Why is iPad 2 so much like last year's model?

iPad 2

Today's iPad 2 launch came with a couple surprises: Apple CEO Steve Jobs, who is on medical leave, officiated the media event. It's a smart way of quelling rumors about his health, without ever having to disclose any real information. The other surprise: The new iPad isn't remarkably different from the 1st generation model. Like many other second generation Apple products, the iPad 2 is evolution not revolution, a pattern of product development Jobs instituted long ago.

Apple typically develops its products incrementally, starting with a showstopper that Jobs often calls "one more thing." There is a consistent pattern: "One more thing" debuts with modest hardware features but something else nevertheless killer -- something people want, or think they do. During the launch event, Jobs performs his marketing magic, demonstrating how this "one more thing" will make peoples' lives better. Often the product lacks something compared to competing wares but offers something more elsewhere.

People pay more to be Cool

Once Apple releases that "one more thing," the company then iterates -- incrementally improves -- the product over time. The process is essential to Apple maximizing margins. "One more thing" products typically have initial higher selling prices or same as the replaced product(s). They're cool. People are willing to pay more, and Apple certainly doesn't discourage them from doing so.

"One more thing" is very much about selling the coolest thing. Plenty of buyers demand the newest, coolest product, and they're willing to pay a premium price to get it. To many of these buyers, the tech gadget is as much an accessory -- statement of their coolness, superiority -- as useful product. Apple engages in a tried-and-true retail practice. It's good business. Clothing stores take a similar approach. There are teens who must have the newest wears from Aeropostale, American Eagle, Gap or Hollister at full price; they can't wait for sales. They want to be cool. Apple sometimes charges more for fashion, just like clothiers. Remember the black MacBook, which cost $150 more than the white model, simply for the color?

However, as a product's lifecycle progresses and Apple maximizes margins at the front end, incremental improvements begin. The company typically starts by offering better hardware for the same price. Later, Apple adds substantially better hardware or features and cuts the price. Eventually, Apple retires the product and introduces another "one more thing."

The iPhone is a good example of this process. The iPhone 4's design somewhat differs from the "one more thing" model that went on sale in June 2007, but the user interface, basic features and most functions have only incrementally changed since. The original iPhone lacked 3G, video and MMS, but offered slicker user interface, a capacitive touchscreen, more enjoyable media playback and better calling features than comparable handsets. The iPhone was less and more comparatively, then. But buyers paid. Apple and AT&T sold the 1st generation iPhone for $499 or $599 at launch; Apple lowered the price to $399 a few months later. New models brought lower prices -- $199 and $299. The older 3GS is still available, now for 50 bucks. Apple has already maximized margins on the 3GS, which now exists to capture buyers unwilling or unable to pay more.

When Change isn't Enough to "Wow"

The iPad 2 clearly follows the approach of incremental development, by offering small improvements with substantial benefits, without dramatically changing basic form and function. The new model is 33-percent thinner than its predecessor but basically same height and width, but lighter (1.3 pounds). However, battery life is comparable, Jobs claims. LED screen size and resolution are unchanged from the original model. Apple's newest tablet packs a dual-core processor, which matches the trend among Android 3.0 "Honeycomb" tablets. There is now a gyroscope, two cameras and extra-cost accessory for connecting to HDMI cables. Apple also made many software tweaks, such as offering FaceTime video streaming and Mac OS X's Photo Booth feature, both supporting the addition of cameras. Apple also introduced some new apps, most notably Garage Band.

There are plenty of incremental tweaks, which as a whole should improve the overall user experience but not dramatically change it. If I were in the market for an iPad, I would take the original model at $299 (16GB WiFi) or $399 (32GB WiFi), if Apple were to offer such prices. Update: After I posted, Apple started offering 1st gen models for $399 and $499, respectively (they're not cheap enough). Hey, this incremental approach is why Apple can still successfully sell the iPhone 3G, even though it lacks hardware features found on iPhone 4.

Keeping with this incremental approach and maximizing margins upfront in the product development and distribution cycle, Apple kept the price for iPad 2 models the same as the originals -- from $499 to $829. I would expect any price cuts to come with the next product release, which likely will more dramatically improve features and functionality -- keeping with Apple's incremental design approach.

Measuring iPad 2's Incremental Improvements

How does the new iPad, which goes on sale March 11, compare to some other tablets?

iPad: 1GHz A4 processor (single core); 9.7-inch LED display with 1024 by 768 resolution; 16GB, 32GB or 64GB internal memory; accelerometer; ambient light sensor; compass; WiFi; 3G (on some models); iOS 4.2.

iPad 2: 1GHz A5 dual-core processor; 9.7-inch LED display with 1024 by 768 resolution; front-and-rear facing cameras; 16GB, 32GB or 64GB internal memory; 720p video recording; accelerometer; ambient light sensor; compass; gyroscope; WiFi; 3G (on some models); iOS 4.3.

Galaxy Tab 10.1: 1GHz dual-core processor; 10.1-inch TFT display with 1280 by 800 resolution; two cameras -- rear-facing 8-megapixels with LED flash; front-facing 2MP; 16GB or 32GB internal memory; Flash 10.1; 1080p video recording; WiFi; 3G, with support for HSPA+ 21Mbps networks; GPS; Android 3.0.

HTC Flyer: 1.5GHz processor; 7-inch display 1GB of RAM; 32 GB of internal storage, expandable with microSD to 64 GB; a 5-megapixel back-facing and 1.3-megapixel front-facing cameras; light sensor; velocity sensor; digital compass; Bluetooth 3.0; GPS; Android 2.4.

Motorola XOOM: 1GHz dual-core nVidia Tegra 2 processor; 10.1-inch display with 1280 x 800 resolution; 1GB of RAM; 32GB internal storage, expandable with MicroSD card; 5-megapixel back-facing and 2-megapixel front-facing cameras; 720p video recording; 1080p video playback; HDMI and USB 2.0 ports; accelerometer; barometer; gyroscope; Android 3.0.

Which would you buy, if any of them?

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