Apple Inc. Wins Gold With New iPhones

By James

Source: Apple.

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Apple has released its blockbuster iPhone in gold and rose gold colors, but that's not the only gold the Cupertino giant can lay claim to recently.Anandtech, a site founded in 1997 that reviews technology products, recently announced that the iPhone 6s and 6s plus won an "Editors' Choice Gold" award. It's the highest-rated iPhone ever and the second phone overall to secure this designation.

So what does this say about Apple's history of development with the phone? Critics often say the first iPhone was innovative and since then it's been iterative. I have a few observations that I think bode well for the future of the company and its stock.

Iteration can be innovation over timeApple has released a new iPhone about every year since 2007. Recently the process has become like clockwork, with the 6 following the 5s, which followed the 5, all about a year apart. It would be difficult to argue when comparing the original iPhone to the 6s that there has not been a tremendous amount of innovation in both form and technology. Critics who scoff at Siri, Touch ID, or 3D Touch as innovative features may be right on the surface, but they're missing the big picture.

It's possible for a series of iterative improvements to lead to true innovation over time. Innovation is the equivalent of seeing a friend come back from a cruise 20 pounds heavier. The difference is clear. Iteration is seeing that same friend gain half a pound a week for 40 weeks. The change is harder to notice, but the end result is the same. For Apple to receive this award shows that hard work improving small parts of the overall device over many years can ultimately lead to a drastically improved piece of overall technology.

Improved tech specs = improved userexperienceOneof the marketing advantages Apple had early on was focusing not on technology specifications but on how the devices would be used. WhileIBM,Dell, and the like were espousing the merits of RAM and hard-drive space, Apple was preaching ease of use. How can Apple make your job or downtime easier and more enjoyable? Recently Apple has had to move away from this method a bit.

When new iPhones are released, there are usually one or two totally new areas of functionality. After that, consumers are bombarded with a bevy of improvements to the camera, processor, screen, and nearly every other hardware component of the phone. While some consumers (including me) may yawn at these as they roll out -- even as Apple fans line up to buy the new device -- they eventually lead to a vastly improved experience.

When multiple apps are open and the screen sticks or lags, consumers are wont to say, "This phone is garbage." Preventing this occurrence and creating a seamless experience is what all of these tech upgrades are all about. Apple should do a better deal of explaining how more RAM improves the experience of a grandmother trying to video chat with her grandchildren, but as long as it actually does make the video chat more seamless, Apple is ahead of the game.

Gold iPhone 6. Source: Apple.

Focusing on iteration is also a sound nuts-and-bolts business decision. Apple is much better off releasing a phone that is 5%-10% better every year than one that's 50% better every three years. The upgrade cycle is the predominant driver for the company right now, and constant iteration is necessary to keep sales from being too lumpy. Apple's recently introduced in-house financing and upgrade plan should further help with this process.

Why Apple worksApple has done a wonderful job of preserving its own business interests while continually giving consumers an improved version of something that they already love. Iteration and the upgrade cycle have made something that was once a one-off purchase into a quasi-recurring revenue stream. Most people with iPhones tend to continue to buy iPhones. Wall Street has given this model short shrift, but it remains a wonderful business.

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James Sullivan owns shares of Apple. The Motley Fool owns shares of and recommends Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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