The iPhone is not superfluous, not easily copied, not revolutionary and not a premium product

The release of the iPhone is rightly acclaimed as a watershed event in the history of telecom. It was a sensation. But it was also a product that was widely underestimated and dismissed. Even today expert opinion is divided. The critics of the product transitioned directly from labeling it a superfluous bauble to an obvious and copyable sustaining innovation. Advocates of the product describe it as revolutionary and dazzling with the potential for capturing significant profit share due to premium pricing and positioning.

So which is it?

I’ll argue that it’s none of the above. The iPhone is not superfluous, not easily copied, not revolutionary and not a premium product. What it is is disruptive.

First, we have to quickly define disruptive potential.

A product is disruptive if it competes with an existing, incumbent set of products on a new basis. It competes along a new measure of performance. That means it’s either “low end” and hence cheaper, simpler, more modular and conformable, or it creates a “new market” where completely new measures of performance or quality are relevant.

In both “low end” and “new market” disruptions the product is usually wrapped in a business model that insulates it from incumbent response due to inherent asymmetries. Incumbents will find the economics of the entrant product unattractive and will be motivated to ignore it or actively avoid copying it.

The consequences of disruptive product entires are often catastrophic for the incumbents because, over time, the disruptor product vacuums up all the profits in the industry, robbing the incumbents of the fuel to respond by the time they become motivated to do so. In essence, the transfer of value to the new basis of competition happens so slowly that the threat is imperceptible until it’s too late.

If we look at this definition, it’s startling that the iPhone does not seem to fit.

As a phone, it’s not cheaper, nor modular and hence not “low end”. It did not create a new market.  As a phone, although it did recruit more regular phone users into becoming smartphone users, it was not the first or last phone to do so. Its phone business model was not a radical departure. It was not ignored by the mobile phone incumbents who reacted with various degrees of urgency and vigor. It was actively copied in every way from the UI to the ecosystem to the pricing model and distribution.

The only thing that seems to have happened according to the disruptive formula was the transfer of profits from incumbents to Apple, at least temporarily.

So the iPhone seems to be correctly classified as a sustaining innovation. Something that moves the phone market forward and which, except for a temporary misallocation of profits, will entrench the incumbents after they manage to copy it effectively.

However, here is where we have to dig a little deeper.

Market analysis easily becomes myopic when looking only at a market defined by a product. I’ve argued in the past that strategic insight comes from looking at products that cross over their market boundaries. Especially products that are hired to do different jobs than the same products in their categories. The iPod may seem like an MP3 player but it caused catastrophic profit collapse in multiple industries. It knocked out the CD business, it crippled the component audio system “Hi-Fi” industry, it razed the music retail business and affected the entire music value chain. It’s still pounding at the gates of video and TV production. And, almost as a side-show, it crushed the Walkman.

Even though it was a music player, the MP3 device market was the smallest target for the iPod. It turned out to be far more dangerous to ancillary industries. The reason is subtle: it competed as an integrated ecosystem. You hired the iPod to serve you music everywhere, not just in your living room. And it did the job in an integrated way from source to earbuds taking what was a hodgepodge of modular components built around analog music and smoothly integrated them to deliver music in new, non-consuming contexts.

The lesson is therefore that when looking at the iPhone one has to look at ancillary industries not just at phones.

Phones have always been a component in a wider inter-related telecom value network. Even today they are often called “terminals” in the industry meaning that they are the end points of a network. Similar to the PC, the iPhone enables a migration of intelligence away from the center toward the edge of the network resulting in a de-valuation of the network itself.

I argue that the real disruption of mobile computing (i.e. iPhone) is made possible not by the smartphone technologies but by mobile broadband. Once broadband became mobile with 3G the smartphone could shift its focus (jobs it’s hired to do) from voice to data. That shift is disruptive to incumbents because they built their businesses around operator distribution and operator service economics. With apps, mobile computing brings with it services which allow all communications to be independent of operators. Selling ringtones, maps, email and video-on-demand are all dead business plans today. But operators clung on to these hopes for many years and forced vendors to comply to this strategy.

The incumbents relied so much on the telecom value chain, where the value flows from the monthly service charge, that they would not deploy technologies or business models that were asymmetric to operator business models. This is the root cause for Nokia and Samsung and Motorola and LG “missing the boat” on smartphones. All the vendors had the pieces of technology on their shelves. But when they took these technologies to their customers, the customers rejected the package.

This is why entrants like RIM and Apple could easily gain a foothold and grow. They had modest volumes, sold new concepts like business email and new UIs with iconic designs, but did not go after the core business model. This is similar to how iPod/iTunes got a toehold with the record labels. By the time the disruption took hold, operators were addicted to the new high-ARPU being generated even though they were all pure bitpipe plans. A bird in the hand is worth two in the bush, so the new device brands stuck.

Do the incumbents still have time to respond effectively? It’s less and less likely. They cannot build the new computing ecosystem without the distribution power of operators. Note that iPhone ‘clones’ in Android are still sold via operators and that nobody is interested in making either iPod touch clones or iPad clones sold independent of the operator channel/subsidy model. This is not because of technical or economic reasons but because of a lack of distribution (and lack of integrated content).

When you step back and look at the phone in the context of the network business model as well as the shifts in consumer jobs to be done you realize the potential is far greater than taking share from incumbents. The iPhone is not divided into a portfolio of different phones, but it’s a part of a portfolio of new mobile computing products. It just happens to be the only one which still depends on the cellular operator distribution network.

Seen as part of a new mobile computing paradigm and following the trajectory of the mainframe, mini-computer, PC and laptop, the iPhone is an essential, non-superfluous device for a vast population of new users.

Seen as an integrated app ecosystem with strong network effects, it’s not easily copied. Responses that only account for it as a glass and metal object of desire will fall way short of being competitive. As the hardware was always available to competitors, it’s not a revolution in hardware or even in user experience.

Most importantly, seen as a computing alternative merged with a communication appliance, it and its siblings are not premium products. The pricing and service structure around it make it seem a low cost alternative for solving the jobs it’s hired to do.

In other words, it is as disruptive as it gets.

  • Rogelio Solis

    "The iPhone is not divided into a portfolio of different phones, but it’s a part of a portfolio of new mobile computing products. It just happens to be the only one which still depends on the cellular operator distribution network."

    Is there a new technology out there to make the new iPod and WiFi only iPad free from the operators networks?
    I mean a free or cost effective way for consumer communication away from carriers control. WiFi is still an indirect form of communication, since the original signal must be provided by someone else.

    Is there a way for the public in general to buy back a portion of the electromagnetic spectrum for social communication through income tax law?

    • guest


  • MattF

    Turn-by-turn GPS navigation is an example of this. By installing a $40 app, an iPhone becomes an in-vehicle navigator, and Garmin/TomTom's value proposition has to make a detour through the App Store.

    But…. comes now Google with the free Google Maps Navigator, and disrupts iPhone based GPS navigators. The Google Navigator is cloud-based, so you don't have to download a gigabyte of maps, maps don't need to be updated, it does walking and bicycle navigation, and has a voice interface.

    Interesting times.

    • TiredOfTheCloud

      First of all, maps are ALWAYS updated with Google Maps – each time you navigate you update the maps.
      Second, you don't need to download a GB of maps with local GPS software. It either comes preinstalled (e.g. Nokia Ovi), or you can buy/download only the countries you're interested in. A top quality map is < 100MB.
      Thirdly, having a 3G connection on throughout the whole route drains the battery much faster.

      All in all, Google Maps is an inferior mobile GPS solution.

      • kevin

        On your third point, cars have electrical outlets, so that point is moot.

        In any case, Google Maps might be an "inferior" GPS solution but they are proving to be good enough. If you haven't looked lately, the prices for standalone GPS devices are in free fall. As that happens, Garmin and TomTom and others might be moved to lower their app prices, so that the cost will more closely match the value of having maps in poor cell reception areas.

        Note: Using Google Maps on an iPhone, you can "cache" maps by scrolling through your route before you depart (while you have wifi or good 3G reception). Not perfect or foolproof but often it is good enough.

      • Not everybody is in a car when using mobile maps so it's a good point.

        The other problem besides the 3G connection requirement with Google Maps is they're only slowly adding turn-by-turn a country at a time.

        If you're an international traveller, no turn-by-turn and no pre-downloaded maps makes it almost useless. Add in roaming charges for the 3G requirement and it's expensive too.

  • kevin

    Superbly insightful analysis. Thank you. I'll be digesting this further for days to come (and hoping you'll have more to say) on how this might play out in the future, i.e., how can/does Apple's disruptive position get attacked and defeated?; when has this outside-the-box scenario happened before (besides iPod) and what were the longer-term outcomes for the disruptor and its competitors?

  • Another way of looking at it: the iPhone, and the iPod before it, are what Roberto Verganti (in the book Design Driven Innovation) calls innovations in meaning – disruptive not purely because of technology innovation, but because they change what the product means to people.

  • stsk

    As always, excellent, Horace. Part of the problem faced by both analysts and competitors is the error of categorization. By calling the disruptive product a "smartphone" and analyzing the "category" or "market", they miss the point. The iPhone was viewed by competitors and analysts as another entrant in the smartphone market, a market already populated by Palms and Blackberrys and others. It was nothing of the kind. The iPhone is disruptive because it, as you correctly point out, defies procrustean categorization. It has more in common with a Macintosh than it does with a Palm. It has more in common with a Nintendo DS than a Blackberry. It has more in common with an iPod than a Nokia 95. It became tremendously disruptive because it's not just a "smartphone"…. just like the iPad is not a member of a category of "media tablets"….

  • berult

     … —> { Mac / OSX —> (OSX< / iOS) —> (iPod) / (iPad) —> iPod —> iOS —> (iOS*) —> iPod / iPhone —> iPad —> iOS ~ —> (iOSX) —> Mac / iOSX } <— …

    A paradigms' Paradigm. A singularity which spontaneously and vigorously resists being taken apart, therefore compresses into one momentous event a sequence of contiguous "integrities". 

    • Joe_Winfield_IL

      Huh??? Poetic writing, but I don't understand even a little bit.

  • Chris

    Like a wave behaving, dude. I dig it.

  • davel

    Nice article.

    Yes. The iPhone like the iPod before it is disruptive.

    The iPhone did not bring new basic technologies to the marketplace. What it did was integrate existing technologies into a new product that its competition was not able to copy for a few years. It immediately became the gold standard of high end phones. Its competitors laughed at Apple before the product was released and they were introduced to the error of their ways.

    The only competitors to Apple are Microsoft and Google. Notice that the major players in this space are software companies with the exception of Apple which has always been a hardware/software company. I am not sure RIM can compete long term because its platform has been superseded by new technologies and it has proven to be a one trick pony.

    Apple is trying to differentiate itself from its competitors by bringing some technology in house. It is to be seen if it can innovate on the hardware side to give itself a competitive advantage to complement the software innovation it brings to the table.

    I think Apple's next move other than bringing out a cdma phone is to stratify its offerings a la the iPod. It cannot exist on this years model and last years model alone.

    • Kizedek

      "Apple is trying to differentiate itself from its competitors by bringing some technology in house. It is to be seen if it can innovate on the hardware side to give itself a competitive advantage to complement the software innovation it brings to the table."

      Trying to??? Yet to be seen???
      The new designs, manufacturing techniques and materials used by Apple are all firsts and still unique across all computer and consumer electronics products.

      One-piece aluminum carving on laptops and iPads
      Glass and metal bonding
      Phone with antenna integrated into it's steel band, glass front and back
      Interior spaces optimised for extra batteries
      Exclusive Agreement with super sci-fi alloys company
      In-house silicon design with PA Semi for custom SOCs
      The list goes on.

      • TiredOfTheIphone

        With the end result of dropping calls when touched in certain ways and cracking into 10 pieces when it's dropped.

      • Yowsers

        All phones have that problem — many of them have it worse, too.

  • Russell

    good observations. longterm, any business model is only as good as the money it can generate. If the iphone were a standalone company, it would be one of the top ten companies on the planet today. That really puts their business model in a good light at this point in time.

  • timnash

    Handheld gaming is another ancillary industry disrupted by iOS. In 2010 Apple will sell over 80 million iOS devices – about 8 times the sales of Sony's PSP and equivalent to over 60% of Nintendo's DS user base. As iOS games are much cheaper, it has attracted new gamers. It's a new revenue source for developers, who like the download and revenue share model and that the iPhones, iPads and iPod Touchs are a more powerful platform than what Sony and Nintendo offer. This is discussed in more detail in my article

  • Russell

    Horace, great observation and insight. Do these disruptive elements within Apple's DNA provide it with any "sustainable", competitive advantages against its competitors? In example, could they increase market share at the expense of the other two going forward, or does it read more in terms of better margins over a longer period?

    Since MSFT and GOOG have deep pockets, I wonder if it affords them an prolonged, muted advantage against what Apple could do. If Apple can keep it together and innovate further into future, I believe if it will put increasing pressure on the other two models and/or supporting valuechains with possible negative consequences.

    • EricE

      "Since MSFT and GOOG have deep pockets"

      How long are they going to have deep pockets? Google is assaulting Microsofts cash cow in MS Office. Exhibit A:

      From the story: "Under the licenses, the city paid for a the full Microsoft Office suite — including Word, Excel, PowerPoint, Outlook and other tools — even if many employees used only Word and Outlook.

      Under the new deal the city will pay only for the applications employees use."

      That is a huge, earth shattering change of strategy for MS, who traditionally have been pushing bundle, bundle, bundle in the hope to get not only extra revenue but for people to adopt their software since with the bundle it's "free"…

      And Google – they, like Microsoft are a one revenue pony. Instead of moving into Mobile with a leadership position, they have managed to piss off Apple – owner of the high revenue Mobile users. And now Apple is staring back at Google with iAd in Google's biggest future growth area. Not smart.

      So yes, Google and Microsoft are flush with Money, but for how long? You can't piss money away forever. And Apple is already bigger than either company. How long until Apple is bigger than both combined? That would be an interesting wagering pool 🙂

      Bonus thought: Do you think Apple is now larger in size than either company because they loose sleep at night over what their competitors are doing? You hear that Steve Ballmer?

  • OpenMind

    Great information from an experience one. Indeed, the UI and associated hardware is the strongest point.

  • TomCF

    So many analysts looking at what the manufacturers are selling and not considering what consumers are buying. And not even realizing that the two are different.

  • Kizedek

    Maybe the iPhone copied others in form factor before it, in as much as it was kinda rectangular, roughly 3×5 inches and a half inch thick and had a screen on the front.

    Otherwise, I'm pretty sure it was the first phone to have a screen almost as large as the phone, and to have but one physical button and no slide-out keyboard, relying on touch alone. Of course, this was immediately copied in appearance and intent, most notably by the Palm and the change in direction that Android and Blackberry took.

    But as Horace notes, the copiers don't know what they are copying.

    • O.C.

      Palm or HP pda's had similar features: a screen pretty much the size of the device itself and a handfull of buttons. Touchscreen devices have always looked like pretty similar, the iPhone didn't invent that.

      • EricE

        There is quite a difference between devices that use stylus (what the Palm and HP PDA's referenced were) and the iPhone.

        Not only was the iPhone a stylus free and real "touch" interface, it was mutli-touch – it could use and in fact several operations relied on more than one finger being used simultaneously.

        If you would have tried that on the prior Palm and HP devices it would make eating with chop sticks look tame by comparison.

  • Horace,
    Enjoy your application of Clayton Christensen's concepts to the smartphone space.
    For us lifelong students of strategy, the smartphone space got very interesting June 2007.

    The iPhone was truly disruptive for the reasons you cite.

    Do other vendors have time to respond? YES.
    In the coming decade, really huge growth in smartphones will happen from Asia, South America, Russia and Eastern Europe. Regions were Nokia and others are strong and Apple's 'ecosystem' is not firmly established.

    Ballmer and Elop will end up with credible share against Jobs and Schmidt. I would add Samsung as wildcard to break into the top 5 "smartphone" club.


  • Westechm

    The iPhone is a small, hand held computer which also happens to be a phone. I use it to check my mail, get stock quotes, do crossword puzzles, surf the net, play an occasional game, read a book (so much anymore since I got an iPad) and make or receive an occasional telephone call. In reality, most people do these things in various proportions. The telephone companies regard the iPhone as a primarily a telephone to which all the other things have been added as features. This difference in point of view leads them to do things which are counter productive. They just don't get it. In any case new methods of transmitting bits through the air insures that their businesses are at risk and that they will have to change their business models or die.

    The IPad is a bigger hand held computer which can do all of these things better, but it doesn't make telephone calls. It could add this feature Burnett size and form factor makes using it as a phone is a bit clumsy; however, it could be a dandy speakerphone.

  • Iphoned

    Of course iPhone can not be copied. That's why Android phone sales blew past it so fast.

    • kevin

      Maybe you could add some value to this thread by explaining why it happened, why it took as long as it did, and whether and how it will be sustained.

    • Since Android sales have blown past iPhone sales, this indeed suggests that Android is different in some intrinsic way than iPhone.

      This is also a comparison of a platform to a single device of a platform. Obviously a platform cannot be a copy of a device.

      You could instead say, for example, "iOS cannot be copied. That is why Android has blown past it so fast…" And in this case, please note that the article is not actually talking about iOS.

    • dchu220

      It's not about winning a battle, it's about winning a war.

      Android is currently winning the battle of distribution, but it has not shown that it will win the war of adoption. That's where the real battle lies. When you start seeing lots of third parties base their business models on your platform, then you know you are winning.

      In it's heyday, people thought Wang and DEC were going to take over the world.

    • asymco

      Let me turn this around for you: if Android copied iPhone and "blew past" then surely Apple could copy Android and catch up.

      If not, then what makes Apple so foolish as to always build something that is easily copied but that it cannot itself copy?

  • Iphoned

    Mac in it's days could not be copied either (except, of course if you just borrow Apple ip without consequence). Sound familiar?

    • You are correct in that the Mac, the iPhone itself, and the software they run, can and have already been duplicated (in form at least).

      The critical point of discussion is that what provides the true disruptive power of the iPhone/iPod and modern Mac is the integrated ecosystem for content and application delivery. This has not yet been duplicated elsewhere. This is the critical point of discussion.

      Assuming it cannot easily be duplicated, and provides Apple with some sort of intrinsic advantage, these days are very different then from the days of the old Mac.

      It sounds familiar in brand name only, then. Apple and Mac in 2010, according to this argument, are nothing like the Apple and Mac of 1990.

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  • davel

    Wired had a cover story on exactly this point a few months ago.

    At first I did not understand their point about the death of the web.

    I agree that the app model is more immersive and can be a better experience than the web. However in my experience most apps are not designed well. In fact most content providers have a better web experience than app. Hopefully time and effort will correct this.

    • Kizedek

      I think this whole "death of the Web" meme is totally overblown. The only people really bemoaning it are those heavily invested in non-standard, proprietary sites that rely on Flash or Front page extensions or .net or similar frameworks.

      You might say that what is in danger of dying is the mobile browser. That better web experience over app that you are finding, is mostly true when you compare desktop browsing on a big screen with the apps — apps for mobile devices. yes, I would rather browse Facebook on my 22 in desktop screen via a good browser. But on any of my mobile devices, I would far rather use the app than the mobile browser.

      No, the web isn't going anywhere. On the contrary, it is finally adding some depth and extra dimensions. Decent sites are now built with a CMS and are data driven. Sites are no longer a loose collection of static one dimensional HTML pages. There are PHP scripts, java scripts, and other code that together form rich web apps right on a website's pages. An app that you install install on a mobile device and use in place of a mobile browser is not "killing" the web. It is merely interacting directly and exclusively with the functionality present on most modern websites.

      People browsing the web are no longer merely reading a flyer or window shopping (viewing a simple static html age in a window); they are now entering the store and interacting with the shopkeeper (using apps, whether server side or cloent side, to interact with data remotely in new ways). This is all largely due to companies like Apple that are stressing and promoting open web standards, technologiesmand protocols. Apple believes in the open web.

      Unfortunately, few people are recognising that it is actually those companies that proclaim how "open" they are that are killing the web. They want the web put back in the bottle; they want to be the gate keepers, not of the superior user-experience on the device that you choose to buy to experience an open web, but of the whole web itself. They want the web to be their own backyard. They want your traffic to run through their servers according to their algorithms and scripts.

      I'm a web developer. I really like crafting a good online experience that achieves an objective, and looks good in the browser. But if I was a programmer and could come up with companion mobile apps that interacted directly with the website data, i would in a heart-beat. It's the same web, but it's added value with depth and specialisation. Do you go to a sixteen-year old wearing a Walmart badge for computing buying advice? Or do you go to an Apple store genius who can give you one-on-one hands-on experience?

  • kizedek

    Thanks for the clarification on hardware vs fit-and-finish.

    As far as "PR nightmare" goes, though:
    I think that the fact that some are calling it a "PR Nightmare" is just another example of making a tempest in a teacup, where any bad word against Apple has to be capitalized on because the opportunities to hark on about Apple mistakes are quite few and far between.

    A number of blogs and news outlets ran with a legitimate complaint that a few iPhone owners had. I know a bunch with an iPhone 4 who are not experiencing any issue whatsoever (anecdotal I know, but so are the numbers of complaints).

    Steve did have to make one speech about it, in which he rightly pointed out that other phone manufacturers have same issue (and they go so far as warning in manuals or videos how to not hold the phone) and that a re-calibration of the bars did alleviate what were mostly symptoms of being in a low signal or busy area — with a phone that is by all accounts gets better signal than its predecessor. And Apple went so far as to offer free silicon covers for awhile and extend their return policy for awhile. Both these measures are at an end. Meanwhile, Apple still can't keep phones in stock! How many thousands or millions of real people and businesses are not buying an iPhone as a result of this alleged "nightmare"? I think it is much less of a nightmare than those blogging about it would like to admit, but it got them some hits at the time. It has long blown over for those who even knew about it.

    It really is quite hypocritical: these types of issues are usually only ever "nightmares" for Apple and no-one else, only because Apple is self-avowedly committed to excellence, and everyone holds Apple them to a much higher standard as a result. And so they should.

    • davel

      Perhaps Apple is held to a higher standard.

      I know of people who questioned upgrading for exactly the antenna issue. The fact that Jobs personally addressed the issue and that the company offered free bumpers to current and future customers shows just how important the issue was. Right or wrong it was a major issue. Consumer Reports rightly criticized this particular aspect of the latest phone while grading it as the best overall phone available of the ones it reviewed.

  • What are you talking about? The iPhone STILL does not do VoIP. It has NO built in SIP stack and until iOS 4 you couldn't even write a VoIP app that worked properly yourself because Apple wouldn't allow it to run in the background which meant incoming call handling was impractical and just getting a notification was enough to kick you out of outgoing calls. Truly awful, awful, awful.

    The only smartphone vendor that includes full VoIP support in it's OSs is Nokia. Both Symbian and Maemo have it built in to the core OS.

    • Ted_T

      So I'm hallucinating every time I make or receive a Skype call on my iPhone? I take your point that Nokia may offer better OS support for VOIP developers but "The iPhone STILL does not do VoIP" is an out and out lie. I have been happily using Skype since back when I was still on the original iPhone.

      • You appear to have very low standards if you think that even the current implementation of Skype on the iPhone is in anyway approaching Apple supporting VoIP. I've no idea how anyone could be 'happy' with a wifi only walled off Skype app that couldn't multitask till iPhone 4.

        Nokia's support of VoIP is not at the developer level, it's at the user level. VoIP is integrated into the address book, the OS, the home screen … anywhere you can make a regular call, you can make a VoIP call. It's not tied to some hokey proprietary app.

        If CndnRschr was looking for disruption due to VoIP, it happened about 5 years ago when Nokia started adding it to their phones and the carriers cried foul in case they lost precious revenue. Of course, I'm sure Apple will 'invent' VoIP in a few years and it'll all be super magical and the carriers will love it through gritted teeth because it's Apple. But as ever, the pioneers here aren't Apple or even Google.

      • EricE

        "I've no idea how anyone could be 'happy' with a wifi only walled off Skype app that couldn't multitask till iPhone 4. "

        Um, 3G happend in iOS 3:

        "But as ever, the pioneers here aren't Apple or even Google."

        I don't think anyone is claiming that Apple is a VOIP pioneer. However, with their implementation of the background in iOS 4, VOIP on a mobile device is far more practical as you can get decent battery life without your phone crapping out.

        As is typical with Apple, they didn't invent VOIP on a handset, but they do it better – with the better in this aspect being battery life. And for all the complaining about waiting for features in the iOS, as a whole Apple has been outpacing the industry. The pool of "must haves" is shrinking as Apple continues their relentless pace of development. What the heck are other vendors going to be left with as a differentiator?

      • Ted_T was referring to the original iPhone and Skype which was wifi only and did not multi task. He was apparently happy with that. I'm not sure how he got it working as Skype needed the release of iPhone OS 3.2. It still didn't multi task until iOS4 so it was useless as a communications device, in my opinion, but them I'm spoilt by having full SIP compliant phones from Cisco and Nokia integrated into my office life.

        I'd like to know how you come to the conclusion that Apple's method of enabling VoIP requires less CPU and battery life than an OS provided SIP implementation. Presumably you have evidence?

        I would guess, ie. I've not measured it, Apple's method requires MORE battery power since the the VoIP stack is inside a 3rd party application running in user space that has to handle it's own registration and back end services. Skype itself is a power hungry application since it's peer-to-peer with your data connection being shared by other Skype users. That's why the phone companies get panicky over 3G usage.

        As my evidence, Skype on a Nokia is more battery hungry than Nokia's SIP. I can go a couple of days on a Nokia with SIP on over 3G and WiFi. It barely adds any load. If I left Skype on, it'd be dead in less than 1 day. Surely Apple would be better at managing power levels in their phones than Skype?

        Apple's method of 'doing it better' is simply to leave it up to 3rd party developers and not implement VoIP at any level in the OS or the major apps within the iPhone. That's their relentless pace of VoIP development. It's slightly faster than their Bluetooth development or their OTA/Wireless updates and sync or their support for AdHoc hotspots I'll give you that.

        It's not necessarily a bad thing that they take their time to implement a feature as usually it's worth the wait but it's just frankly bizarre that they haven't implemented simple stuff like OBEX Bluetooth file transfer. That's basic stuff even dumbphones do.

        Facetime, yeah, lovely. But why not allow it with the 3GPP standard for video calls we've been using since the 1990s that nearly every phone outside the US supports? That's how Apple differentiates – by not implementing the stuff the other guys use.

  • OpenMind

    I had a headache comprehending all this. We have mainframe by IBM, power in the hands of lazy IT. Then we have PC, power in the hands of idiot end users. Then we have client-server, somewhat balanced power. Then we have Web and thin clients, power back in the hands of greedy googling. Then we have iPhone and local apps, power balanced or tilted back in the hand of users? 64K$ questions.

  • O.C.

    Having single touch before and evolving to multi touch isn't revolutionary, but evolutionary.
    Inventing multi touch without there being single touch…now that's revolutionary!

  • gctwnl

    Apple has now almost all parts in place to turn every TV into a video conferencing system. Picture this: iPhone/iPod Touch put on small stand before TV. Makes FaceTime call with other party. Uses AirPlay to display the other end on the large screen TV. Use AppleTV remote to choose who to 'call'. Bingo: instant Video Conferencing for the masses. You meet your friends as if they are there. Share each other's living room.

  • famousringo

    Jobs being the personification of cocky, I think they've been at stage 2 since 1997, well before they hit stage 1.

    Maybe your folksy, inevitable path of history isn't as ironclad as you think it is?

  • kevin

    What evidence do you have for your assertion? As famousringo states, with Jobs, Apple has always had assuredness (you call it cocky) that it's choices are correct. And they've been shown by the market to be right more often than wrong in their choices since Jobs' return.

    You fail to see that Apple tries out many things on a small scale. Then when it's shown to be successful from both the consumer demand pov and the production supply pov, they improve upon it and expand it to other products. Plus with the expanding chain of Apple Stores, they are much closer to consumers than most of their competitors. So it's a bit of a stretch to think they will lose touch, even given their size.

  • Yowsers

    In terms of the iPod, where are they on your scale?

  • Kizedek

    What's "big"?

    Certainly Apple has big Market cap, big revenues, and high profile. But they don't act big. All the insights into Apple point to the fact that they still act like and operate as a start up, even 30 years on. Steve Jobs knows and understands what each and every person on his project teams is doing, and they all keep each other up to date along the way.

    Contrast this with MS which does everything by committee, and is yet out of touch with real consumers; has layers and layers of middle managers; sets up competition between completely isolated project working groups; etc. That's all a hallmark of big. Cocky is thinking that we are so big and relevant that we can carry on this way regardless, because we can hold back the progress going on around us and keep the world from looking up and asking too many questions. Cocky companies rest on their laurels.

    Companies that think small constantly look for the next big thing and continually try to outdo themselves. If they focus on a limited number of products in order to make them insanely great, that's not getting cocky by telling people what's best for them: that's focusing on a limited number of products in order to make them insanely great. Also, it's not terribly cocky to say, "we are passionate about making insanely great products that we love to use ourselves." Contrast this with: "my employees and my children are forbidden to use Apple products; iPhone? Hahahah, I like our strategy; and it doesn't matter how long it takes us to deliver it nor how poor it is when it does arrive, people will wait because there really is no alternative."

  • Great article. Highly thought provoking.

    I know that there will also be some gold in the comments as well, but I don't have time to read properly, frustrating.

    Some observations;
    – Don't think the iPhone was under-estimated, at least not amongst the mobile industry people I hung out with
    – Was definitely not the first 3G handset, not even the first big seller
    – Don't think the incumbents "missed the boat", they just executed really poorly. Nokia Ovi strategy dates back to a Nokia internal blog post in 2004-ish by this fella (and the Nokia 2.0 initiative which started after);

    Everybody agreed that Nokia needed to be aggressive in internet and services, also going way back to the 1990s. They had all the elements to make an iPhone. From a spec-sheet point of view they even had products and services that could do more. It's just that they sucked, cos Nokia thought it had "won" the handset war and focused more on stuff like R&D efficiency and trying to take Qualcomm down a peg or two.

    I think the iPhone and its ecosystem disrupted the incumbents just thru being crushingly superior in conception and execution. Not a disruptive innovation as defined by Christensen, just one company looking at the problem with fresh eyes and really kicking ass. So I would categorize this as a step-change mega sustaining innovation, executed at a period where the incumbents had incorrectly decided that the business was irrevocably locked into a confrontation strategy battle (

    Anyway. This comment is probably misplaced given the erudite discussion that it no doubt happening above. I will be back when I get more time to digest!!!

    Thanks again for creating the smartest most interesting blog on tech.

  • asymco

    Your theory rests on psychology (and only psychology) as a cause for company failure. If you are correct, then surely it's possible that a motivational speaker could set failing companies on the right path. After all, all it would take (after step 1) is to have a C-level executive on hand to prevent cockyness. Perhaps a Chief Humility Officer could be granted massive option packages that would ensure cockiness prevention programs would be widely implemented. After all, his leadership in humility management would be worth hundreds of billions of dollars.

  • alex

    Thanks for this article, Horace, which explained the contradiction in my mind, which bugged me for years, that iPhone "appears" to be disruptive to incumbents but is not when applying Christensen's criteria literally.

    It could be very insightful to discuss your ideas of extending Christensen's framework to disruption by eco-system integrated with ancillary industries.
    Especially since Christensen didn't consider the iPhone disruptive back in 2007 (before Apple started with the AppStore to build an eco-system).

    Are there any other examples for this kind of disruptions (beside Apple's)?
    Has Apple created a new form of disruptive strategy that will one day be academically analyzed, described and named?

    How would you characterize RIM's impact on the incumbents a few years back? BB corporate email and BB Messenger create network effects, and RIM also built an enterprise eco-system around apps before Apple came along, which certainly hurt Nokia's ambitions in enterprise mobility a while back, but BB hasn't really disrupted anybody, just clever competition, or what do you think?

    • alex

      I meant to say "to discuss your ideas… with Christensen himself".

    • asymco

      I hope to do just that. The theory is evolving and there is a forum now which could enable debate:

  • Android 2.3 adds full SIP VoIP support in the OS. Now who is disruptive?

    • asymco

      Technology is not disruptive. Technology coupled with disruptive business models makes for disruption.

      The list of technologies that ended up disrupting industries decades after being conceived or implemented is long. It could begin with TCP/IP first designed in 1973 or so, 20 years before making a commercial impact through "the internet" (the "I" in TCP/IP) that was popularized through something called the world wide web.

      Adding SIP support was done quite early by Nokia. That did not disrupt anything. The technology of SIP may not reach disruptive status until its wrapped by a value chain that makes it accessible and successfuly solves an unmet job to be done.

  • ChriS

    Really good article, thanks for this.

    I just have one comment on it:
    "Its phone business model was not a radical departure."

    In my opinion this is not entirely correct, because in terms of business-model Apple created one big distortion-factor in the market: They ensured that they earn money AFTER you bought the phone.

    Apple squeezed a revenue-share contract out of the operator, and the only thing they had to give-in in return was product-exclusivity.
    (which was not really hurtful, because they couldn't secure product-quality for multiple operators at once anyway)

    After all they ensured that they do not only earn money at the time of sale, but continously profit from the usage of the product.

    For me, this is one major cause for the disruption of the market. They took away the pressure from themselves to make you replace the product.

    The main market-driver
    "If we can make you buy a new product, we generate proft"
    "If we can make you use our product more often, we generate profit"

    And that's something others can't copy, because operators won't make such a deal again…


  • uttam

    Horace, as an analyst, I too was influenced by Christensen. While you do ultimately argue that the iPhone is disruptive, that conclusion could have come about sooner if you had not argued that the iPhone " did not create a new market." The iPhone did create a new market: one for paid apps on phones. Due to carrier restrictions, apps never took off for other phones, smart or not.

    • asymco

      You're right. The iPhone created multiple new markets. What I meant was that it did not create a new phone-with-a-touchscreen market. The app market was created more than a year after it was launched (and 18 months after it was announced.) The point was that device makers looking at it back in 2007 and 2008 were scratching their heads asking what the big deal was all about.

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