet feel more like you were on a PC than on a cellphone.
- It must offer economic benefits to a marketplace of vendors. The iPhone offered apps, an entirely new market for existing and new software developers.
- It must offer clear economic benefits to hardware vendors. If conditions one and two are met, hardware vendors have a strong incentive to build systems to take advantage of the new technology and drive upgrades.
I’m not going to attempt to predict what will ultimately supplant the Apple “i” ecosystem. That’s a fool’s task. No one predicted Apple’s rise and rebirth under Steve Jobs. No one predicted the iPod and its influence on Apple sales. Certainly, no one predicted the iPhone and the impact it would have on the industry.
Some even greeted the iPhone with great scepticism and more than a little sarcasm.
But as chips grow more powerful and network speeds get faster and artificial intelligence gets smarter, the technology that topples the iPhone could already be out there in nascent form. The bigger question is: Will Apple be the one to produce it?
