“It was insanity,” Schiller recalled. “Tons of products, most of them crap, done by deluded teams.” Apple had a dozen versions of the Macintosh, each with a different confusing number, ranging from 1400 to 9600. “I had people explaining this to me for three weeks,” Jobs said. “I couldn’t figure it out.”

He finally began asking simple questions, like, “Which ones do I tell my friends to buy?” When he couldn’t get simple answers, he began slashing away at models and products. Soon he had cut 70% of them. “You are bright people,” he told one group. “You shouldn’t be wasting your time on such crappy products.” Many of the engineers were infuriated at his slash-and-burn tactics, which resulted in massive layoffs. But Jobs later claimed that the good engineers, including some whose projects were killed, were appreciative.

He told one staff meeting in September 1997, “I came out of the meeting with people who had just gotten their products canceled and they were three feet off the ground with excitement because they finally understood where in the heck we were going.”…After a few weeks Jobs finally had enough. “Stop!” he shouted at one big product strategy session. “This is crazy.”

He grabbed a magic marker, padded to a whiteboard, and drew a horizontal and vertical line to make a four-squared chart. “Here’s what we need,” he continued. Atop the two columns he wrote “Consumer” and “Pro”; he labeled the two rows “Desktop” and “Portable.” Their job, he said, was to make four great products, one for each quadrant. “The room was in dumb silence,” Schiller recalled

I've recently had a lecture where the iPhone was used as an example to explain innovation cycles in economic geography. Sadly, I left my notes somewhere else so I'll paraphrase. So this is the answer from an economic perspective:

There are four stages in the Product Life Cycle:

- Introduction, where a new market or product is created for a relatively small audience (think first iPhone)

- Growth, in which the amount of people adopting the product increases

- Maturity, when the growth reaches its limit and the amount of people using the product slowly plateaus

- Decline, when the item becomes obsolete or is replaced by a better one (the way smartphones replaced normal mobile phones for instance)

A company wants to stay in the growth stage as long as possible. But this is only possible if the growth increases more and more, because as soon as the growth this year is less than previous year, it's coming close to entering the maturity stage, at which its userbase doesn't grow anymore. And to stand still is to regress, especially for investors.

To keep growing faster and faster, Apple needs to innovate more and more. But at the same time, they need to make more iPhones every year, to keep the growth going. So as the product life cycle goes on, a company will spend less money into product innovation and more money into process innovation. That way they develop methods to make their product faster, cheaper and with a larger volume every year. Apple has developed special robots, made to make iPhone parts. Economies of scale are dominant here. Standardization of products leads to bigger volumes at a lower price per phone.

This is why every new iPhone looks so much like the previous one: they already have the investments in efficient processes, so it's cheaper to use (nearly) the same pieces. A new processor is usually the same shape. But they can't deviate too much, or it will mean large adaptations in the production process, at great costs.

If they were to make different iPhones for different price categories, this would require them to use cheaper parts of the same model (iPhone 5c) or make big, costly changes to their highly efficient production process.

Well they just released the 5s and 5c and the 5c is doing generally horribly - they just cut huge production even with the holiday season quickly approaching.

If you have read Jobs biography it answers it for you. I will try to find the passage.

Basically, Jobs believed that consumers couldn't be making the decisions if there was too much stuff on the market. He wanted a minimal product line where every product was the best. Immense time, energy and focus went into developing and updating the existing products. There was 1 laptop. 1 desktop. As time went on the line grew a bit - you had one power desktop (the Mac Pro - completely updatable, swapable etc) and the Mac Mini. Then you had the 1 iPod, 1 iPhone and iPad.

The iPods were the first line to be diversified but it took a long time. First it was just the regular one and the shuffle. Then they introduced the mini. Each was targeted to vastly different markets - the shuffle wasn't for a different price point, it was for people on the go.

The computer line did the same. They introduced the Mac Pro (the tower) and the Mac Mini and the mid-range all-in-ones. Again, these weren't aimed at different price points as much as different markets. The Mac Pros used to be the only thing you would edit video on. They were easily updatable, enormously expensive but you had 4 memory slots and 4 hard drive spots and more holes for firewire and USB than you could count. You could get 32gb of ram in them in 2005. The Mac Minis were for people who didn't want to fuck around, they just wanted to go online.

They diversified the iPad line similarly - waiting until it was a resounding success and then offering the same thing in two different sizes. This is starting to get away from Jobs though because there really isn't a reason to have two different models besides to keep the brand fresh. The difference between how they split the iPads and how they are now splitting the iPhone is that the iPads were different sizes. The problem with the 5C is there isn't really a difference - the 5C is just plastic and cheap looking.

I don't have faith in this 5c and 5s business. They aren't for different price points or for different markets (here in the US.) People are saying that the 5C is mostly targeted to Asia to cut out a corner of that market. Some people are saying they are for kids. I don't know.

All of this is speculation on my part since I don't work for Apple or have any access to someone who does.

1. Apple has the iPhone, the iPad, and the iPad mini. This works out to 3 models of mobile device.

This is probably enough differentiation on a practical use level.

2. Most companies that have many different models of desktop or laptop are are targeting specific price points in an attempt capture more of the market. It's commodity computing.

Apple doesn't seem to care about price points or offering a commodity computing device. They offer basically 2 models of laptop and 2 models of Desktop. Each is widely considered to be top of the line for their particular category. Apple doesn't care of the middle or low end for those categories. This removes any incentive to ship multiple models.

In short Apple's game is not to be a commodity producer but a Luxury Good producer. They ship exactly one model for category of computing device and that device is intended to be the best in class for that category.