The less expensive iPhone

Cheap vs. transformative:

The easiest way to lower costs is to make something cheap. Cheap components, cheaply assembled, cheaply packaged, with cheap software and services, and cheap support, sold at razor-thin margins, results in a really cheap price tag. Nothing exemplifies this better than the netbooks of the last decade. Sold at unprecedentedly low price points, they ultimate pleased almost no one, not the customers who bought and suffered through trying to use them, nor the manufacturers who saw their profitability vanish and their market get trashed. No one but people for whom price is the only important feature, the kind of customers who break companies and entire industries, if those companies and industries are foolish enough to cater to them, benefited from netbooks.

The harder way to lower costs is to make something — or things — transformative. Instead of a netbook, Apple released the MacBook Air, ultimately providing greater value at a consistent price point, rather than less value at a lower price point. Apple also released the iPad, which ditched the keyboard and trackpad but added multitouch to the mix, kept production values high, and still started at half the price of the lowest end Mac.

via The less expensive iPhone.