USB Adapter
A USB adapter for the iPhone would be incredibly innovative as it would allow a user to use other input methods with the device such as a mini keyboard for typing. A huge advantage would be to add external storage software so that flash drives could be used with the phone. This would make transporting files to and from the iPhone (without a computer obviously) a much easier task for business and regular users.

Please feel free to reply with your improvement idea (Hardware wise please).
You can also send in a topic for me to post on at [email protected], or PM me on the boards.