I think Apple understands business pretty well.
To succede in business it is not necessary to make a *perfect* product. Perfection is, in any case, more of a metaphysical concept than a realistic business goal. To succede in business one most merely produce a product whose perceived benefits to the customer outweigh the perceived costs of acquiring it. This is something Apple seems to do better than any other company in tech.
One other concept that people seem to get wrong all the time is the concept that Apple "needs competition" to keep improving their product. This is false, or at least a mis-reading of the situation.
Apple's main motivation for future products, the things they are working on right now, is to sell Macs or iPhones or iPads or some other (as yet unreleased) product to people in 2012, or 2015. But do you think - for a second - that Apple is looking at the Xoom, or the Galaxy Tab, or the Playbook for inspiration? Are they picking apart Honeycomb source code, and saying "Gosh, we ought to do it just like these guys did.."?
No: Apple's competition, be they Google or Motorola or HP, are followers. They are not innovators, at least in the tablet space.
If Apple allowed their products to stagnate, eventually (and pretty soon, if most tech trends are to be believed) sales of iPads and iPhones would dry up. Everybody who wanted a First Gen iPad would have already bought one. And since they weren't adding new capabilities, there would be little incentive for new buyers to come along. Apple would be left selling replacement iPads to people who'd broken or lost their old ones.
Quite frankly, at this point the main benefit Apple has gotten from their "competition" is how good they look in comparison.
The second point I think most people don't understand about business in general, and engineering in particular, is that it involves compromises.
When it comes to building a product, any feature that you put in - from a tiny camera to a few extra lines of code - has a cost. Not just a cost in terms of buying the components or writing the code. But a cost in terms of performance, of weight, of additional software instability.
Every time I read someone whining that the iPad doesn't have USB ports, or a visible file system, or support for handwriting recognition - I realize that this person just doesn't get it. That if Apple had loaded up the original iPad with a tenth of the junk people complained it didn't have originally - then they'd be stuck with another $1400 dinosaur, gathering dust on the shelves along with all the other Tablet-PCs that went before.
) has said at some point that the ipad is perfect and doesnt need to be changed at all. Now this is good and well... partly true. theres no real competition to the ipad. even though the xoom is as good if not better. apple needs to believe that the ipad has real competition, once we can make them believe that theyll be forced to bust out with some amazing new features for the ipad. but if we keep telling them its perfect the way it is... its never gonna get any better.. a 1 mega pixel camera isnt helping either 
