iPad 2 – Why now and what can it do for Apple?

Here’s a question for Product Management. Is shortening your product lifecycle a good thing? or not? Apple’s launch of iPad 2 has been quite impressive. But why did they really do this?

 

Just look at the impacts

– Taken a highly successful product iPad 1 ( 15 Mil units in sales for year 2010) and killed it

– Rolled out a new product in less than a calendar year with more features but some risk on user experiences / adaption

 

What is the probability that they would have continued on a solid sales growth in 2011 had they not launched iPad 2. Probably very high. I’m sure they would have easily done another 15 to 20Mil easily given the popularity of the device and the lack of real credible competition yet

 

I think from a strategic perspective, 95% of companies would have most certainly held off launching the next version until the existing product ran its full lifecycle- ie the traditional product lifecycle will be lead by sales numbers, and will have either customer saturation/ obsoleteness or competitive forces drive down the sales curve and hence push new product launches.

 

Also note that the more the product is in circulation and at the peak of the demand curve, the more the company can make in terms of margins – by driving down supplier costs and by optimizing distribution.

 

So it looks like Apple went against the grain ( as usual) and decided that design/technology/ user needs and the need to stay ahead of the competition was the thing to do instead of juicing more sales. Compare this to other path breaking products -eg Nintendo Wii that has been unchanged for virtually 3 + years and saw a lacklustre holiday quarter last. To speak nothing of how Microsoft’s Kinect is doing in that space.

 

But that reasoning does not do justice to a forward thinking company as Apple. There must be more especially since the iPad 2 appears to be the fastest product upgrade even by their own standards. Could it have to do with

– upcoming competition as a factor – esp Playbook (RIM), HP(webOS), Motorola (android). Possibly even though only a few of these products will live up to their expectations, the ability to confuse users and take away valuable market share is real

– pure product segment domination lead by another dose of smart design and technology

– to sustain the marketing hype, consumer interest in this space.

– opportunity to make better margins on newer design and lower supplier/ logistics costs( since the retail prices of ipad2 are virtually the same as the first version).

 

It appears all the above could be true but none stand out uniquely. So I was quite interested to learn that 30% of the folks waiting in line outside the Apple store on Friday’s launch were actually existing iPad 1 customers. Is it possible that Apple new this sometime last year?. Cause if it did and the math worked out right –

– Assume a 2011 sales growth of 50% over 2010 = 15*1.5 =22.5 ( new buyers)

– 30% of 15 Mil = 4.5 Mil ( existing customers upgrading)

 

So the ipad2 can actually do (22.5+4.5) = 27 Mil in 2011 sales!

 

A more likely number will be say 30 Mil and a blowout could be even 40 Mil!

 

Could the iPad 1 have done that – most likely not ( especially if you factor the 30% out of this mix).

 

So in effect iPad 2 is actually sales driven and Apple just made shortening product cycles smart strategic sense.