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Competing with a Mac

Publicly, Mr. Lazaridis and Mr. Balsillie belittled the iPhone and its shortcomings, including its short battery life, weaker security and initial lack of e-mail. […]

Internally, he had a very different message. “If that thing catches on, we’re competing with a Mac, not a Nokia,” he recalled telling his staff.

From How BlackBerry blew it: The inside story – The Globe and Mail

The whole article is worth reading, detailing as it does the decision process inside BlackBerry during the painful disruption of its core business.

What struck me most however was how similar their decisions were to those of Nokia at about the same time. Consider:

  • The engineering priorities placed on optimization around constrained hardware. Although engineers knew how to build the right products, the business priorities caused them to be deployed in the wrong direction.
  • The delays these misdirected efforts caused. Mobile phones have narrow windows of opportunity but long lead times. A strategic mistake is very costly and most probably impossible to remedy. In the case of BlackBerry, buying QNX came too late while for Nokia the deprecation of Symbian was catastrophically managed.
  • The feedback loop from network operators which shut down any initiatives for improved user experiences. Your best customers provide all the wrong information when the market is being disrupted. Ignoring them is impossible while complying is a strategic mistake.
  • The demand from network operators to develop “killers” to competing platform-based products[1] and the subsequent “jumping at the opportunity”.
  • Listening to large buyers at the expense of users. While BlackBerry was guided to omit consumer features from its enterprise buyers, Nokia never secured enterprise buyers of any significance[2]. Nevertheless it created the “E series” business-friendly phones which suppressed features like cameras and music.
  • The celebrity sponsorships and wasted promotional efforts in the face of structural failures.  This is manifested today by HTC as well.

The parallelism of this synchronized failure can be seen in the following graph showing smartphone volumes.

Screen Shot 2013-10-01 at 10-1-4.12.09 PM

The striking thing is how the two companies peaked are almost precisely the same time and how that moment (end of 2010) was not related to the entry timing of their nominal disruptor.

Recall that both companies cite the iPhone as the factor which caused a shift in the basis of competition. But the iPhone launched in mid 2007 (at the beginning of the graph’s date range.) BlackBerry had 16 quarters of growth after the iPhone and Nokia nearly the same. The stock prices of the companies also prospered for a period long after the iPhone entered the scene validating a do-nothing approach. So this is the crux of the incumbent’s dilemma: how do you rally a response when you don’t feel any pain? It’s worse actually: how do you embark on a painful course of action while feeling comfortable and safe?

The reason the companies did not suffer immediately from the iPhone was because it (and its Android equivalents) took time to reach the core customer bases. Remember that the iPhone was not “good enough” to be an enterprise product at launch and Android was not the first to serve the low end of the market, where Nokia was dominant.

Vision is worth exactly nothing without timing.

But enough about ancient history. The crucial question is what does it teach us. It’s tempting to suggest that this disruption is happening again with the iPhone today.

There is one big problem with this. The iPhone was not a low-end disruption. It was exactly the opposite. The BlackBerry and the Nokia products were striving for the low end. They observed the discipline of constrained resources. They were expanding into emerging markets. They watched every fraction of a penny on the bill of materials. The low end was manna for the whole industry. Even Microsoft with Windows Mobile was better positioned for the low end than Apple.

Instead, what Apple did was unthinkable. It entered with a high end product. It even promoted its high price ($500, subsidized!) This is why it was laughed at.

Theirs was “the Mac in a phone” idea. The reason it worked was that it was not a phone. The reason it worked is because it was the hardest disruption to spot:

A new market disruption[3]

Disruption is not a process that merely rewards breaking convention. Any fool can rebel against the status quo. To change it requires a process that rewards asymmetric competition. Finding a way to be seen as irrelevant and yet conquering at the same time. Being disruptive is, above all, being imperceptibly valuable.

For iPhone the core asymmetry was that it was a computing product and not a telecommunications product. Every decision thereafter flowed from the calculus of computing and not the compliance with telco convention. The ecosystem, the rapid rate of improvement, the rich user experience, the tie into other product lines.

It was this asymmetry which confused every observer. Predicting how a high end product can conquer the low end is fiendishly counterintuitive.

In contrast, spotting low end disruption is a parlor game. There is little challenge in observing a cheaper alternative competing as a commodity. For  evidence look at how markets react. Whereas they could not understand the value of the iPhone (or iPod or iPad) they reacted instantly to the whiff of a commoditization play. Angst surrounding cheaper alternatives pervades.[4]

The problem with the low end disruption thesis is that low end is also much easier to respond to, especially now that everyone read the book. The incumbent simply needs to have a flexible cost structure and a vast margin to dip into. Most failures to respond to a low end disruption come from companies stuck in a high cost structure not from a failure to see a low end alternative.[5]

Apple’s costs are mostly variable and their fixed (R&D and SG&A) are growing far slower than sales. There are huge margins and more cash being spun out than anyone can figure out what to do with it.

The distressed response to the low end tends to be a retreat into the higher margins and an abandonment of existing customers.

I don’t see Apple doing either. Rather, it is gradually adjusting its portfolio toward lower end alternatives. Note that demand for the lower end product is far less than for the high end. Instinct would suggest that they should have stuck with the 5S alone. But it moved down anyway. It also did so with the iPod, iPad and Mac mini.

The idea that Apple is vulnerable to the low end is a relic of an idea. It goes back to the Mac of the 1990s, at a time when the world-wide computing market was orders of magnitude smaller than today and where purchasing and development decisions centralized in the hands of a few large companies[6]. And even when looking at that competition, the Mac somehow managed to survive.

That’s not likely to be the case for those who found themselves in competition with the Mac in its pocketable re-incaration.

 

Notes:
  1. Ironically, Nokia was asked to do a BlackBerry killer []
  2. though they tried very hard to get them []
  3. The reason Clayton Christensen and his disruption consulting black belts could not spot it is mostly because new market disruption requires deep industry domain knowledge []
  4. The contrarian should note that commoditization plays are hard bets to win since everybody can spot them. []
  5. Christensen case studies almost always cite how the low end disruption was perceived easily but the response was felt to be marginally worse than not responding or fleeing upmarket. []
  6. essentially B2B as Ben Thompson points out []
  • https://twitter.com/#!/azulum azulum

    Only one piece of the iPhone hardware was dedicated to the phone part—the earpiece. That tells the story pretty well. The iPhone is phone in name only—and as a phone, was almost certainly the worst of all of them—but like the keypad, those features were *last century*. I think that has a lot to do with why the competition was so flatfooted.

    • markwilcox

      Well the original iPhone had a cellular modem and within that had to have hardware dedicated to circuit-switched telephony – so “they only hardware dedicated to the “phone” part is a bit of a stretch. There were also other touchscreen phones with no keypad in the market at the time and many years before.

      To suggest that Nokia was caught flatfooted because they didn’t see this transition coming demonstrates ignorance of the industry history. Have a look at Nokia’s 7710, released in 2004 with a 3.5″ touchscreen (resistive since capacitive displays were not quite yet viable at the time and Nokia sold heavily into northern Europe – couldn’t use a capacitive touchscreen with gloves in winter – and Asia – need a stylus for stroke input), no keys and a higher resolution than the original iPhone.
      http://en.wikipedia.org/wiki/Nokia_7710

      Part of Nokia’s problem was that they believed in this approach but they had already tried variants of it several times and it simply didn’t sell. What did sell was cramming cameras, music players and GPS devices into existing phone form factors. As Horace said, vision is worth exactly nothing without timing.

      • https://twitter.com/#!/azulum azulum

        A quad-band cellular modem that also accessed data despite its 2G speeds. You could only buy the first iPhone with a data/messaging plan.

        I bet all of those those phones without keypads had dedicated send and end buttons.

        The point of my observation was in line with Horace’s—and Gruber’s from 2008—http://daringfireball.net/2008/05/blackberry_vs_iphone The iPhone is a computer first, phone at most second. That’s why BB and the like were caught with their pants down.

      • markwilcox

        You miss my subtlety – you can get a cellular modem that doesn’t support circuit switched voice telephony – packet switched data only parts existed for data “dongles” and M2M use cases.

        Also, I assume you didn’t even look at the 7710 – it has a number of buttons, but no send and end – it is most clearly not a phone first – it is a crude early attempt at a touchscreen mobile computer.

        I completely agree that the iPhone is a computer first and in fact a phone far, far from second – to my mind it didn’t become a credible mobile phone until the RF performance allowed you to sustain a call whilst actually moving around fairly freely (iPhone 4S for the record).

        What I strongly disagree with is that Nokia were caught with their pants down because they didn’t expect the market to transition to mobile computing rather than mobile telephony. See the 7710 referenced above from, I repeat, 2004. Go check that Nokia started calling their high-end smartphones “Multimedia Computers” in 2005. The N95 was rated as better than the iPhone by most tech sites and magazines in Europe and Asia because the original iPhone was still far from “good enough” on a whole lot of metrics.

        What Apple did was take a whole bunch of things Nokia had already done and made them significantly more usable for normal people.

        As Horace stated above, Nokia was attempting to grow down market when the iPhone hit and had aggressively moved their hardware platforms to improve economies of scale into the low end. Due to long lead times they were left in a position where their only “rapid” response options were a high-end Symbian device on core silicon designed for $100 devices of the time (critically no GPU) – which created the disaster of the N97 – and a Linux-based platform that was just transitioning out of hobby project status with a very small team – created the N900 block-shaped qwerty slider (no send or end buttons though). Nokia then badly mismanaged what should have been their co-ordinated response across both platforms and lost another product cycle, by which time they were too late. Apple and by then Google were iterating rapidly and had built large ecosystems around their platforms – defensive moats too wide for anyone to cross.

        The only part of the disrupted by computer companies part of the story that has real truth in it is the increasing shift of value to the software and Nokia’s relative lack of competence in that area, particularly applications software. Apple and Google were both able to iterate their software platforms at a greater rate.

      • http://people.scred.com/~setok/ Setok

        It really goes even further than this when you consider the 770 and n800/n810 in 2005. Those truly were full computers, with a completely modern OS at the core (Linux / Debian). Modern dev tools and the ability to do anything a computer could do. Nokia was just so wary of disrupting its own Symbian business it decided not to include phone radios in those devices, and left them dangling for way too long as hobbyist projects and without concentrated UI refinement work. Even when the n900 came out, which finally had GSM radios, it was still a side project — even though it was actually better than the n97 in just about every single way.

        They finally got the plot in building the follow-on project to the n900, but a string of dubious revisions and an unnecessary tie-up with Intel led to further delays. Finally when the N9 came out, it was beautiful and displayed UI innovations I miss to this day (on my iPhone). That device gained heaps of praise, despite coming out much later than it should have, only to be unceremoniously EOLed before even reaching the shops.

        Nokia had the future in their hands.

      • Sander van der Wal

        Nokia’s communicators were already computers, and were the followers of the Psion Series 5 PDA’s of the late 1990′s, which were computers. Complete with proper keyboards and keyboard shortcuts like Ctrl_C and Ctrl-V.

        Nokia started dumbing down they Communicators to S60 level with the E90. So it isn’t just a matter of timing, but also a matter of keeping the eye on the ball.

        Regarding Symbian OS, with iPhone mobile hardware was finally capable of running a Mini Computer level OS. Symbian was much nimbler, but they forgot to hide the complexity a nimble OS exposes to the application programmer by the time the mobile hardware was at the Personal Computer level.

      • Troy

        It’s my understanding tho that even tho the n800′s OMAP 2420 had a PowerVR MBX core, nVidia didn’t have the driver stack to actually drive it.

        http://www.khronos.org/message_boards/showthread.php/5253-OpenGL-ES-EGL-Support-on-Nokia-N800

        API-wise, nokia had nothing like CALayer, the API that drove the iPhone’s slick UI.

        n800 came out in 2007 btw.

      • http://people.scred.com/~setok/ Setok

        Yeah, Apple was really the first to properly use hardware in rendering of the UI. It’s somewhat incomprehensible why it took so long.

        The n800 came out 2007, but the 770 (the direct predecessor to the n800) in 2005.

      • xynta_man

        >it didn’t become a credible mobile phone until the RF performance allowed you to sustain a call whilst actually moving around fairly freely (iPhone 4S for the record)

        Lolwhat? Even the original 2G iPhone was capable of that

      • markwilcox

        That obviously depends on network signal strength where you live. However, even in London I still had colleagues cursing their iPhone 4 on a regular basis as they had to redial for the 3rd time in a 10 minute conversation.

        Side by side signal strength comparisons with other phones on the same network in the same location consistently showed iPhones to be very poor in this area.

      • Troy

        >There were also other touchscreen phones with no keypad in the market at the time and many years before.

        these required a stylus, so where not touchscreen of the calibre of Apple’s initial foray.

        Plus there’s that capacitative touch issue, too. I used my HTC Apache w/o a stylus, but if felt like I was touching a water balloon, not glass.

    • Space Gorilla

      I would say the biggest problem for competitors was simply that the iPhone was a computer, and Nokia, Blackberry, etc didn’t make computers. I saw that immediately, I thought “These guys are screwed, they don’t make computers.”

      • https://twitter.com/#!/azulum azulum

        I would say the biggest problem for competitors was simply that the iPhone was a computer…

        That’s what Horace’s post was about. And yes, I agree. My point is that it wasn’t strictly speaking better as a phone—though it was far better at contacts and voicemail, it had far worse battery life and was very expensive. It was a Trojan Horse.

      • Space Gorilla

        Yeah, but I don’t really understand the discussion around why this was hard to spot in 2007. I was stunned that most analysts didn’t immediately understand this.

      • https://twitter.com/#!/azulum azulum

        You may be more perceptive that most.

        I thought the iPhone would be a hit sight-unseen. I had faith in Apple’s methods by that time and I knew cellphones absolutely sucked. I tried a knock-off iPod once two years earlier and that was enough.

        But you’ve got to remember that at that time, pundits were saying that the iPod was doomed, so, you know—they were a bit distracted plotting the demise of this rogue upending the status quo.

        Keep on plotting guys—one day you’ll get it right.

      • Space Gorilla

        I don’t think I’m any more perceptive, maybe just less biased. I don’t have the ‘Apple-is-doing-it-wrong’ monkey on my back the way many in the tech industry do.

      • https://twitter.com/#!/azulum azulum

        Ever hear of the Dunning-Kruger effect? [Click it for the link.] By merely admitting that you might not be more perceptive than others, you likely are more perceptive than others, and that may be only because you are less biased (:))

      • http://www.innovativedisruption.com thinkdisruptive

        This reminds me of the Heisenberg Uncertainty Principle. It’s a challenging, but cool idea. Or decision fatigue (why you’re less likely to get a fair hearing at the end of the day than in the morning or after lunch breaks). This effect has great rhetorical value for challenging so-called experts.

      • https://twitter.com/#!/azulum azulum

        Be careful with HUP. It can be useful for this conclusion:

        The location and trajectory of a particle at any given time is known only probabilistically, thus a deterministic model of the universe is fundamentally flawed.

        But some will use it to cast unreasonable doubt at human-observable scales, and this is not correct. The quantum haze aggregates out the uncertainty, to the point that the probability of an object that I can handle deviating from the location and trajectory outlined by the physics children learn in the universe’s lifetime is ridiculously small, such that I’m not sure there is enough matter to write the number of zeros to put between the decimal and the one.

      • http://www.innovativedisruption.com thinkdisruptive

        Well, you’re worried about scale and measurability. I was thinking more about the mind-bending paradoxical nature of it. Philosophically speaking.

      • poke

        It’s a kind of essentialism that crops up everywhere. Not just with analysts and management, but with users too. Look at all the people who can’t imagine ever using a tablet for some task. Most of their reasons come down to essentialism: a keyboard and mouse is just what a computer is, anything without it is not a real computer. Apple’s entire culture – even its org structure – is designed around anti-essentialism. When people’s livelihoods depend on something, they’re especially prone to essentialist thinking.

      • Space Gorilla

        I also farm, I wonder if that somehow got rid of the natural bias re: this tool for this task. When you farm the priority is on the task, not the tool, and the tools change all the time, you use what works best, you adapt quickly. Farmers are pragmatists. That has carried over into my use of technology. I use whatever works best, I don’t care what it is.

  • Accent_Sweden

    “Vision is worth exactly nothing without timing.” – A wonderful insight that should drive us to act in those rare and fleeting moments when we actually see things as they truly are and not just sit back waiting for someone else to make it happen.

  • Accent_Sweden

    If being imperceptibly valuable is key to disruption, it also requires being imperceptible to the competition while being obvious to potential customers. That’s a tough act. The imperceptibility must still be related to the competitions’ self-imposed blindness since they can’t see past how they’ve defined their own world.

  • Bruce_Mc

    ‘Listening to large buyers at the expense of users. … Nokia … created the “E series” business-friendly phones which suppressed features like cameras and music.’

    Nokia and Sony-Ericsson during this period were very frustrating for this user. Neither company would build a phone with all of their best features, instead, they would have separate models, one with the best camera, one that played music best, one for Exchange email, etc.

  • Murphy

    “Disruption is not a process that merely rewards breaking convention. Any fool can rebel against the status quo. To change it requires a process that rewards asymmetric competition. Finding a way to be seen as irrelevant and yet conquering at the same time. Being disruptive is, above all, being imperceptibly valuable.”

    Fascinating.

    In other words, the iPhone, a highly portable Macintosh computer with the attraction of a new input method (multi-touch input), and combined with hardware sensors befitting a mobile device (3-axis gyroscope, accelerometer, proximity sensor, magnetometer) commoditized the Blackberry/Nokia business model merely by adding a cellular radio. Engineering-wise, it was easier for Apple to add cellular telecommunications functionality on top of its operating system and mobile form factor than it would have been for Blackberry/Nokia to add comparably competitive operating systems and attractive mobile form factors to the already existing cellular telecommunications functionality of their devices.

    Strategically, I suppose the decision for Apple to add cellular connectivity to their devices could be seen as simply wanting to enable their customers wider, more perpetual access to iTunes store content and the forthcoming App Store ecosystem.

    • John

      Murphy,

      That’s an insightful way to look at it.

      Along the same line of thoughts, the iOS computer has actually “applified” mobile phones, just like how it applified mp3 players, watches, handheld game consoles, metronomes, etc. These days no one will buy these goods for their functional purposes. They are now just apps on an iOS device.

    • poke

      What’s interesting about the concept of being “imperceptibly valuable” is that Apple continues to do it after disrupting. They manage to be continually imperceptibly valuable. Year after year they release a hit product that technologists, analysts and competitors don’t understand. They’re less a serial disruptor than a continuous disruptor.

      I think this indicates that disruption theory is just a special case of something bigger. Established companies have an inability to appropriately measure products in certain dimensions. This means other companies can creep up on them. We call this disruption. But it’s typically the case that a company doing the disruption is just in an early stage: it measures things in a different way, and hence produces disruptive products, because it hasn’t yet become a traditional firm and adopted the values of a traditional firm. It retains a naive view of the world. Eventually it will grow old and its ability to disrupt or see disruptive opportunities will wane and it will be disrupted itself.

      Apple enters this picture as a different kind of entity. It’s a mature company that has a culture that enables it to measure things in a way that is incommensurable with traditional business theory and practice. It is always imperceptibly valuable; not just when introducing new product categories, but with every iteration of those products. It is the most successful tech company in the world, but because the competition are institutionally incapable of valuing what it does, it can always fly under the radar.

  • Micromeme

    Hi Horace,
    That post really crystallized a lot for me– about the “disruption” we are watching. the common element of disruption stories seems to me to be

    “well our best customers tell us it doesn’t matter or want us to do different things”

    and the identification of a disruptive market idea is about serving in a new way an underserved type of customers
    i.e. apple is directed to the consumer/user experience without regard to enterprise and carrier desires…both of which represented ‘best’ customers for incumbents and steered them wrong.

    arguably the biggest difference between android today and apple is that android vendors achieved very rapid market access by complying with carrier desires. ie samsung and htc and all the rest were almost instantly available with all carriers placement by saying yes to all carrier contract requests. But as a direct result of that they cannot today in any carrier deliver (1) phones free of carrier bloatware and (2) instant global software upgrades for old and new phones. And (1) and (2) are features to the user directly, against the interests of the carriers.

    My question is then, is apples ability to deliver instant upgrades and fixes across all its phones still disruptive to android or the android-carrier relationship? I think maybe it is, though it has to overcome price issues.

    Another way to put that would be we look at a ‘price’ like 650 for a new iphone 5S with iOS 7 and compare it to a average andriod phone $300 and say– more expensive. But the android phone at that price is often not even on google’s latest release and will spend its whole lifetime (say 2 years) missing latest release features– and bug fixes.

    Arguably thats worth a good chunk of the price differential right there.

  • stefnagel

    Maybe the iPhone was first an information device, not a communication device. It promoted (freee) messaging over voice. Most of us still prefer to reserve voice, and even moreso video, to more personal interactions.

  • benbajarin

    This has exactly been my point Horace in this thread of understanding disruption related to personal computing platforms. I would offer that computing has never been as personal as it is today and it will get more so on the basis of handheld computing being advanced through hardware and software.

    Apple has a vision for personal computing and that has been the driving force. As these devices become more intimate both the lock-in and the ability to defend against low-end disruption or good enough alternatives is harder to swallow by the consumer who values specific things unique to them and tied to them. These will be things that someone just chasing the low-end can not offer in personal computing.

    There will be a market for both the low and the mid-high. Some consumers will be pragmatic. It is interesting that even a pragmatic consumer would still consider Apple’s products however. But the point remains that Apple can continue down their path at the mid-high end creating actual handheld computers and advancing them as such in partnership with their developers.

    Nokia and to a degree BB were competing in personal communication. They were disrupted by personal computing. When we start to frame computing in this light with a very personal and intimate nature, it starts to become clear how the foreseeable future will play out.

    When good enough becomes good enough, it will happen when we have exhausted the means of hardware innovation, silicon innovation, material sciences, etc, and at the point that all software development moves to the internet as the standardized platform. We are still a very long way off from this future.

    • rationalchrist

      Personal computing subsumes the personal communication. Which one is easier: add OS into a phone, or add cellular chip and associated device driver into a computer?

      • benbajarin

        It isn’t a matter of which is easier technologically but which is the right form factor.

  • Walt French

    Now if we can just get the dialog to use (and understand) the phrase, “asymmetric competition.”

    Looking at the recent announcement that Delta “will” buy each pilot a SurfaceRT/2, I think that the ability to disrupt is tied to the change in who the buyer is (changing also the Job To Be Done). Microsoft advocates are highlighting the 11,000 unit sale (about an hour or two’s iPad sales volume, to be rolled out over 2 years) as proof of a resurgence of the Windows model, but the announcement sure suggests it’s mostly a PR move by Microsoft: Delta cannot have tested these not-yet-for-sale devices; the FAA hasn’t certified them; the Big Deal 3rd-party software hasn’t yet been ported… from iOS(!).

    I put “will” in scare quotes because Delta had previously announced a field trial of the iPad for the function, which was to have been followed by an Android rollout, and is now premised for the new tablets. Hard to imagine a less consumer-ish decision process (first, to go with what your friends are happy with, then decide you can’t abide the vendor, and finally to commit to a product that’s not yet for sale).

    BlackBerry certainly would’ve gotten caught in this trap of listening to Enterprise buyers, who installed the Enterprise Messaging without which the nifty pagers/messagers, later phones, were of little use. Nokia perhaps suffered from having a weak knowledge of the American market but the basic story is that Jobs had the crazy idea to put a full OS into a device that would scarcely seem to be capable of running it for more than 5 minutes.

    • handleym

      I think the punctuation you wanted was:
      …Delta will “buy” each pilot a SurfaceRT/2…

      Sure, they’ll buy them, paying full retail price…

      • Walt French

        Tell me: if you were the Surface Product Manager, wouldn’t you do your damnedest to achieve the same result?

        Methinks the various sites’ posts about the Delta deal will generate more (ad) revenue than Microsoft gets out of the sale (), but that’s far from the point: either Microsoft rejects the Consumerization of IT (Wikipedia, even!), or it fights tooth and nail to get WP and M*tro accepted.

        I believe that both will be mere footnotes in 5 years’ time, but I’m not ready to bet that yet.

    • flying north

      Pilots will still use their Ipad…count on it…

  • Walt French

    There’s another fascinating point regarding that piece: it relates an argument, late in 2012, about keyboards. By a co-CEO, versus his replacement, in which the Board was forced to take sides. An argument about deck chairs, as it were.

    That suggests that the highest level of management was still completely unable to quantify/understand the competition with 5 years of hindsight. Can this really be about asymmetry of competition, or does running a company like BlackBerry require such total concentration that insights you take almost for granted, elude these very smart, ambitious titans of industry?

    Or perhaps the article was obliged to help the company’s stalwarts justify their mistakes, in exchange for the “get” of access to them; asking the difficult questions was maybe never likely in the hometown rag, and especially inappropriate as we stand around the victim in Death Watch.

  • rationalchrist

    Palm CEO Colligan laughed off the idea that any company — including the wildly popular Apple Computer — could easily win customers in the finicky smart-phone sector.

    “We’ve learned and struggled for a few years here figuring out how to make a decent phone,” he said. “PC guys are not going to just figure this out. They’re not going to just walk in.”

    • rational2

      The PC guys didn’t walk in. The Mac guys did :-)

  • Space Gorilla

    It boggles my mind how many analysts still miss the truth that the iPhone is not a smartphone.

    • handleym

      “Not a smartphone” is less than ideal phrasing.
      “More than a smartphone” is better.
      But you think that’s the only thing they get wrong?

      - The same analysts and internet pundits can’t tell that a tablet is NOT a laptop, and is not going to destroy the keyboard device market. The tablet is, as Horace put it, a NEW market disruption. (Along the same lines: the delusion that a keyboard UI and a touch UI should be identical “for efficiency”. Whose efficiency? Certainly not the user’s.)

      - Same thing when it comes to wearables, with various moronic statements along the lines of “no-one wears a watch anymore therefore…” or “my watch already does what I need it to”.
      (On the other side you then have the idiots who think the watch will REPLACE the cell phone…)

      - I suspect that the story of Intel will play out much like the RIM/Nokia story, though on a much longer timescale, and with the obvious SGI/SUN/MIPS flee to the high end for as long as possible. Intel claim they’re aware of the threat from ARM, and they are in a vague sense, but they seem completely uninterested in actually CHANGING to adapt to the new world. They seem to believe that all that’s necessary to thrive in the post-x86 world is to offer Atom and Quark versions of what they’ve always sold, in the same configurations that they’ve always sold, and grateful manufacturers will flock to their wares (or maybe the plan is that angry customers are going to demand “Intel Inside” their phones and tablets?)

      • Space Gorilla

        I knew the iPhone wasn’t a smartphone from the very first moment I saw the original unveiled, it was obvious that it was a computer that happened to also make phone calls. I couldn’t believe all the reviews that completely missed that. I wouldn’t say “more than a smartphone” either, but I think we mean essentially the same thing. The iPhone is and always was a computer, and that is the proper lens to view it through. It then becomes very plain to see that the iPhone doesn’t have nearly as much competition as most analysts think it does. $600 to $800 is expensive for a smartphone, yes, but it’s quite reasonable for a computer. Just as the iPad price is quite reasonable for what it does. Expensive for a media/consumption device, yes, but only fools would say the iPad is a consumption only media device.

        I see the iPhone as the computing engine that will drive wearables, as well as second screens and other accessories. And I expect different iPad form factors as well in the future. iOS is the next computing platform. Android has certainly won the smartphone war, but Apple isn’t on that battlefield.

      • http://loewald.com/ Tonio Loewald

        “It’s a pocket size one of these”

        http://loewald.com/blog/?p=95 June 28, 2007.

      • Space Gorilla

        Exactly.

      • Walt French

        linked twice, we find, from 2007:

        iPhone is both sales positioning and a ruse. iPhone is positioned as a phone… because Apple believes this is the purpose that you will understand out of the starting gate…
        [B]ut it isn’t a phone. It’s also a ruse, because Mr. Jobs has a much higher goal in mind than selling the world’s coolest phone. But this is an effective way to divert attention from the real disruption that is happening until it’s too late.

      • Space Gorilla

        I don’t see Microsoft having much of a chance. Mobile computing is so finely tuned, I think you have to “make the whole widget”. Of course nobody really makes the whole widget on their own, but you get my meaning, you have to control the stack. Over the next five years I expect iOS to outpace Android by a large margin, from a technology/capability perspective, forget about market share (it’s pointless).

      • http://www.innovativedisruption.com thinkdisruptive

        Can you design a bicycle that is suitable for the Tour de France if you don’t understand the biomechanics of a cyclist, the challenges of that kind of course, and how a racing pro is different from a casual Sunday rider? Microsoft products are focused on compatibility with Windows OS, not on the principal job to be done. Microsoft is engineering-driven, not job-driven. The more computing platforms become ordinary consumer appliances, the more this hurts them.

      • Walt French

        The best case I can make for Surface is that Microsoft’s customers in IT, want to see their champion offer a modern, hero device.

        At the time the decision would’ve been made, Intel didn’t have a suitable device for all-day battery life, and the codebase would be compiled in an environment that could target any CPU, so RT was born.

        ARM chips still have a big advantage on bang for the buck, if not so much on modest-power performance at low battery requirements. That’s the problem with playing a game that somebody else invents: Jobs was able to take his sweet time on the OS until the CPU/battery/screen tech was good enough (plus, he amazed the world with how much you could do with a 400MHz ARM chip and tiny battery, not to mention the tiny screen), but Microsoft obviously felt compelled to intro the sub-platform despite knowing and being able to affect Intel’s roadmap.

        I don’t think the challenge was technical; it was the business strategy. I’m not amazed by the Surface don’t believe it is ready at the level Microsoft should want, but it is NOT that bad against what people otherwise use by the hundreds of millions.

        As you say, it’s just that there’s no particularly good reason for anybody outside of IT to want one of the things—it’s almost like a concept device. Microsoft will need a few years to build out the platform to the level that iPads are at, and they are generally unwilling to make sustained, bet-the-farm investments such as it’d require to hope to catch up before Apple pivots again.

      • http://www.innovativedisruption.com thinkdisruptive

        A small niche will prefer Microsoft, but there is no compelling reason to choose it, other than you’re a 100% Microsoft shop. It doesn’t uniquely solve any problems that I have, and from a usability perspective, it’s more of a nuisance than a joy. Added to that, it’s never a great idea to try to compete on a playing field that someone else has designed, and you’ve got a big mess. They aren’t quite to the stage of self-immolation that Blackberry has gone through, but I think the best you can say is that they’re treading water. The technology is irrelevant to me. The reasons to use it aren’t, but no one can say what they are.

      • http://www.innovativedisruption.com thinkdisruptive

        Thanks Tonio. I never saw your precis of my article 6 years ago. Great summary.

      • SubstrateUndertow

        Android has certainly won the smartphone war, but Apple isn’t on that battlefield.

        Well said !

      • Childermass

        Yes, yes, yes. Well said.

        I go further and insist it has NO competition in its true field. If it is a phone then, yes, lots of competition. If it is a pocket computer then none.

        (Some people buy Android phones as pocket computers, but the usage data show such tiny rates fragmented across a dozen or more operating system variances mean the effective competition is nil.)

        This also explains why Apple seem so indifferent to ‘market share’ of smartphones. It means nothing to them. The market they look at shows them owning it.

      • charly

        Intel is the best foundry in the world captured by a reasonable good fabless chip maker with tons of money. They are making Atoms not with their best process but on an older one and it still beats ARM. Problem is that they don’t have the radio part. But they are busy solving that problem. Also most software on Android runs in a virtual machine so porting to another architecture is not necessary. Add the change to 64 bits that is coming soon and i would argue that Intel isn’t dead in phones.

        ps. A bigger problem for Intel and the whole chip industry is the coming end to die shrink

      • handleym

        In what way is Intel “beating” ARM?
        Not in design wins. Not in number of units shipped. Whatever it is they are winning in doesn’t seem to be of much interest to either manufacturers or consumers.

        You’re also wrong in your details.
        Bay Trail (the only Atom SOC worth a damn) is manufactured on 22nm which IS Intel’s current best process. And in that best process they’re only able to match Apple’s A7 — which is manufactured at 28nm. And Bay Trail is a tablet SOC — when the A7X comes out (end of this month?) it will presumably be 15% or more ahead of the A7 and Bay Trail.

      • markwilcox

        Apple’s A7 appears to show the latest Atom chips not to be significantly ahead on performance and still quite far behind on power consumption. Surely Intel needs a major advantage in performance per watt to make it even remotely likely for iOS or Android ecosystems to adopt x86 in a big way. Without majority adoption by one of those app ecosystems I really don’t see how Intel has a chance in smartphones on x86.

      • Shawn Dehkhodaei

        Refer to my earlier comment above …

        Intel’s ONLY strength is fabrication !!! They’re sorely lacking in architecture. They’re gradually hitting the plateau, where no matter how much you densify the SOC (increase transistor count), you’re hitting the efficiency wall of the X86 architecture ….

        Let’s be honest. X86 is VERY OLD. Like from the early 80′s. It’s a real wonder how it managed to stick around this long. ARM’s instruction set is what sets them apart. They can squeeze double the performance from the same amount of transistors, since they have a much more efficient architecture. This is also true of IBM’s Power series server chips.

        There are a lot more variables to CPU performance than the simple numbers of fabrication process and die size.

      • Shawn Dehkhodaei

        I actually believe Intel doesn’t have what it takes to compete with ARM, and they know this quite well. Intel from the early days, has been a one trick pony; they’re entire bread&butter is x86. Every new market they’ve entered, they’ve left it in a hurry and with a disaster or a major failure.

        It simply is NOT in their DNA to re-invent themselves. All they’ve been doing in the past 10 years is buying themselves time by investing in the FABRICATION part of chip making, NOT the DESIGN or ARCHITECTURE. They’re very similar to Microsoft in this regard. They’ve got a great cash cow and it’s still got milk, so why let go of a good thing?

        I think their demise will be slow and gradual, but I believe they’re already where BlackBerry was in 2010, so I don’t think they even have an opportunity for an offensive.

  • jim_zellmer

    Perhaps the iPhone is indeed a “low end” computer disruptor for many.

    Regarding RIM & Nokia, could they have institutionally or aspirationally approached an operator and cut a computer style deal (rather than traditional phone) in the same way Jobs did with Cingular – pre at&t acquisition?

    I continue to wonder if aapl’s asymmetric deal cutting ability (think content deals as well) died with Jobs passing. The rise of sandbox TV apps (enter your cable tv provider prior to using) perhaps offers a clue.

    • Walt French

      Not to get all hobby-horse on people, but I absolutely believe the iPhone and the iPad are low-end disruptors of Wintel computers.

      By all measures, their CPU, screen, keyboard, memory, “mouse” — the biggies of a desktop PC — are inferior. Just like Christensen’s examples of ever-smaller disk drives, or smaller backhoes, the cost per cubic yard of soil moved per day, or per GB stored with 6 9′s reliability, is worse, much higher.

      And yet, thanks to mobility, and a few drops of special sauce — pinch-to-zoom, auto-rotate, double-tap to map the frame-width to the screen are my biggies — these clown-car toys (per quotes @rationalchrist) have sold by the billion. Two billion by the end of 2014?

      Despite the phone circuits, they’re mostly doing PC work. Not very well, either. But with Apple alone selling iPhones at about the level of the entire PC industry’s desktop+laptop business, they’ve prevented a lot of people from buying a PC, and owners of older PCs are relying increasingly on mobiles. There’s very likely a while of 10% annual decline for Wintel purchases, by which time desktops will still work better, but will not have had any innovations to justify spending more. The logical next form will be a phone- or tablet-based “dashboard” for a web-based service.

      Microsoft is the obvious target/victim, since there’s a lot of money going to Redmond for not that much in the way of new capabilities. Probably the same for Santa Clara (Intel). Both companies will continue to make fine products — and they’ll be increasingly chased up-market.

      • Space Gorilla

        Bang on correct.

      • jmfree

        Completely agreed.

      • Childermass

        Thank you and well said.

        It’s so tempting to use this as a segway to some of my hobby horses, which I shouldn’t really … well, go on then:

        - Why using sales data (or ‘activations’) is unhelpful (aka meaningless) whereas using usage data isn’t
        - Why ‘Wall Street’ (or 9 out of 10 other analysts) don’t get Apple because, to quote Sallah, “They’re digging in the wrong place!”
        - Why real analysis of Apple should use niche markets as the paradigm (niche does not mean small)

        There are more and they all stem from the insight you so cogently expressed.

      • Walt French

        Thanks.

        PS: a Segway is pretty much like a literal hobby horse; a segue goes to your metaphorical hobby horse.

  • Naofumi

    If Clayton Christensen can’t spot the new market disruption, nor the incumbents with vast domain knowledge, nor the analysts/pundits who can’t reach agreement, then we have to conclude that our current understanding of “new market disruptions” does not allow us to reliably predict the success of a new entrant.

    This doesn’t mean that the theory is useless, because it gives us insight as to why incumbents did not persue the opportunity until it was too late. It does suggest however that the usefulness of the theory is limited compared to low-end disruption.

    • http://www.asymco.com Horace Dediu

      Some understood it to be what it came to be.

      • Naofumi

        Yes. But how do you know who will understand it and who won’t? You can’t use their understanding of the theory as the sole yardstick, nor can you use the extent of their domain knowledge as a measure. Compared to low-end disruption, prediction seems to be extremely difficult, almost impossible.

      • http://www.asymco.com Horace Dediu

        The value of the theory is to the practitioner. It’s not perfect but it offers a set of eyeglasses. They may not help everybody to see but just because few can make use of them does not mean they are not valuable. The complexity has to do with understanding jobs to be done and hence categorization plus value chain evolution and the commoditization of various technologies which depends on their rates of improvement. These are debatable topics and not purely intuitive beliefs.

      • Naofumi

        Totally agree. Correct me if I am wrong, but are you also stating that disruption theory cannot be disproved based on the failure of certain experts’ failed predictions.

      • http://www.asymco.com Horace Dediu

        The theory cannot be proved or disproved as it is not universal enough. Or, at least, explanations for all the anomalies are not yet part of the theory. Put another way: The theory works in some cases and not in others. In those cases where it does not work, some are explainable but some remain unexplained. So a proof of its correctness would require having no unexplained anomalies and a disproof would require that there will never be explanations for the anomalies. We’re not at either point.

      • http://www.innovativedisruption.com thinkdisruptive

        Look for their analysis of the job to be done. Prediction is extremely easy if you are measuring the right things. Christensen got it wrong because he placed iPhone in the wrong market (ironic, since he discusses this problem in his books, but we all have occasional blind spots — it took me 3 years to understand why people used Twitter, for example), and didn’t fully grasp why people would want one.

    • http://loewald.com/ Tonio Loewald

      Christensen does a terrible job of explaining Apple’s success, which is ironic since that’s exactly what he’s credited with doing. The inability of companies to build disruptive products because they won’t risk damaging existing revenue schemes is a great insight, and it certainly explains some spectacular failures I’ve personally been involved with, but it doesn’t explain Apple’s successes.

      • Naofumi

        Yes. The question is why can’t he. Is it because his theory is flawed or is it because he has somehow misapplied it? Maybe market conditions are different. It is also possible that Apple is a diligent observer of Christensen’s solutions so that they are now rather immune to the dilemmas that he put forward.

      • http://www.asymco.com Horace Dediu

        I have had conversations with him and his teams of researchers. The answer is that technology in general and Apple in particular are difficult to analyze. There is huge complexity and the need for a great deal of historic data. It’s complex because of multi-sided markets, network effects, ecosystem dependencies, non-linear patterns of growth and extremely rapid turnover of firms and categories of products.

      • http://loewald.com/ Tonio Loewald

        Genuine innovation, whatever that is, causes discontinuities. I think it’s going to be hard to turn that into something you can analyze. I suspect it’s more like chaos theory — a way of categorizing things that aren’t well-behaved (like the weather and the stock market).

      • Accent_Sweden

        Perhaps Apple is also disrupting Christiansen and team.

      • benbajarin

        Perhaps Apple may be the only company in which the theory is not applicable.

      • benbajarin

        We simply need a lot more pure consumer market history related to personal computing to get the full picture. I’m yet to see emotional consumers related to computing to be factored into how the the theory is being applied. If exists I’d like to read it.

      • SubstrateUndertow

        I’m yet to see emotional consumers related to computing to be factored into how the the theory is being applied. If exists I’d like to read it.

        Here you go – reading this !
        http://stratechery.com/2013/clayton-christensen-got-wrong/

      • benbajarin

        Thanks. Ben is my podcast partner along with Benedict Evans. We have discussed this at length. Ben makes my point exactly in his series on this. Disruption theory is not entirely applicable in the pure consumer markets.

      • http://www.innovativedisruption.com thinkdisruptive

        I completely disagree with this Horace. That may be Clay’s excuse, but this has nothing at all to do with technology, and everything to do with understanding the marketplace.

    • http://www.innovativedisruption.com thinkdisruptive

      It was actually very easy to spot if you knew what to look for. Christensen had a blind spot for Apple which is hard to understand, but I suspect it may have been because he was more focused on low-end disruption. (Which, by the way, the iPhone was if compared to a notebook computer, and not a phone. That it was both low-end and new market partly explains the magnitude of its success.)

      I don’t see this as requiring vast domain knowledge at all. Just a willingness to suspend disbelief, and see a future with different assumptions than those that are commonplace today. This is not that difficult if you can appreciate the job to be done (which in the case of the iPhone was not a technical job requiring technical domain expertise, but very much a consumer-oriented JTBD), and not think about today’s products as your framework.

      Warren Buffett also relies on public domain knowledge. He has superior understanding of what creates market value, which is why he’s a better investor than the rest of us. Anyone else could use the same information and the same methods. The fact that they aren’t able to achieve the same results doesn’t invalidate his approach. It simply says you aren’t as good as him at doing it. Applying disruption theory to make predictions can be reliably done, but it’s about understanding market needs, not technology.

    • http://www.innovativedisruption.com thinkdisruptive

      The fact that many people don’t understand or misuse the theory does not mean its usefulness is limited. There is a fundamental disconnect that a lot of people have with the term “disruptive innovation”, because they focus on the innovation part and not the market disruption part. It is the reason that something is disruptive that matters, and that is about marketing, not about technology or product or innovation.

      Just like we can all drive cars, but only a few are Formula 1 racers, and we’re all able to walk, but only a few are Olympic athletes, we can all talk about business strategy, but only a few deeply understand why. To those who do, the theory is immensely useful and powerful, for predicting disruption and investing in it, for planning strategy, for designing the right products and business models to match the markets they’re targeted at, and for knowing when you are likely in the path of a disruptor and should do something urgently.

      Mathematics is not generally described as having limited usefulness, but I can assure you that the vast majority of people have difficulty adding 3 numbers in their heads.

      Regarding the incumbents not being able to spot things, what you must remember is that most incumbents who are not run by the original founders are structured and designed for operational efficiency. That is precisely the opposite of what is required to think disruptively. In Clay’s language, their Resources, Processes and Values (aka culture) is what blinds them to disruption. They know too much (about the existing market) to see disruption coming or if they do, to deal with it effectively. Domain knowledge is a disadvantage to market disruption, because you assume that you know things that you really don’t. And unfortunately, most analysts/pundits have too much book smarts and not enough real world experience — failure is the greatest crucible of learning and understanding, and most of the consultants working at a McKinsey, Bain, or even at Innosight have never had that experience burned into their psyches.

      At the risk of sounding a bit sycophantic, your host here (Horace) does a pretty damn good job of analysis and explaining why. Nobody is going to get this right 100% of the time, anymore than Lebron James scores a basket every time he approaches the net. One of the reasons is that predictions are probabilistic, and there are factors that you can’t control. Accept that 95% is pretty good, and accurate enough to make a lot of money for you.

  • Almat

    What about the possibility that it was Android that ate Blackberry’s and Nokia’s lunch and not the iPhone? That would explain the timing of RIM’s and Nokia’s peak and how Symbian was slowly replaced by Android.

    • http://www.asymco.com Horace Dediu

      For the purpose of this argument Android is not distinguishable from the iPhone. It’s like distinguishing which type of microcomputer disrupted the minicomputer market.

    • obarthelemy

      Indeed. But that wouldn’t fit the narrative of Apple being the hero and the high-end part of the disruption being key.

      • 39concepts

        A repercussion of that view, is that you have to consider that Android hasn’t eaten Apple’s lunch as well, as Apple is only growing into base it never had. It would be difficult for you to have it both ways, as you often seem to attempt.

    • Bananaj

      The “peak” roughly coincides with the release of the iPhone 4 and the first iPad, AND Android Froyo. Perhaps the moment that smartphones went mainstream?

      It was the moment when Apple’s ecosystem value proposition became more explicit (apps could be used across iPhone and iPad), also when they filled in the remaining feature gaps on the phone (eg. front-facing camera/Facetime) and noticably leapt ahead of the competition in several areas (Retina resolution, thinness, build quality). It was also the time when the iPhone hit many more carriers in some key markets (eg. all carriers in the UK, Verizon slightly later in the US).

      With iPhone taking the high end, Froyo added features to the point where Android became a truly workable iPhone clone, so companies like HTC started eating Nokia and RIM’s mid-range lunch.

  • Naofumi

    Regarding the Mac in the 1990s, I have to disagree. The prices of Macs at that time were insane compared to PCs while differentiation was disappearing, and that alone was sufficient to turn away consumers, even without corporate IT decisions. The mandates of large corporations were not the main reasons for the decline.

    If iPhone lost its differentiation and carriers stopped subsidies and Apple maintained high prices, then we would see history repeat itself. But Apple won’t let that happen again, and is prepared to gradually cover the lower end, as Horace has noted.

    I don’t think that we need to assume that the market conditions are somewhat different from the 1990s.

    • Space Gorilla

      Market conditions are different though, computers were not consumer-facing appliances in the 90s, far from it.

    • http://loewald.com/ Tonio Loewald

      You’re right about the period 1991-1997, but that simply caused Apple to slide from 10% market share to 5% market share. They were stuck at 10% because of things that happened in the 80s, which had very little to do with price (IBM and Compaq computers were not significantly cheaper than Macs and were brutally hard to use, but sold well anyway.)

      What’s funnier is that every TCO study showed that, for enterprises, Macs were still effectively cheaper than PCs throughout the 1991-97 period, but that didn’t sway anyone. They bought PCs, with their attendant support nightmares, anyway. (The TCO for a Windows PC in 1997 was measured by Gartner to be in the $20,000 ballpark — and this did not include measures of lost productivity while you waited for tech support to restore your printing functionality or get Novell Netware to work again.)

      • rational2

        Perhaps the IT departments loved PCs because corporate users were then forced to rely on these departments to function?

      • http://texrat.net/ aka texrat

        Cynical yet valid. ;)

      • http://loewald.com/ Tonio Loewald

        Exactly so. $19,000 of the $20,000 annual TCO was IT Department Budget.

      • http://www.innovativedisruption.com thinkdisruptive

        B2B markets are strongly driven by standards (and de facto standards). As they used to say, nobody ever got fired for recommending IBM. In the 80s and 90s that applied to Microsoft. Today it applies to Google. TCO is a small part of the picture. The vendor that sets the standard and owns the lion’s share of the market also has the most apps built for it, and the largest support ecosystem. Until a disruptor comes along and competes on different turf, the ecosystem in particular is a very difficult advantage to overcome.

      • http://loewald.com/ Tonio Loewald

        Exactly so. Microsoft’s rise had almost nothing to do with any cost benefit or technical virtues, and everything to do with the licensing agreement IBM signed in its haste to secure an OS for the IBM PC.

      • Tatil_S

        Macs were fine when I started using them in our computer labs in around 1994 when the alternative was Win3.1, but they became pretty unstable and underperforming around 1996 when we all switched to Win95. I am not sure which operating system update made them so horrible, but there was a very good reason for the decline of Mac market share at the time, independent of its price or business model.

      • http://loewald.com/ Tonio Loewald

        I think more likely like many people you were comparing old Macs to new Windows boxes. Having developed software on both platforms throughout the relevant period, there were no significant differences in stability between Windows 95/98 and Mac OS 7.5–9.1. Windows NT/2000 was remarkably more stable than classic Mac OS, as was and is Mac OS X. That said, Windows always had more malware problems than Mac OS (thanks to Apple aggressively building anti-malware functionality its applications, funding free anti-malware applications, and — of course — being a minority platform).

      • Tatil_S

        Possible, but it is also likely that the Win95 update on our existing boxes, after the painful setup period worked reasonably well, while Macs did not perform all that well after one of the Mac OS updates. I cannot prove either assertion with the hazy memories.

      • http://loewald.com/ Tonio Loewald

        A lot depends on how well you know a platform. E.g. pre-OSX you could switch OSes on a Mac in a matter of minutes (without reinstalling anything) whereas if your OS is giving you problems in Windows you’re looking at a lot of pain. (You can re-image a PC pretty fast, but then everything you’ve done to make that PC useful is toast, and if you’re not careful so is a lot of your data.) So, on Macs if you had an iffy OS update you simply backed out of it and waited for something better — on Windows you lived with it. Also, Windows tended to drown in cruft over time until Windows 7, Macs not only didn’t but if you felt like it you could install a fresh operating system in a few minutes and keep all your applications.

        A cynic might argue that the Mac advantage lay chiefly in most Macs being unsupported by IT.

      • Tatil_S

        > “on Macs if you had an iffy OS update you simply backed out of it”
        Awesome. Never knew that. Could be handy even today.

      • http://loewald.com/ Tonio Loewald

        OSX is much harder to deal with in this respect than “Classic” Mac OS. E.g. on a Classic Mac you could duplicate your system folder (or copy it to another hard disk) and then do a system upgrade. If you didn’t like the result you could simply “bless” the copy, reboot, and you were back — no mess no foul.

        Similarly, you could create a CD with a copy of your current System and Applications folders and then grab a new or old Mac, boot ofr the CD, and simply copy everything across and your were good to go. (Hence, new Macs would be up-and-running in a production environment within fifteen minutes of unboxing.) Worst case, you’d need to type in new license codes for things like Photoshop.

        With OS X you can do an install and archive and then back out but that’s relatively slow and painful compared to classic Mac OS.

      • Shawn Dehkhodaei

        Yes …. I remember those good old days … renaming System Folders …. it was so nice :-)

    • Shawn Dehkhodaei

      I would respectfully disagree with you. In the prosumer and professional space, Mac pricing was about 5-10% higher relative to SIMILARLY configured PC’s …. this still holds true today.

      The reason that the Mac is doing much better now, is that people have come full circle, and consumers in general have matured, especially when it comes to choosing computers and electronic devices (i.e. being the cheapest doesn’t guarantee success), hence why DELL is doing really poorly. Also, the Mac has a much larger installed base, and therefore it has crossed a “relative” chasm where it will remain relevant to computing for a long time to come.

      This pattern of consumer maturity and “appreciation of quality” is evident in other markets, and brands, such as WholeFoods, Starbucks, Lululemon, etc., where consumers are willing to spend a little more money to gain access to a “much” higher quality product.

  • markwilcox

    >> The stock prices of the companies also prospered for a period long after the iPhone entered the scene validating a do-nothing approach.

    From a technical perspective, RIM’s “smartphones” were really little more than feature phones with push email. They used a basic RTOS with a Java ME-like environment on top. RIM tried adding touch screens and a better browser but as you rightly point out they had to embrace a total rewrite on top of a more capable OS and were far too slow to do that. I tend to agree with Ben Thompson that BlackBerry was obsoleted rather than really disrupted – along came a better product that could do everything they could and more.

    Nokia on the other hand had two software platforms internally that were capable of supporting an iPhone-like experience and already had all of the features of the iPhone and more. They either had to swallow their pride and shamelessly copy most of the iPhone experience (they probably still would have been taking some cash from Apple in patent trade afterwards) or shift their culture to make the engineering organisation serve the very capable designers they already had. They failed to do either. They knew they had to improve usability significantly to compete and made a lot of desperately poorly co-ordinated effort to do so.

    >> So this is the crux of the incumbent’s dilemma: how do you rally a response when you don’t feel any pain?

    Nokia may still have been growing smartphone sales into 2010 but the bulk of their smartphone profits were historically at the high-end, where they previously sold decent volumes of $400-700 devices. The iPhone3G had already started eating this high-end profit and the 3GS had destroyed it. They certainly felt the pain and were nearing the end of a 2000+ man-year engineering effort (which never saw the light of day because it was simply not good enough) to rebuild their Symbian UI at that point.

    I find the fact that “the iPhone” is referred to like a thing rather than a series of products tends to encourage revisionist history, maybe this is a deliberate marketing move by Apple, maybe just an oddity. In any case, the original iPhone was clearly NOT a threat to Nokia and BlackBerry because it barely worked as a phone and was missing lots of features existing smartphone buyers considered essential. As a mobile computing device it clearly had the potential to be disruptive and I think strategy folk at both companies recognised that. The 3G was a massive improvement and anyone senior at RIM or Nokia who didn’t get what was happening when the 3GS made a similar evolution was living in a cave.

    • rational2

      iPhone obsoleted Blackberry phones. Apple disrupted RIM (and others) business model. Is that a fair way of think about obsolete and disrupt?

      • markwilcox

        RIM had two user demographics, enterprise and text/BBM addicted consumers (mostly teens and young adults). You can correctly say that the app ecosystem business model obsoleted the sell a device + email/BBM service model but I think that argument misses the subtleties of how and when the JTBD of those user groups were satisfied by the iOS and Android ecosystems. In the enterprise market I see an argument for disruption but I think iPhone being the premium/status device and thus starting BYOD through the executives (that IT couldn’t say no to) was more important than the business model. In the consumer segment I think the rise of social networks was key. The important networks were also accessible on BB but the iOS/Android experience was much better – enough for heavy users to give up qwerty keyboards and unlimited BBM for minimal cost. I see that as fundamentally a better solution being available rather than a major disruption to the business model.

    • xynta_man

      > the original iPhone was clearly NOT a threat to Nokia and BlackBerry because it barely worked as a phone and was missing lots of features existing smartphone buyers considered essential

      Well… that’s just like your opinion, man…

      For most “regular consumer smartphone users” (yes, they did exist back then, just weren’t that widespread, compared to today) even the original iPhone was such a big breakthrough in terms of actual user experience that many of them jumped to it in the first year of its existence.

      For example, while I know that it’s not a good representative sample, almost a quarter of smartphone users in my social circle jumped to the original iPhone in the year it launched, and this is despite the fact that there were no Mac users (i.e. pro-Apple) among them, except me. And they loved it — they were thrilled that they didn’t need to use their Symbian phones anymore, they were thrilled that the device offered a real desktop-class web browser, a convenient way to use email, had a relatively large screen, worked smooth, et cetera. And this is despite Apple not offering the iPhone in any official capacity in our market, with the only option being non-official retailers, which jacked the price above $800.

      Many of other smartphone users in my social circle did not get the iPhone solely because of their Apple-skepticism — they “knew” Apple as just some niche PC vendor that makes “overpriced computers for kids”. But since the iPhone was already present in our social circle they were exposed to it and, having witnessed it up close and personal, started to understand that it was in fact a gem of a device. Each new iPhone iteration expanded the number of iPhone users among us and, fast forward a few years, currently the majority (70+%) of them are using iPhones.

      • Diamond9

        Damn right. The meme that the first iPhone was “barely a phone” is and always was a crock. It was a fine enough phone that went on to show what could and should be.

      • markwilcox

        I don’t dispute that there were smartphone users who got a better experience out of the original iPhone but it didn’t sell at all well in most places outside of the US because people were not willing to give up things like 3G and MMS. The camera was also pretty terrible compared to what others were shipping at the time.

        If your primary use cases for a smartphone were browsing on WiFi or listening to music then the 2G iPhone was already streets ahead.

      • Vega

        3G was useless on phones without usable browsers (i.e. all Symbian, Blackberry and WinMo phones in 2007). MMS was always an underused dud, mainly due to extremely high prices. So your argument doesn’t hold. The main reason for the slow iPhone roll out was the slow pace of carrier roll out. Apple started with only a small fraction of worldwide carriers.

      • markwilcox

        As someone who tried both extensively at the time I’m convinced a relatively poor browser on 3G was infinitely better than a good one on 2G. The main mobile browsing use case at the time was looking something up on the go, which usually required little more than a search and browser quality was a secondary issue (actually screen size was a much bigger issue than browser quality at the time). If you didn’t want/need to browse where there’s no WiFi, obviously this was not a major issue.

        MMS was an underused dud but back then when we didn’t have widespread social network usage and mobile access to photo sharing sites, MMS was the only vaguely usable way of sharing the images captured on your phone. It was underused in the general phone population but the stats were pretty good for users of smartphones with decent cameras.

        The sales data on the networks outside the US where the original iPhone was rolled out does not support your argument. Before 3G and the availability of 3rd party apps the iPhone was simply not that appealing to the majority of consumers in Europe and Asia at that price point.

        I’m surprised the argument that the original iPhone showed a lot of potential but was actually not that attractive a value proposition for a large majority of existing smartphone users is even contentious. Among serious tech enthusiasts in Europe around 2008-9 a Nokia or BlackBerry plus an iPod Touch was often considered a much better value way of participating in the Apple ecosystem. :)

      • Sander van der Wal

        There is a lot more to the browsing experience than the download speed. I almost never used the Symbian browser, as it was slow and hard to use, but the browser on the first iPod touch was very usable.

        There’s also the access point idiocy on Symbian. iOS just connected to the nearest wifi, of failing that, the mobile network. On Symbian you had to create all kinds of access points and whatnot.

      • markwilcox

        Absolutely yes, there is much more to the browsing experience than the download speed – however, IF you needed to browse on the move then being stuck at 2G speeds was excruciatingly painful. I also used my iPod touch for browsing on WiFi when it was handy in preference to most of the other mobile devices I had lying around at the time (except the N800 internet tablet).

        The access point thing was a great example of Nokia being steered down the wrong path by its big customers. Of course the engineers at Nokia knew that what everyone wanted was to be on WiFi by default and fallback to the cellular network if it wasn’t available. The network operators foolishly wanted the opposite and they got what they wanted. What happened in the real world was that some people were able to master the arcane settings to reverse that policy but most got stung by big data use bills and minimised their mobile data use. iPhone users on the other hand got used to pulling their phones out of their pockets to check anything and everything while at home and at work and it was then just second nature for them to keep doing that while out and about… the result much higher network data use and ARPU for the operator.

        Quite honestly I don’t see how Nokia had a way out of things like that – they’d tried hard a couple of years earlier to push back and get control of the experience with Vodafone and the result was massive investment from them in the Sharp GX10 (and successors) along with a major celebrity advertising campaign (David Beckham). Apple as a new market entrant was able to play networks off against one another (when they didn’t have the production capacity to supply them all anyway), while Nokia would have had to throw away a large fraction of its business to do the same thing.

      • Tatil_S

        That is exactly the dilemma. How do you justify cutting off a substantial portion of your business for more profits in an uncertain future? Yet, those who do get rewarded… Sometimes…

      • willo

        I use my first iPhone in 2007 surfing all the time. And I´m from Norway. You guys are forgetting it was the first phone that had decent, fast and easy to configure WIFI. It would automatically join whenever I got home. It also had apps and games tho only on jailbroken iphones. There was even an App Store for those sort of apps/games, and it was very much similar to the App store now.

        The iPhone in 2007 was in a whole other league than any Symbian phone before it. I had the SE P800 at the time which was the latest greatest, and the difference was like going from DOS to Win95.

      • markwilcox

        Anyone who had the first iPhone is clearly not very objective about it – I’m talking about the majority of consumers in Europe & Asia and they statistically did not buy it in significant numbers. If your first iPhone was jailbroken then you are a statistical anomaly and your early app store experience does not reflect the proposition Apple was selling.

        I acknowledged already that the original iPhone browsing experience on WiFi was superior and that the iPhones in general had massively better usability than the alternatives. Those are not the only considerations when buying a product.

        I should have known better than to suggest the original iPhone was anything less than perfect on a blog (albeit an excellent one) that studies Apple as a shining example of greatness.

        FWIW, I’m a huge fan of my iPad and I’m typing this on a MacBook Pro but I still don’t use an iPhone (other than for testing) to this day because it’s not that much better than my Nexus 4 to justify more than double the cost (unsubsidised) along with my £10/month ($15/month) network usage (500mins, unlimited texts, 1GB data).

      • robdk

        “…the majority of consumers in Europe & Asia..”

        Rubbish! The first iPhone was only available for purchase in the USA, the UK, France, Germany, Ireland and Austria. Look it up on wikipedia. The vast majority could not buy iPhone 1 because it was not for sale in those countries. It was only from the 3GS and 4 that Apple got the distribution levels up to a global level.

      • markwilcox

        Was it not the case that Apple sold more original iPhone units in the US than the other 5 countries combined (I forgot they were all in Europe), all of which had more developed smartphone markets than the US? I recall they also had to drop the original price by $200 to get traction at all.

      • willo

        Yeah, I can acknowledge that I am an anomaly when it comes to iPhone. I had mine jailbroken in August 2007, which was done by soldering cables onto the logicboard.

        Perfect is time defined answer, as it was “perfect” when it came out, vastly different than anything else out there, and with a ton of new usage areas. iPod, Calculator, Stocks, Weather, and excellent webbrowser in your pocket. It was perfect compared to what was out there at the time, obviously you give it MMS and 3G and you get an improvement. That does not make the first iphone any less perfect in my book though.

        I´ve owned every single iPhone since then, and I got Nexus 4, GS3 and GS4 as well. I guess I´m biased towards Apple since I own shares and love Apple products, but honestly I really do think that the iPhone/IOS platform is superior to Android in many ways without getting into it now.

        The majority of the commenters in here are highly knowledgeable, and much less biased than I am though. :-)

      • Chaz

        people forget…. and they hate…that’s jealousy. One if the seven deadly sins

  • imn2

    Brilliant analysis.

  • Pam Harris

    Interesting read.
    But isn’t Apple taking a risk by letting their competitors build viable ecosystems (if this battle is about ecosystems) instead of pouncing while they’re strong ?
    Hardware features and costs are basically the same for all players at the high end, the low end, and in-between (3rd party everything). OS, apps, logistics and marketing are what differentiate. Those are a slow build. Android has “gotten there” and then some, WP is well on its way. Won’t we look back 5 years from now wondering why iOS let itself be pushed into 3rd place ?

    • xynta_man

      In my opinion, Apple doesn’t really have a choice here, simply because they can’t make an unlimited number of devices in any decent way. They can’t scale it (manufacturing and the whole company, like support, retail, etc) with just a flick of the switch. And they would need to, if they want to significantly outgrow the market.

      For example, for the whole 2012 Apple sold ~135 million iPhones, which got them a 19.1% marketshare of the whole smartphone market (712.6 million devices), if we go by data from IDC. Purely theoretically, to achieve something like a 50% marketshare figure in 2012, Apple would need to sell ~350+ million iPhones. I don’t doubt that could’ve pulled it off from a demand perspective (e.g. by slightly broadening their portfolio), but they sure as hell couldn’t have done that from a supply perspective.

      350 million iPhones in 2012? After 2011, where they sold ~93 million of them? That’s like increasing sales (and everything that is tied to them) almost by four times in just a year. Good luck with that, even with Apple’s capital expenditures, especially when you need to do it without releasing 20+ different iPhones (which would do them more harm, than good) to offset pressure of sourcing that many similar components. Hardware isn’t software — you can’t “make another copy of it” just like that.

      There are suppliers, components, manufacturing, assembly personal, logistics, carriers, support, warranties, et cetera. It’s not like Apple starts from a low base — it’s one thing to go from making 5 million of something to making 10 million of it, and a whole other ball game when you need to go from 100 million to 200 million. And thats 2012 numbers. Many analysts expect that in 2013 the smartphone market will surpass 1 billion in annual device sales — good luck in having a 50% marketshare of that… 500+ million iPhones in a year? Good like with that supply chain, especially if you don’t want to cut corners in every way possible.

      Sure, it all can probably be done, but not in such short timeframe.

      • charly

        The same factories that can’t make 350 million iphones are building Androids and Nokia’s. It is not that Apple can’t but that it doesn’t want to.

      • xynta_man

        That’s why I mentioned things like not cutting corners, not making 20+ different devices, et cetera.

        Need I remind you, that you are comparing a single vendor to hundreds of them, most of which aren’t even on people’s radar because they make low quantities of no-name to semi-no-name low-end devices?

        It’s not like the whole other part of the market is own by a single large vendor or two — nope, currently the biggest vendor in the smartphone market is Samsung, which isn’t even two times bigger than Apple, having a perceived (we don’t really have solid numbers, do we?) marketshare of ~30%, to acquire which it was required to make 20+ different devices for all possible price points and spend $10+ billion in marketing expenses.

      • http://www.BarnesFamily.com/ davebarnes

        Not really the same issue. The iPhone 5S has a fancy machined aluminum frame. This is not something that you can order another 200M of.

      • charly

        Apple can’t really grow a lot in the price range of the s5. What Apple needs is a cheaper Iphone without a fanny machined aluminum frame

    • Space Gorilla

      3rd place as measured by what exactly? Is the Mac a failure because it has small market share? Or is it a great success because it dominates the segment that it targets (and takes much of the entire PC industry’s profits)?

      • charly

        Sold phones. Androids one, WP two and IOS three

      • Space Gorilla

        Well, it’s a good thing Apple isn’t in the phone market :)

      • charly

        Tell that to Apple.

      • Space Gorilla

        I think Apple already knows, no worries there.

      • Chaz

        I will never-ever never give up my Mac Desktop. It has been great to me in my career and personal life.

        This translates into brand loyalty in phones too. “Brand loyalty” is what idiots call “apple fan boy” mentality. But lets face it, everything Apple works well and reliable. Why would I go to untested iOS operating systems like Windows? Because of the cool tiles? or Android because of…well, Apple has everything I need.

        If Android is #1 and the million of consumer that buy it impresses you …does the fact that Apple holds 10% of corporate wealth in America mean anything to you? Or do you choose to ignore that fact?

        Apple doomed? er….I dont think so. If you think so, sell me your shares at 1/2 face value.

    • http://www.asymco.com Horace Dediu

      You’re assuming that ecosystems develop into monopolies. This happened (nearly) only in the PC world during the 90s where there were circumstances at play which don’t exist anymore. Ecosystems exist outside of software and existed outside the computer industry before Windows. The mobile market covers about 5 billion users and is big enough to permit more than one viable ecosystem. Broadly speaking one billion users makes a healthy base for an ecosystem. Consider that one billion is roughly the peak size of the Windows user base. Several ecosystems have or will reach one billion users. Java, FaceBook, iOS, iTunes, Google Play to name a few. It would be futile to try to become a monopoly ecosystem today. The market is multi-sided and won’t sustain it.

      • charly

        Apple will never get 1 billion users. 1/2 billion max but they will be large enough in the US and Japan to survive.

      • http://www.asymco.com Horace Dediu

        iTunes accounts are already at 575 million and growing at 500k/day. 700 million iOS devices have been sold. You can read more about platform adoption ramps here: http://www.asymco.com/2013/09/12/a-new-platform-classification/

      • charly

        3 years of growth without accounts closing/going zombie. I don’t see that happening.

  • TheBasicMind

    Very good analysis as always Horace. I do think there is, in a sense, a little bit too much soul searching on the behalf of the incumbent smart-phone manufacturers though. They missed a lot for sure, but the key missing ingredient was one they couldn’t manage into existence in the window after they became aware of Apple as a threat. Culture.

    Company culture grows like a tree. Once the trunk is established, you can top and tail the branches, but you can’t move the trunk. You have to grow a new tree, but the resistance to doing such is clearly of an existential magnitude. It’s similar to human development of character and skills. By the time we are teenagers, our basic coping and interaction strategies are laid down.

    To me, if it doesn’t sound too immodest to say, from the moment the iPhone was launched it was clear Apple would become the dominant force over at least the next five years. The reason I always thought this was not simply due to the iPhone being an engineering project like a compacted PC (which is entirely correct), but that to manage such a project optimally requires the top to bottom operating system design chops – a whole software and hardware engineering culture that only Apple and a couple of other companies at the time possessed.

    Apple already had the trunk of their culture tree growing in the right place and at the time the only other two companies in the vicinity were Microsoft and Google (with Amazon, the surprise wildcard, who by focussing lazer-like on their strengths have managed to grow a new sufficient or good enough culture of software development and backed it with an awesome media supply capability and service infrastructure).

    Microsoft though with the technical engineering skills didn’t have the UI design or sufficient, at the outset, sufficient control over integrating hardware product. As it turned out of course, only Google were positioned with a tech and software engineering culture ready to emulate Apple’s success. They backed this up with an inspired open source strategy for co-opting developers (and a whole thesis can be written on that alone).

    Of course Apple’s platform wasn’t opened up to third party API’s until a while after launch, but as an engineer I only needed a brief review the iOS API’s to identify the incredible extent of planning and thought that had brought to bear. Apple crossing the finishing line in delivering an integrated solution backed by a culture that knew how to do it, was, to Nokia and Blackberry, simply the sound of the starting pistol where to stand a chance, they would somehow have to have magically reshaped cultures with the completely new processes that would entail, so they could raise the bar and match what the iPhone had laid down. By that point they were already clearly, hopelessly, outclassed and any individual decisions would be doomed to failure.

    So my point is simply that I believe the decision points you have referred to are slightly misleading. After the launch of the iPhone, there were no single decisions that could have turned the tanker around for either Nokia or Blackberry. An adequate response could only have been mustered by a chain of better decisions, and such a chain could only have been expected of a different culture.

    The “myth” (in my opinion at least) that there were one or two key bad decisions persists to this day. Witness the Blackberry’s Messenger narrative and all the “if only’s” as though getting a single messenger service right in the face of the Appstore, iMessage, Facetime, iCloud, FindMyIPhone, iWork (iWork on the web), iTunes, iBooks, Airplay, Apple TV and even (dare I say it) Apple Maps, would have meant Blackberry had any greater chance of survival. IMHO their current predicament might have been delayed by at best 2 months and even that is probably being too optimistic.

    Perhaps I sound a little too fatalist with regard to the opportunities these companies had. I am in fact an optimist and believer in the transformative power of innovation. But I am also a realist. The scale these companies are at is too large for a large cultural shift to be achievable if it is required at the point you identify your competitor has the better and more appropriate culture and that point is also coinciding with them launching a new groundbreaking product.

    At some point there will be a new wave of innovation. By 2010 it was already inevitable we would have to wait some time for that new wave and that it would certainly not be being brought by Nokia or Blackberry within five years.

    BTW, this thinking makes me a bear in my opinion on Samsung.

    • markwilcox

      This is a very good match for what happened to Nokia – they had a heavily engineering led culture and their main internal response to the iPhone got cancelled before launch (throwing out thousands of man years of engineering effort) because the look and feel was not significantly different from the failing platform they already had and it needed more powerful hardware! They also built another parallel tree, which turned out a decent and nicely designed phone (the N9) but the new tree was too small and built too slowly to compete.

      • TheBasicMind

        It’s a shame because Nokia had every opportunity to grow the right software engineering culture way back when. The root of the Symbian OS was Psion and early versions were really something special (handhelds with true multi-tasking before Windows could manage it and a great UI). It’s not my area of knowledge, but if I remember rightly Symbian was hobbled through being managed by committee as part of an Industry consortium and inevitably stagnated. IMO Nokia should have bought the solution outright from Psion and adopted the team as their own (though I suspect Psion didn’t want to sell outright as they wanted to continue to use the result – but perhaps a license deal could have been worked out). It was back in the 90′s so they would have had time to establish the requisite software engineering culture. But still I think it would have been difficult for Nokia because Apple, Microsoft’s and Google’s experience is from from the expansive and “conceptually unbounded” PC space and Moore’s law delivered mobility to them as a major opportunity to apply their expertise and OS engineering at scale to a new category of devices.

  • John

    Brilliant as usual.

    One thing I disagree is that Apple disrupted because people didn’t understand it came in as a platform/ecosystem instead of as a phone. Microsoft should understand this. In actual fact, it’s been trying to be that ecosystem in handheld and embedded devices for years.

    My thinking is rather, (1) competitors failed in *executing* counter strategies and (2) competitors saw and knew it coming in as a platform but thought it was a failing one, like PalmOS.

    • Walt French

      “Competitors” failed due to the 1-2 punch of Apple’s new market disruption of hardware devices, at the same time Android’s low-end disruption of mobile OS sales cut off the WM model at the knees. OEMs had been relying on Microsoft, the Symbian consortium or Oracle for large parts of their software stack, and had no way to respond to Apple; conversely, Microsoft had no hardware sales or monetization strategy for its OS and so was utterly floundering until it got a captive hardware firm.

      So it’s helpful in being explicit who the competitors are; different ones had different pain points.

      I *like* this notion of new market disruption but any time I see something with two sub-categories, I look for a generalization, hence my call for simply “asymmetric disruption.” There are lots of reasons why a successful firm can suddenly be unable to respond to new competition. Ben Thompson has said B2B is more susceptible, which I take to be recognition that the customer base, buyers and JobsToBeDone for eg business laptops got disrupted by not knowing the customer base/buyers/JTBD/influencers for business tablets and especially consumer usages of them. RIM’s Playbook was a mistake in many ways, but mostly in wanting to be a “me too” device where RIM simply had no idea what customers were looking for.

      • John

        Hi Walt,

        You mentioned Oracle. Where did/does Oracle fit in? I didn’t know Oracle had an active interest in this space.

      • charly

        java

      • Walt French

        They were the licensor for java ME, which apparently (per Wikipedia) was the primary app environment prior to iOS/Android.

        Google pretty much knocked ‘em out of the ring when they provided for java apps without licensing from Oracle.

      • John

        ic. So it was actually Sun Microsystems.

        Sun has vastly mishandled their Java asset. They simply had no idea what to do with it with the exception of cannibalizing their own Sparc hardware business.

        But that’s a different story.

  • Chaka10

    One small bone to pick, with your statement that “Apple’s costs are mostly variable…”. The D&A from the significant cap-ex for manufacturing assets in the past few years (on which this blog has commented) is not variable, but represents a fixed cost built into COGS. As we’ve seen in recent Apple quarters, it can be a source of potential negative leverage (affecting GMs) in the event unit sales and/or ASPs decline.

    Great piece. As I said in a prior comment on a May 25th piece on the Apple 2.0 blog (“Why doesn’t Apple cut it’s prices and sell more iPhones?”):

    “… Apple never set out to be a phone vendor, and it won’t change its tack on that now, and nor should it. That is a crappy, hit-driven suckers market, littered with casualties — Moto, Ericsson, Sony, Nokia, LG, …. Apple set out to make and sell handheld computing devices that have a phone function but, more relevantly for Apple, that are capable of providing the full mobile computing experience that the iPhone (and others) provide, in a vibrant apps ecosystem, e-commerce, and so on … (The telephony feature is just one, prob least meaningful, aspect of those devices).

    …. The size, scope and geographic location of that Apple addressable market depend on many factors, including extent and timing for availability AND AFFORDABILITY of mobile broadband. To emphasize, these factors include but are NOT limited to price/affordability, and the relevance of price/affordability goes to cost not only of devices, but also mobile broadband access. Put simply, it makes no sense for Apple to figure out how to make and sell a low priced unit that is still capable of providing the iPhone experience, if the target buyers still won’t have access to affordable mobile broadband to use that device in the way it’s meant to be used.

    I believe the Apple addressable market is still developing in many parts of the world and that the US is a harbinger of where that market (the real addressable market targeted by Apple) may get to in the future. I’ve seen and considered the arguments that the US market is “different”. I believe those arguments just conveniently cite carrier subsidies as a distortion (that’s a different debate, which I will just acknowledge, but not belabor here).”

    • charly

      AFFORDABILITY of mobileinternet is not a problem. Too many powerful people want it.

  • Sander van der Wal

    I believe that at least Nokia was able to see that they were being disrupted. If you look at their Annuals Account at http://www.nokia.com/global/about-nokia/investors/financials/reports/results—reports/, the top 10 key markets section, you’ll find that revenue was collapsing after 2007 in their key Western European and later their key Asian markets. Collapsing revenue by itself is not proof, even if the timing is right, because Nokia sells more stuff than smartphones. But there is additional proof in the remarks by (former) Nokia employees that during that period Nokia had lots of problems selling smartphones in these areas.

    Their global revenue was still growing, and that figure masks the collapse in some markets.

    • warcaster

      No they didn’t see it. The former CEO kept chugging along with Symbian, instead at the very least putting a lot more money into the development of Maemo, a more modern OS for touchscreens than Symbian.

      They were also very dismissive and ignorant about both iPhone and Android, just like Blackberry.

      • charly

        Adding more manpower doesn’t work with software

      • markwilcox

        Past a certain point that’s true. Depends how many people are working on it already and how many largely independent bits there are to work on. The original Android team was only about 40 people when Google bought it – there is no chance they’d have got this close to catching up with iOS if it had stayed that size.

      • Sander van der Wal

        Nokia started with Maemo in 2005 or so. Which is a clear signal that Symbian was on the way out.

        Nokia bought Qt in 2008, with the publicly stated reason to unify development for Symbian and Maemo. This is a strategy change, their big user base had suddenly become an asset against iOS and Android. But for that to work, they needed that user base unified. Hence Qt, unifying the API for the application programmer and turning Qt into Nokia’s mobile platform. Not Symbian, and not Maemo. Nokia was peddling this strategy to developers for years.

        Regarding the dissmisiveness, Balsillie said that to, parafrasing: its PR, in public, play to your strengths.

      • markwilcox

        Maemo was a hobby project in 2005 – Symbian wasn’t clearly on the way out until late 2010.
        The Qt strategy pre-dated the iPhone – these things just took a very, very long time.

        Nokia’s high end consumer device portfolio was unfortunately incredibly weak after the iPhone came along – the N95 was very successful (launched before the iPhone) but then followed by the N96 (oops, worse than its predecessor) and N97 (oh dear, catastrophe). So they were losing some revenue at the high end before Apple even really started to capture most of it in Europe.

        You’re right that they did see it happening (original iPhone was not taken very seriously but by 2009 Apple was widely referred to angrily as “that fruit company” by Nokians) but unfortunately it didn’t mean they were able to co-ordinate a response.

      • Sander van der Wal

        Qt was bought by Nokia in june 2008, and the unified strategy was announced at that time. That’s a year after the introduction of iPhone, and after the announcement of the iOS SDK. A bit hard not to see this as a response.

      • markwilcox

        I agree it does look like a response but it was just the continuation of an internal platform unification strategy that had been running for several years. Maemo was originally going to be a high end experimentation platform on which they could productise the output from the research labs faster. UI unification was planned for cost saving rather than ecosystem building purposes.

        This isn’t all secret insider info either, there was a talk about this strategy at one of the developer conferences. If it was a strategic response to animated finger touch UIs then Qt was a really bad choice. The Trolltech engineers knew this and set about building a completely new UI framework (what is now Qt Quick/QML). As Horace has pointed out, the results of strategic moves in this space have really long lead times and getting them wrong can be fatal.

  • Tarent

    How come there are so many comments by Apple fans stating that “No, Apple is not dead !”. As they are quick to point out, Apple is still doing huge, indecent (and taxless) benefits. So ? What’s the urge ?

    Well, as stated by the article, it’s not because everything is going well today that the future is safe. After all, this is precisely what happened to Nokia and Blackberry.

    So what’s the common point ?
    Well, the common point is “momentum”. Apple had the “brand” advantage, the “Steve Job” effect, the (incorrect) “first to market” perception, well, it had momentum. This attracts new customers, looking for “ego differentiation”, spreading the (favorable) word around. That’s something difficult to measure in financial terms.

    And where is momentum today ? Well, sorry guys, but it’s no longer Apple.

    That’s something intangible, it can be “felt”, but it’s difficult to measure. Hence the defense line, only citing “good figures”.
    The defense in this article is more elaborate. It just states that “low end disruption” is an almost worthless attempt, easy to shrug off. Is that a coincidence if that’s exactly the current strategy of Google ?

    To me, the most interesting part is the existence of such articles. They seem to be repeated ad nauseam across the full spectrum of Apple fan sites currently. Why is that so ? Why do they erect defenses, do they feel endangered ?

    Yes, as stated earlier, momentum can be felt. Just listen to the crowd…

    • measure

      That some true things are difficult to measure and must be “felt” doesn’t imply that everything you “feel” but can’t measure is true.

    • Space Gorilla

      Yes, yes, Apple is doooooooooomed. I’ve been listening to people (who don’t understand Apple) say this since the 80s. Welcome to the bandwagon.

      • Userul lui Peşte

        If Steve Jobs wouldn’t had come along and do what he did, well… we all know what was just about to happen with Apple back then!

      • Michael Bellis

        You may as well make the same analogy about God, Jesus, etc.

        Fact is fact: he did and now its history.

        Get over it, yet another idiot with a brain no better than a goldfish!

      • Chaz

        now is thme to buy stock in Apple when it slipped a little due to stock holder fears…you all remember when the stock was $60 and you said you should have bough it….

      • Space Gorilla

        I did buy, below $100, and a lot of it :)

      • Michael Bellis

        Apple is doomed, yet they make the biggest profits of any corporate company.

        You are an idiot.

    • mjw149

      There’s no such thing as momentum here. Sure, there can be public perception, but it doesn’t change as quickly as you think. Apple is the most valuable brand now (not that the recently published measure is any good, it relies too much on financial results which overweigh MS I imagine) for a reason. Apple were popularizers and perfectors, not innovators. There was nothing to lose.

      Also, Apple still has more share than BMW and Mercedes in their premium markets. The tech market has churned a lot in the last decade, but that’s an outlier. We’re coming to the last form factors, the commoditization not just of hardware and software but platforms. Apple will be fine, as the recent iphone sales show, they’re still the premium choice and that’s what they need to be.

      Now, their PC business on the other hand, well…

      • charly

        BMW and Mercedes are 100% compatible with Fords with respect to Autobahn, gas stations and parking lots. Iphones are not 100% compatible with Android Apps or websites build for Android browsers.

      • Tatil_S

        With WiFi, Bluetooth and cellular being the highway, plugs on the wall or USB chargers being the gas station, I don’t see how this analogy is working for your argument.

      • charly

        USB chargers don’t work with iPhone

      • Tatil_S

        Yes, I forgot that iPhone requires magic pixie dust to be mixed in with the incoming 5V DC.

      • William Benjamin Abbott IV

        Really? I took my iPhone out of its box, plugged its USB cable into my desktop, corporate, Dell, and it charged quite nicely. You’ve got to have the unique iPhone to USB cable but its the same one I used to charge my iPod when I take IT to work.

      • charly

        I can’t find any hole in an iPhone where i can plugin a mini-usb loader

      • Space Gorilla

        Your argument makes no sense at all. BMW being compatible with Ford would mean integral parts of both vehicles being interchangeable, and this is not the case. What you’re actually saying is that the iPhone is compatible, your argument makes the opposite point to what you want to believe.

      • compat

        Since all the apps are on iOS, you should probably be saying that the other way around.

      • charly

        The biggest telecom providerhere released an app yesterday so you can use your smartphone as landline phone when your home. Android first. Others later. So i wouldn’t say that all apps are on iOS. In fact i would say that all the important apps are first on Android and maybe later on iOS and WP

      • Walt French

        I’m pretty sure you know the distinction between a general website and an app.

        Nobody is claiming that iPhones are the biggest marketshare everywhere. You claimed there were sites that were incompatible with iPhones, and followed it up with the belief that they were probably unintentionally so.

      • compat

        You can say whatever you like, but it’s not true.

      • charly

        Maybe not in the US but definitely in Europe

      • Accent_Sweden

        Most definitely not in Europe.

      • Walt French

        I suppose there ARE websites built for Android browsers. Not the official, open-FTW Android browser, of course, since it doesn’t run Flash, driving most Android ® users to the Google-proprietary browser.

        But why would anybody who wanted general access intentionally code a site to exclude the most active and higher-income iPhone users? What would so trump economic reality?

      • charly

        They won’t do it intentionally but iPhone users are just a small group. Not worth it to test for

      • Walt French

        In what economically-important region is the iPhone not among the top brands in web access and desirability to advertisers? And which Android browsers would be tested that would confer better compatibility with more users? (I.e., what claim to testing at all are you making?

        Mobile Safari isn’t a perfect browser, but ever since iPhone 1.0, it’s pretty high on the compatibility scale.

        Maybe you have some example sites that are reasonably representative and work on Android but not iPhone. Your original claim seems pretty far out on a limb, absent some reported stats or example anecdotes.

      • http://www.innovativedisruption.com thinkdisruptive

        Have you been on the Autobahn? Pretty sure Fords are not compatible with this road, although they’re certainly compatible with the parking lots.

      • Michael Bellis

        German cars are aren’t anything like your crappy USA built Fords.

        Quality alone puts the German Cars ahead by miles (LOL )

    • robertyunatv

      I am always amazed and amused at these people who hate Apple and who love thing with “Android” on it. I can see them all sitting in their underwear in their mother’s basement, typing away.

      • Carolina

        I am living in a heart of Silicone Valley in my own house worth a few million dollars, I am all dressed up but just my underwear costs more than half of your wardrobe, my mother lives half a planet away, and yes, I am all “Android”.

      • Andreas Fuchs

        LOL…good one!

      • psiberaktiv

        If you managed to mis-spell “Silicon Valley”, you are probably some homeless hobo using the free internet at the Apple store to submit your comments on your cheap China made Android phone…

    • Andy Andresen

      “And where is momentum today? Well, sorry guys, but it’s no longer Apple.”

      I am an early Apple product user since 1986 in Europe. I stopped counting the times people told me I am a nut and I am crazy and I buy the wrong brand/product/item and nobody needs that stuff bla bla bla.

      Let me rethink:

      1987: Bought the first Mac with Pagemaker 1.1. All typesetting studios laughed at me. None left to laugh today.

      1988: Connected the first scanner to the Mac. All lithography shops laughed at me. None left today.

      1989: Established my first Apple network connecting my two design studios in Munich and Berlin. Big laugh in the advertising scene about wasting my money for unnecessary high-tech stuff. We did win the hottest $12 million corporate design job that year against all other competitors because we could do it in 3 months instead of one year.

      1990: We connected our Apple network to the first Canon 4color copier. Made us twice as fast and half as expensive than anyone else in the business.

      I can continue this stories until today. Every time I bought an innovative Apple product, business or private, I was told it is the end of my life, of Apple and of the whole universe.

      I still sit in front of my Apple stuff and it works better and more reliable that
      any PC I ever owned.

      Where is the new cool company? I do not see it at all.

      You know what: I will be cool with Apple being 95!

      • charly

        Amiga user

      • psiberaktiv

        Did all the “Guru Meditation” work out for you?

    • http://twitter.com/matthewwanderer matthew

      “How come there are so many comments by Apple fans stating that “No, Apple is not dead !”".

      How come most every Apple critic views this space as a zero-sum game?

    • Walt French

      Your post might be valuable if you defined “momentum” and then showed that you measure it with something other than your attitude about a platform. Care to join the real analysts here?

  • mjw149

    Whoa, you missed something HUUGE.

    Iphone was 2007, yes, but:

    APP STORE was 2008.

    The original iphone WAS hardly a threat, with terrible battery life and no app store. But people are on two year contracts, and the iphone got better pretty quickly, 2010 was the debut of the iphone 4.

    • sharrestom

      So, competitors had a twelve month window to create a better smartphone, failed, and Apple still rides the momentum from 2007 even with its limited product line.

      But that doesn’t account for the iPad’s disruption, and the continued growth of Apple’s ecosystem. In fact, there were plenty of milestones that Apple had to meet that could have been interrupted by a competitor, maps as an example, and yet Apple somehow powers through. Perhaps Apple is much more self aware than given credit for.

  • Rocky Stefano

    Yeah yeah whatever. I love how people are the master of 50/50 hindsight after the fact. How about in 2 years we’ll see a new article called, “Competing with Samsung, why Apple blew it”

    • Greg Huston

      I don’t think that is going to happen. Nobody ever unseated the iPod from its’ position at the top of MP3 players, same with the iPad.

      • charly

        Ipad is already runner up to Android and the only reason why nobody ever unseated the iPod is because everybody could see that it would be death in the near term. It could only exist because of the high price of flash. As soon as it would become cheap it would have been included every mobile phone and with it the need for an mp3 player

      • nobody

        If Android tablets have “unseated” the iPad then why does nobody use an Android tablet?

      • charly

        Because many of them are cheap & nasty. But that doesn’t mean that they don’t win

      • nobody

        If nobody uses them for apps or websites, and developers don’t make any money from them, and users get no value from them, who is winning and by what criteria?

      • orienteer

        But the iPod was unseated, more or less, by the iPhone. And presumably Apple is working on disrupting the iPhone as we write.

      • Rocky Stefano

        Then your thought and vision is as clouded as the former board of directors for Research in Motion.

    • http://www.asymco.com Horace Dediu

      You must be new here.

  • WadeCollins

    Yes it’s always easy for the Monday Morning Quarterbacks to tell us what went wrong. All these geniuses that are available to us.

  • darsh

    Articles like this are not even worth a penny. They are performing autopsy on a dead business. Autopsy may be useful in criminal justice system, but not in business world. It is easy to judge the dead one. If the writer knew that well about BB then, they should have started warning BB from 2007 onward, and not in 2013 when there is nothing left of BB

    • Walt French

      Your comment falsely presumes the premise. It must have taken me all of two minutes to search the very first post tagged as BlackBerry, a January, 2010 post that commented,

      The reason this is significant is that smartphones are embryonic mobile computers with a clear trajectory for improvement. Feature phones are overshot voice phones which are likely to be disrupted by data-centric entrants.

      (My emphasis)

      2010 is not the 2007 that you demand, but then again, it appears the first posts here were in mid-2009, so asking for a fully-formed post, even if Horace was fully aware of the iPhone potential for disruption, is an overreach.

      And those very earliest posts are ALSO interesting in showing not the disruption of BlackBerry, but of Nokia (if I chased the archives right, the first two posts). Take the page at http://www.asymco.com/2009/07/, which includes the following predictions made in 2007

      2007.There would be no response within the first year, meaning there would be no perceived threat of any kind. No process change, No roadmap changes and no business review. Apple is not considered a competitor.

      2011.The realization that the iPhone competes as a platform. Planning begins on repositioning Symbian/Ovi.…

      2012.The realization that the iPhone is an integrated product and that integration is a key to competitiveness enters management consciousness. Planning begins on organizational change…

      2013.Management begins planning a new organization structure that takes into consideration the fundamental causes of iPhone’s success: integration, software, user experience over the objections of sales and markets org that depends on shipping plastic to distributor. Another reorganization that is slightly more rational and aligned with the market is initiated.

      Frankly, I’d say that these 2007 predictions, published in 2009, are little short of astonishing in capturing the 2011 “burning platform” notion, and the 2013 “new organizational structure.” And these were the core tenets of this site back then, not some cherry-picked quotes out of context.

      So thanks for encouraging the trip into the wayback machine, but your thesis is junk. Go to the “rules” for the site and see the importance of citing data and working through it, and realize that unfounded opinions — especially mistaken premises leading to hostile argumentation — doesn’t help your reputation or the site’s first-class quality.

    • http://twitter.com/matthewwanderer matthew

      Studying what happened, and speculating as to how and why, is not a waste of time.

      “Who knows only his own generation remains always a child,” -Cicero,

    • http://www.innovativedisruption.com thinkdisruptive

      In fact, nobody was listening in 2007. I wrote the article that Horace’s tweet “it’s a pocket-sized one of these” indirectly points to on the eve of the iPhone introduction 6 years ago. (By the way, Horace, thanks for that. I found this article because I suddenly had hundreds of visitors coming to read a six year old article on my site.) In it, I predicted virtually everything that happened over the next couple of years. Why Apple would disrupt. Why Blackberry would fail. The App Store. Growth rates. AT&T being the principle limiter of growth (end of 2010 is when other carriers got iPhones). I also pointed out why Christensen was wrong in saying that the iPhone would not disrupt (because he was comparing it to the wrong thing, and didn’t appreciate what market job-to-be-done it was addressing).

      At the time, I tracked visitors very closely. There were a lot of people at RIM and at Apple reading my article, and it got posted to intranets there. Three years after the introduction of the iPhone, Balsillie was still laughing saying it would never succeed in corporate America without a keyboard, and security was crap. Even as new handset sales for iPhones passed Blackberry. Even as market share for Blackberry and consumer preference was literally melting away. Blackberry was well aware of this analysis — it was freely posted and lots of them read it. They ignored it, because they mostly didn’t understand it either. I’d argue they still don’t, because there are things they could do even today to right the ship.

      Per Matthew’s comment below, it is absolutely worth revisiting what happened to Blackberry and the strategic failures that led to their downfall. It was absolutely predictable if you knew what to look for. If you don’t want to understand why, then you have no chance of stopping it next time either, or creating disruption on purpose (which is even more interesting).

      The original article is posted here for those who do care what the past can teach you. http://www.anti-marketer.com/2007/06/what-is-steve-j.html

  • JoshuaTreehugger

    Carrier pidgeons, anyone? 600 clams is a lotta jack for any disposable item, regardless of its touted mojo. If it were possible, I’d say reapply the principle of plug and play components to the mobile phone. Surely someone has thought, bring that motherboard back and allow the user to replace failed parts as needed. Much less wasteful, anyway.

    • Gaspar Castro

      • garbage

        Garbage that will never work or sell in quantity.

      • Space Gorilla

        Pipe. Dream.

    • obarthelemy

      Or at least, do a Dell: a basic platform that allows a selection of components (screen, battery, camera), instead of a one size fits all pre-made device.

      As far as I’ve seen, most smartphone motherboards are L-shaped, so they can fit in a choice of cases, allowing to vary those peripherals.

  • RGP

    Arrogance and lack of innovation led to RIM’s downfall plain and simple.

    • buddy

      Those same items will lead to Apple’s downfall. iPhone is already an overpriced novelty phone compared to competitors and new competitors coming out next year.

      • psiberaktiv

        Yes, BMW, Mercedes and Audi are all overpriced novelty cars that will surely go bankrupt once the new low cost cars that are assembled in some jungle clearing in Malaysia are unleashed in the market.

        Horace, is it possible to put some sort of an IQ test to prevent morons with single digit IQ from accessing the comment feature?

      • Michael Bellis

        German cars make perfect economical sense to buy: they hold their resale value, have excellent build quality (if not the best) and their service departments are second to non.

        Which person wouldn’t have a german car over the another brand: only a fool who hasn’t bought one! or can’t buy one because “price” is how they buy everything.

        Cheap is cheap for one reason: inferior service/ product !!!

      • charly

        Sarcasm?

      • Michael Bellis

        Buddy: the iPhone and Samsung Galaxy are priced the same.

        An iphone are not novelty phones: Samsung Galaxy certainly are! Look at how varieties you can buy: 67 at the last count in a store in Hong Kong! Eat your own words: you fool !!!

  • DisquisTL

    Nokia started to tank Q42007, when the iPhone Jailbreak allowed third party Apps. When Apps became official, it dropped again, and Blackberry saw a hiccup. Where things really blew up was after the Apple earnings announcement for the quarter in 2010 for the quarter in which the iPad was introduced.

    It’s pretty clear that the handwriting was on the wall as soon as apps became available on a relatively stable platform across an (admittedly limited) product line, and when compatibility was maintained on the introduction of a new product line, it was game over.

    Both companies should have seen the coming revolution when the iPhone was initially introduced, but as soon as the second jailbreak happened, they had no excuse to not be already acting to counter the threat, assuming their business development people were worth anything at all. When apps became officially supported because Apple couldn’t stop them due to a ROM flaw in the chip mask, and Nokia, in particular, took the big hit from that, it was obvious where they should be moving – but didn’t.

    It’s really ironic that, as an insider at Apple at the time they handed out the “free iPhones” for the employees, I was one of the few people saying that it was a bad idea: after that point, Apple engineers didn’t get to see what their competitors were doing, since all they had were iPhones. Despite that very big mistake, Apple appears to be maintaining because of the Apps, although their recent hardware incompatibilities may eventually hurt them.

    • sharrestom

      Eating your own dogfood is a great idea in Apple’s case. That fact that you have 10′s of thousands of employees and retail workers using your products and ecosystem while providing feedback is invaluable. Apps were always going to be supported, just that Steve didn’t want to direct resources to that task until the iPhone was a stable product line. Look at Apple now with releases of iOS7 and Mavericks on time and mostly bug free. That wouldn’t have happened five years ago.

      Not seeing how it is a big mistake. With the exception of Eddie Cue pushing the 7 inch tablet, which in Apple’s case is an 8 inch one, I haven’t seen Apple respond to much of anything that competitors have been doing. Apple keeps its own council.

      The recent hardware incompatibilities being mostly invisible to the consumer what with the 100′s of millions of iOS7 updates including to the 4S.

      From your post, I’m taking it that you didn’t/don’t fit into to Apple’s culture.

      • DisquisTL

        I’d agree with the dogfood argument, if it weren’t for the fact that it didn’t apply to the App SDK for over 6 months, during which time we were prohibited from learning how to write iPhone applications internally to Apple.

        I can, as a former member of the Core OS Kernel team (I worked on the Mac OS X and iOS kernels), say that apps were never intended to be supported; Steve was deathly afraid of creating another Newton. Apps were more or less forced upon Apple by the iPhone dev team, which is why Apple acquired a third party company started by some iPhone Dev Team members, rather than developing an SDK from scratch themselves.

      • sharrestom

        My understanding is that Apple had an internal SDK to create the apps that were standard on the original iPhone, and that Steve was concerned with stability of any third party apps, hence the push to web apps. I’ve never seen anything about a third party creating the Developer SDK, but I can accept that as accurate. I also agree that it was the jailbreak community and existing Mac developers that sold Apple, i.e. Steve, on the need for an SDK.

      • obarthelemy

        It’s all about feedback:
        1- is internal feedback actually welcome and valued ? Or is it professional suicide to complain that your company phone doesn’t get things right, and nobody cares anyway ?
        2- feedback is relative. It’s also about how others are doing. Products don’t live in a vacuum
        3- the hardest thing to study is actual usage patterns and motivators/demotivators. Polls are very hard to design,superficial, and unreliable, in-depth studies are extremely expensive and intrusive. Not using your in-house user pool to do that study seems like a huge waste.

        If I were making phones, I’d love my non-dogfood-eating employees, because they provide a glimpse into my non-customers.

    • obarthelemy

      Jailbreaks don’t count. As with Android’s custom ROMs and root exploits, they cater to nerds, who are less than 5% of the market. Probably less than 1% actually, but there’s a (limited) halo effect.

      As for giving away iPhones… MS did the same, and made it known they “appreciated” if their VARs and other dependents would do it, too.

      • DisquisTL

        The “jailbreak” on an iPhone at one point meant clicking on a link pointing to “jailbreakme.com” by clicking on an ad that said “Free applications for iPhone!”. So no, not just nerds.

        Early on, there were more iPhones outside the U.S. than inside the U.S., and the only way to defeat the carrier lock was to unlock the iPhone by rewriting the seczone contents in the baseband firmware. This required being able to run a program on the iPhone to do it, which in turn meant that it had to be jailbroken. ~60% of iPhones were.

        People bought already jailbroken iPhones from third parties, which was the only way you could use an iPhone on a GSM network outside the U.S., or even inside the U.S. on a carrier other than AT&T.

        Jailbreaks count. I agree the Android stuff doesn’t count, since you’ve been able to side-load apps on Android phones from day one, since their design was based on the already successful iPhone model. They count even less now, since the reason for the Android hacking was mostly to get around carrier restrictions on the devices acting as mobile hotspots, and those restrictions no longer exist for most carriers that matter.

        I’d like to point out that how successful Microsoft *hasn’t* been in the smart phone market and the ~$1B in write-down they took on their Surface tablets as examples of why not knowing what your competitor is doing is a bad idea.

      • obarthelemy

        “at one point” maybe. Currently, T. Cook is announcing 700m devices sold, and Cydia, 20m users. that’s 3.5%, and doesn’t qualify for mainstream, even if you double to account for non-Cydia jailbreakers and whatever.

        “early on”: early adopters, yes. They’re the definition of geeks ?

        You’re confusing jailbraking (=”rooting” in the Android world, both require some kind of hack, from easy to hare-brained, and void your warranty) and sideloading, which in Android allows installing non-PlayStore apps simply by ticking a box in Settings>Developer Options (and doesn’t void your warranty). There are a lot of other reasons to root a phone: uninstalling carrier bloatware, installing an ad-blocker, installing a two-way firewall, enforcing extra restrictions on apps’ permissions, chrooting into Linux, running various servers (SAMBA, VNC…) and tools (init.d daemons, shell scripts…). I’m not seeing how your gratuitous jibe about Android being based on iOS is true nor relevant.

        Horace is not including MS in his “time to death” countdowns, only the hardware makers. I’d argue that even though their performance is far from magnificent, MS is bucking the “collapse shortly after the first cracks” trend, and may well pass Apple in units sold within 1 year (granted, units is not as good as revenue or profit, but it is better than nothing).

      • DisquisTL

        “early on”: early adopters, no. Plenty of people wanted iPhones outside the U.S., particularly when they were not available outside the U.S..

        Cydia happened well after the initial jailbreaking and carrier unlocking to get grey market iPhones working on non-U.S. carriers. I don’t know why you are bringing it up at all, except so that you have some current relative market share numbers to cite now that Cydia is largely irrelevant for everyone but AT&T customers who don’t want to pay the mobile hotspot fees.

        My point is that it was pretty obvious which direction the market strongly wanted to go, and Apple dropped their anal-retentive “it’s just a phone; develop web apps instead” policy, and Nokia and Blackberry didn’t get the clue even then, even though they were being hit over the head with the clue bat.

        All I’m saying is that the data represented by the graph says something else to me, and the Nokia and Blackberry business development people should have seen it and done something about it, and they didn’t. They failed.

        Yes, they blew it, but they didn’t blow it the way Horace wants us to believe they blew it.

      • obarthelemy

        Well, if you have any reasonably recent figure about jail-breaking, I’m open to revising my “less than 5%” estimate. I need sources though.

      • DisquisTL

        I seriously do not understand why you care about recent iPhone jailbreak numbers, when the portion of the graph we are discussing is from Q4 2007 through Q1 2009, which is the point in time where Nokia and Blackberry would have had to get off their collective butts and act in order to not “blow it”.

        Specifically, for the Q4 2007 numbers to tank like they did, it had to be something that happened in Q3 2007 to drive them down. For them to auger in again in Q1 2009, it was something in Q3/Q4 2008, when something happened to make the slope go negative again.

        Do you have anything else specific that happened in those quarters to point at, or are you with Horace on the interpretation of the data?

        Nokia and Blackberry blew things in those quarters specifically.

      • DisquisTL

        Feel free to contact BigBoss, NerveGas, ZodTTD, ModMyi, Inasnelyi, FillipoBiga, Hackulous, or one of the iPhone dev team members. Your question still has no bearing on my point, since jailbreaking has been irrelevant since Apple allowed third party apps at the graph’s second major inflection point.

  • silkcom

    What’s most interesting to me is that it seems like both of those dropped when the verizon version of the iphone was released. Once the iphone was no longer constrained to AT&T and started to become more open. It seems like that’s the point at which both Blackberry and Nokia started to tank (Q1 of 2011)

  • krishan sharma

    Very realistic fact of couse and action, I am trying to relate my own story now,, . so the answer is dont compete wih big guns.. stay small or vanish..

    • Accent_Sweden

      No, the answer could be to find out what the big guns are blind to and aim for that.

  • illumined

    I think it’s worth mentioning that in the 1990′s the company almost died. When Steve Jobs returned in 1997 Wintel had a staggering 95%+ market share and the Mac was largely irrelevant. If Jobs hadn’t come back then Apple would be a distant memory by now. So I would say that low end vulnerability really did exist and is relevant today. It was the iMac G3 that saved Apple in the late 1990′s, not the PowerMac.

    • charly

      Internet saved them. If you are using your computer only for browsing, what most people do, than it doesn’t matter that apps are missing.

      Problem with smartphones is that apps are much more a necessity and for that you need marketshare. Apple is already almost crossing the 10% line in Europe so it will be death here in a couple of years.

      • share

        You need usage share, and revenue to support apps. Only market share very indirectly.

      • charly

        Market share is indirectly coupled to that but it is not very indirectly

      • share

        Then where are the Android tablets in any kind of usage share? Why is iOS ahead of Android generally in all these measures of usage, developer revenue, etc? Seems very weakly coupled.

      • charly

        Appstore revenue is not a good measure of economic importants.

      • share

        What does this mean? Obviously app store revenue is a good measure of how well an ecosystem supports apps and app developers.

      • charly

        Not really, most developers get paid for commissioned apps, not store bought apps. And there is also a rule that more developers mean that more apps are free.

        See for example the difference between mac and windows in the 90′s. Mac users paid much more money on utility software than windows.That happened because there was much more competition in the windows ecosystem

      • share

        Not really a convincing answer.

      • http://www.totemint.com/ firoze zia hussain

        “unsubscribe”

      • David McMonigle

        Apps went browser based which opened a new world to developers and ultimately the Mac operating system.

      • Michael Bellis

        You make to most valid point within this discussion. Apps like software make a product valuable these days: Hardware is just a medium/platform of support. The APPS market allowed the iPhone to become not just another BB put anything you want it to be by using APPS.

        BB’s approach was to ignore the benefits of APPS are the market it represented.

      • anon

        I don’t think the internet saves them, 1995 was when HTML 1.0 was define, Win 95 start supporting TCP/IP.

        Jobs returned and his first product launch was iMac, the cool computer that saves Apple from bankruptcy. At that time, Apple still have loyal followers.

      • charly

        iMac came out in 98. Internet was already the big thing then

      • orienteer

        Yes, but the iMac was named because it could be hooked up right out of the box. Revisit the national TV ads that show a toddler setting it up. As usual, everything before Apple’s product required hours of frustration and hideous hardware and interfaces.

      • charly

        Complete and utter bullshit. Normal pc’s were harder to set up than an iMac but lets not do like it was brain-surgery. Instead of 4 cables it was 7 cables

      • orienteer

        Classic example of that arrogance which has contributed to the mass exodus to Apple products.

      • charly

        What mass exodus?

      • orienteer

        Forgive the hyperbole. Of course, there’s been no “mass exodus” towards Apple products. But there is a migration towards mobile devices, clearly, in which Apple has been instrumental, and I think this represents a desire for simplicity in devices particularly for consumers. But my original point, which you dismissed, was the marketing angle of the iMac as promising easy internet access and set up for consumers.
        I’m glad you were above this issue back then and the matter of 7 cables was acceptable. For majority of non tech savvy people there was simply no alternative and it was troublesome.

      • obarthelemy

        Indeed. What Apple “got” before anyone else was that computers moved out of the entreprise sphere into the consumer sphere. Key features became ease of use and social value, instead of performance/capabilities, interoperability, and value for money. It took forever to more traditional PC/phone companies to spot that.

        The warning bell for Apple is that… the others now *have* noticed.

      • capital

        Have they noticed? Usage stats and endless feature lists suggest that, if they have noticed, they’re not doing a good job of capitalising on this knowledge.

      • charly

        They did not got that by choice. PowerPC was just not as good as Intel at that time

  • Kareem Khulusi

    haha the title couldn’t be any more true!

  • http://twitter.com/matthewwanderer matthew

    “Instinct would suggest that they should have stuck with the 5S alone.”

    One look at the criticisms levied at the 5c and we begin to see what Apple’s doing. That’s to say, Apple’s doing with the iPhone what it has always done with its other products. Move patiently, incrementally and systematically downward within a product line.

    Apple’s conservative approach to business matters drives the Street and its critics mad, but it sure makes for a solid foundation upon which to build upon.

    • obarthelemy

      at 599 vs 699, the 5C doesn’t make a whole lot of sense.

      at $99 vs $199, suddenly it offers “not a lot less” for half the price.

      • Michael Bellis

        The 5C makes a lot of sense: it’s out selling Blackberries !!!

        You’re a total moran to think otherwise !!!

        Just because YOU can’t understand, don’t make it wrong.

        BTW-did you work for BB ?

  • Ian Nethercott

    Simple the management team was happy and well compensated. They should have been replaced with A results driven team!

    • Michael Bellis

      The BB management team were all INEPT: FACT.

  • Jean Desjardins

    “So this is the crux of the incumbent’s dilemma: how do you rally a response when you don’t feel any pain? It’s worse actually: how do you embark on a painful course of action while feeling comfortable and safe?”

    This precisely what made Steve Jobs a different kind of CEO.

    • JTDeth

      That plus an underlying core concept that quality and simplicity of interface matter, the aesthetic of shibumi.

    • WadeCollins

      Jean Desjardins-Can you turn the page on Jobs? Not coming back anytime soon Jean. I know you think he’s God.

      • Jean Desjardins

        God is dead, Wade Collins. And I don’t want him to come back. Ahahahaha!!

      • Troy

        I was in my teens when the Apple II+ came out. Great PC, changed my life.

        I was 20 when the Mac II came out. With the LaserWriter, great system, changed my life.

        I was 30 when the iMac came out. Well, that didn’t do much for me really, though in the 1990s interim Steve’s NeXT showed the away to the present quite well.

        I was 40 when the iPhone came out. Great handheld computer, changed my life.

        iPad’s cool too. Great tablet, a NeXT machine that finally realized Alan Kay’s Dynabook dream.

  • DarwinPhish

    An interesting point brought up in the original article is that RIM was trying to convince the carriers that 3G was good enough. RIM had a long history of building devices and services that put limited strain on mobile networks. In fact, pre-BB10, it was actually quite difficult to get a BlackBerry to use a lot of mobile data. Carriers even paid RIM service fees because they were able to offload network load onto RIM.

    All of this worked if you were running a 2G or early 3G network, but became less important as networks improved. If your goal as a carrier is to sell data plans and move to a 4G network, BlackBerry phones are not a great fit. Better to subsidize and promote phones which use a lot of mobile data (or which customers assume will use lots of mobile data).

    • Walt French

      Your argument would apply doubly to the idea of RIM selling a “SMS 2.0” to carriers… seems they’d have had exactly zero economic incentive to reduce margins on their least data-intensive product, in order to keep customers thinking of minimized usage.

  • horatio fisk

    what a dysfunctional article with poor understanding of the consumer/user needs and experience. “the engineers knew what to make” probably one of the most idiotic comments I have ever seen because if it was true it is a sure way to NOT make what the consumer wants
    Blackberry actually died in 2006
    and everyone with a brain who lived in the real world knew it. Possibly the engineers at Blackberry live in another solar system.

  • Dan Bradley

    The low end is still a huge opportunity. In fact, it may be what ultimately saves Blackberry.

    • Michael Bellis

      Are you for real?

      Low end means quality and low profits, low quality and profits means bankruptcy, especially in a market place such as smart phones.

      I doubt you are a business person.

      You must be a BB user, who failed to understand there were better products on the market: just like BB-who failed to understand their competition.

      No excuse for ignoring the situation other than your own pride.

    • obarthelemy

      Actually it’s what’s saving MS right now. my go-to website for tech news (sorry, French) even had more views for the Lumia 520 than for the iP5S: http://www.lesnumeriques.com/audience-stars-septembre-2013-sur-numeriques-n31233.html . Granted, the iP5S only had 5 days of exposure in September, but that was launch week, while the Lumia 520′s test is… 6 months old !

      • Walt French

        Per my reply to Dan, let’s see how much the low- or maybe zero-margin devices help boost the WP reputation to compete with current and forthcoming devices.

        Especially in the context of a story about how BB tried to hang on with low-expectations devices—and failed—success is hardly a forgone conclusion.

      • obarthelemy

        - right now it’s not a reputation issue, it’s a survival issue. MS must need build an ecosystem, and step 0 is to get some sales. Any sale. MS don’t care about profit for now, as long as they at least get share. I’m not saying profits will be easy to turn on in 2-3 yrs, I’m only saying it’s a problem they’ll be happy to have a chance to have… in 2-3 yrs. MS (well Nokia) are actually being smart by playing to WP’s and Nokia’s strengths: low hardware requirements, dumbphone dominance, no competition from Apple nor many big names.
        Plus if ecosystems are worth anything, low-end sales *will* facilitate high end sales. I know low-end disruption has a bad name around these parts, but in all cases, we’re well past the disruption stage nowadays. Everybody’s consolidating like crazy, chief among them Apple sticking to their “premium” guns and trade-ins programs.

        - WP devices compete with dumbphones or the cheapest droids (the Lumia 520 is at $230), I think people will like it. The review I linked deems it rather good all-around, especially camera (but not battery if heavy use, but then if you’re a heavy user, you probably don’t want that one anyway). Not OK, but good. I of course go for Wiko droids at that price though ^^

      • obarthelemy

        Also, I think BB’s low-expectations devices are still doing fine. It’s the high-expectations Z10 that’s doing them in.

    • Walt French

      I don’t have a link handy, Dan, but Michael Mace (maybe at MikeMace.Com?) ran a great post in 2010 that was watching BlackBerry disintegrate.

      While the low-end sales soared, the profits disappeared. No money to pay for the intensive R&D that you need to lead a market.

      There’s no sense being a me-too producer, as Microsoft should’ve learned a decade ago.* You have to out-Apple Apple, or out-Samsung Samsung — the latter meaning, being able to crank out huge volumes of products at all price points and configurations, to keep up the momentum and relationships with carriers & sales outlets.

      BlackBerry’s DNA is to serve the high-security, high-reliability, big-business messaging market. Low-end BBM was a free-rider on that but with Androids going for comparable prices and an infrastructure for high data volumes, BBM (alone, or with a lousy ecosystem of apps), no longer has any appeal other than staying on the old network until enough of your friends bolt to another messaging app on their Androids.

      Toast, foreseen at this blog and by other astute commenters, at least three years ago.

  • bat9991

    I think the biggest problem with this article is the faulty interpretation of charts.
    If you overlay the iPhone shipments with the charts above you will not find the difference.
    It tries to make a weak argument on why the numbers didn’t drop till 2011, the iPhone was very popular by then. But if you look at the whole picture you will find 2011 is the year when Android became popular and its adoption skyrocketed. That’s what killed both RIM and Nokia. If it was only the iPhone both companies would still be doing fine. Apple only competes with 10% of the market, not 100%, same as Mac (You got the title right, yet you missed the point??)

    • synthmeister

      Apple was on it’s own, very steady trajectory which was limited by their ability to ramp up production of an entirely new product category and strike advantageous/disruptive deals with hostile telcos.

      Android aped the “computer-in-your-hand” disruption but let the telcos and OEMs do whatever they wanted for free, which explains why it was simultaneously so widespread and fractured and making almost nobody any money.

      • obarthelemy

        Apple didn’t invent the “computer in your hand”. Windows offerings predate that, and gosh, they *really* felt like a computer in your hand (way too much so)

      • anon

        Apple may have developed the earliest handheld computer (Newton), Palm made it acceptable to consumer and business user to have PDA in their pocket. Apple came back and made it with better user experience and market changer. Cycle of life.

      • synthmeister

        And Apple completely disrupted the telco model for mobile devices. Apple called virtually all the shots with the iPhone–software AND hardware. That was a complete upending of anything previous with mobile phones and also one reason the telcos LOVED android. Android allowed the telcos to infest their devices with crapware and avoid the Apple subsidy. But they still lost customers unless they had iPhones.

      • pesc

        Although not so successful in the US, I would say Psion was way before Newton with a whole line of handheld computers.

        http://stevelitchfield.com/historyofpsion.htm

      • Michael Bellis

        Apple will be remembered: whereas BB will be forgotten.

        The facts speak for themselves.

        Anyone who bought a BB just defends their purchase and therefore their own intelligence for buying such a piece of crap !!!

      • Troy

        WinMo didn’t have the graphics stack that Apple shipped.

        So WinMo 5 & 6 were computers ca. 1992 in your hand, while the iPhone was a like a computer from 2210 in your hand.

      • bat9991

        In a sense I agree. Except for the making money:
        1. Money from the hardware is peanuts compared to the potential to lock in services. See MS still collects billions from its monopoly of 10 years ago by selling extra services and software.
        2. Samsung makes tons of profit from Android, arguably even more than Apple

  • Bill Esbenshade

    Horace – It seems like the iPhone just created an entirely new market rather than what Christensen describes/defines as a new market of non consumers who can’t afford what’s currently in the marketplace (which is basically how Christensen defines new market disruption on pp. 45-51 of the Innovator’s Solution). The iPhone was more affordable and convenient than Macs/PC’s, but it also competed for consumers of Macs/PC’s — the iPhone never really targeted people who couldn’t afford or access a PC/Mac, and for this reason it seems to fail Christensen’s definition of a new market disruption.

    So much of this always seems to come down to Apple’s ability to focus on unmet jobs that need done. The iPhone was the first really functional computer that fit in your pocket and was always connected to the Internet — jobs which laptops failed to accomplish, and jobs which people really wanted done.

    Maybe the essence of Apple’s success is their ability to create products designed specifically around these unmet jobs, regardless of whether consumers already buy existing products but want something cheaper (i.e., Christensen’s “low end” market), or whether consumers don’t buy existing products but might buy Apple’s latest creation (i.e., Christensen’s “new market” non consumers). If you’re a product company focused on unmet jobs (whether it relates to functionality, convenience, access, affordability, ease of use, etc.), does it really matter whether it’s a low end or new market disruption?

    What are your thoughts?

    • anon

      Lets not forget that before iPhone came out, Palm Treo 600 and 650 were already in the market as early as 2005. Back then PDA phone (as it was called then) can send/received message, email as well through GPRS, no WiFi, 1 megapixel camera, BBM have a good messaging platform but bad phone reception, Palm has better phone reception but poor email function. Palm lost its way when it implement a Window based device.

  • http://ramonthomas.com/ Ramon Thomas

    Even though this is a post mortem, the decline of Nokia and BlackBerry is a hot topic in my MBA class in China ;-) Thanks to Dr Thomas Schuster.

    • Juan Arrmando Moreno

      hahahaha

  • Sushil Singh

    android made it dead!!

    • Dave Nimd

      Murdered in cold blood!

      • Sushil Singh

        haha

  • STEGMAN

    THERE WAS A TIME WHEN THE BLACK BERRY WAS THE BEST PHONE THAT YOU COULD BUY..BUT THINGS CHANGE AND OTHERS COME UP WITH A BETTER PRODUCT…THIS IS EVOLUTION AND COMPANIES HAVE TO KEEP UP THE THE TIMES…STEGMAN

    • Guest

      WHY ARE YOU SHOUTING AT US?

      • orienteer

        Stegman’s Blackberry keyboard is stuck on caps.

      • Michael Bellis

        why are you?

    • Michael Bellis

      Never has the BB been the best phone: it failed on so many levels !!!

  • David Mortaz

    I learned at HP that if a company does NOT plan to kill their own products,your competition will! Blackberry folks just learned this lesson the hard way!

  • Eric Lucas

    Arrogance killed BB.

    • Michael Bellis

      I agree 100%

    • Dave Nimd

      Errrm… I thought it was Ignorance?

    • Manish

      I think Both ignorance and arrogance killed BB.

      • Michael Bellis

        YES!

    • Michael Bellis

      I agree 100%

  • FOV

    It is a rather simple lesson. You can either manage to save costs or manage to sell more – apple manages to sell more by giving users what they are looking for and consumers go out of their way to purchase their products.

    • http://loewald.com/ Tonio Loewald

      And Apple manages costs incredibly well too. It’s not like Apple’s products are more expensive than comparable competing products (usually built more shoddily), yet Apple’s margins are significantly better.

    • Sathiya

      Rightly said, lets hope Apple doesnt spoil its market, otherwise, which phone you will buy? BB?? Nokia??

      cant even think of.

      Sathiya

  • Mark Olson

    Not being located in the Silicon Valley probably had a lot to do with RIM’s demise also. RIM was too far removed from the daily buzz surrounding new technology and hardware and software engineers. Consequently, the market slipped away from them before they knew what had happened.

    • Dan C

      Samsung isnt located in the valley and is doing a pretty decent job of being successful!

      • orienteer

        Samsung is a component manufacturer for much of Silicon Valley, which in a way brings it to them.

      • pipo

        Samsung has an important part of its R&D and Innovation group in Silicon Valley

      • Michael Bellis

        Samsung: more variety than Heinz, last count Samsung are making over 60 different mobile phones.

        Apple: 2 (not including colours)

        I rest my case.

      • charly

        I would say at least 3. 4s,5c,5s

      • Jean Desjardins

        You do know that both Samsung and Apple phones are made at the same chinese Foxconn plant?

  • The Truth

    Apple monetizes only on their hardware. Android and possibly even Microsoft may well still pummel Apple into failure (again) directly as a result (again) of Apple’s “go it alone” hardware based, partnerless business model.

    • Ed

      Care to put your money where your proverbial mouth is?

    • Dan C

      Erm, are you kidding me? How about the AppStore, iTunes, and the operating systems? Partnerless? Thousands of 3rd party developers partner with Apple. I don’t see a company that has a couple of hundred billion in the bank being ‘pummelled’ any time soon. Apple could easily buy Microsoft at any point…..if they wanted to.

  • Ed

    Do they pay you to write this? I need 3 words to explain Blackberry’s performance. You needed a lot more, and still don’t get it. Can I trade with you?? Pick any stock or commodity and I will take the opposite position of you.

  • Asad

    Apple products are for the consumers, by the consumers, of the consumers….

    whereas BB and Nokia are consumer products-cum-Dictated gadgets,,,,They were considered GREAT coz no one had seen anything else….but Apple just rocked the industry by keeping itself logically simple yet very innovative and cool

    • Michael Bellis

      Apple products are for everyone, you idiot !!!

      • Asad

        Dude come out of Fools Paradise…First of all Apple is not for everyone…reading will help you find out WHY?

        And even so…i have already said that it is for consumer…and everyone is CONSUMER….”LOOSER”

      • Michael Bellis

        What: whereas: BB are for no-one!!!

        You silly man: you have small thoughts and therefore lack the actual understand of the thread!

      • Asad

        u drunk??? read my comment again…and also study the BB Nokia and Apple before writing your dumb brain here….fool

      • Michael Bellis

        Only fool here is you is believe BB were any sort of a good company !!!

        My brain works fine most of the time: unless I’m dealing with inept people: then you make me look more intelligent !!!

      • ama75

        You said BB was arrogant? RIM you mean, first?
        And who is the arrogant one with all your statements and “idiots” insults? Have you been fired by RIM?!
        SO easy to give lessons after the war, I love people like you!

        All companies have their lifecycles, RIM had its own one, and frankly, it was a real champion in its segment, plus, I still believe that not everyone loves those PDAs doing everything except being fall-proof, easy to use for calling and typing, and yes there are now BBs costing 1€ that many teens are proud to have. It has just changed segment, being affordable for more people!
        By the way, I am an happy Q10-owner, it is just perfect for me.

      • Michael Bellis

        RIM, what a BAD name for a company! LOL !!!

        I am pleased you love me: although you don’t know: BTW-I am straight.

        A champion of what? Nothing innovative about a BB: period.
        Old design, old technology packaged up in a thumb crunching phone.

        I know of no-teens wanting a BB, iphone, samsung, sony-yes, but not a BB, it just aint trendy and never was !!!

        Of course you’re happy with your Q10, you’ve just wasted your money on a product that cost you money: you will defend your purchase like the idiot you are!

      • Asad

        let me explain it to you,,,what I meant….

        Apple designed a delivered its products from a consumer perspective….like if steve jobs is a consumer himself and as a a consumer what he would have required in a phone…so from features to styling all was done from a consumer perspective…SO APPLE is a GENIUS….and is a true product for CONSUMERS

        Where as BB and Nokia were two tech companies…with GEEKS who designed and delivered technology WITHOUT taking into account the perspective of a consumer….so they were dictated gadgets and we were forced to get use to them unlike APPLE, which just blend in beautifully…

        I hope now you could understand what I said …

  • afteru

    Good points, but the delivery was terrible. A 7th grader can write a lot better. Where are the editors?

  • Michael Bellis

    Blackberry was (since they don’t exist anymore) the most arrogant company in the whole world, to not understand “their true” competition in the market.

    Just like an ostrich, who buries their head in the sand, Blackberry ignored the world of consumer electronics and therefore died, just like a BIG OLD DINOSAUR.

    Blackberry management are inept, even the corporate world don’t give too hoots about the technology behind the BB phone, it was at best a clumsy design (and don’t try to defend it: it WAS!) as old as the first mobile phone with silly buttons that were hard to press, a keyboard that was lost in the dark ages, and an emailing system that couldn’t group together an “inbox, sent box, etc. Total and Utter rubbish, only good as a door stop.

    I had two BB phones, hated both of them, the service support was nonexistent: like where could you go to get a repair? Back to Canada !

    Blackberry like Kodak missed the boat big-time, if you don’t keep any eye on the markets and changes in developments then, GOODBYE!!!

    Was BB R&D team inept? Where they all on a very long vacation? or Where they just so arrogant like their management !!!

    I’m pleased BB have gone the way of the dinosaur, those who adapt will survive: FACT of life !!!

    • Harry

      The dinosaur analogy makes no sense. Besides, they were all wiped out by an asteroid.

      • Michael Bellis

        Harry: the dinosaur analogy is perfect: why did mammals and lizards survive your asteroid?

        Answer: because they “adapted” to their environments.

        Unlike BB: who continued their arrogant approach and believed nothing was changing.

        Analogy confirmed !

      • William Benjamin Abbott IV

        Michael,

        Respectfully, Dinosaurs dominated their environment (and our ancestors) for far longer than they have been ‘gone’. Dinos were very well adapted to their environments and managed to change while the world changed, for over 100 million years. Crucially, dinosaurs out-competed mammals for most of that time. The big, hulking, dinos have been gone for 65 million years, but their fun-size version, birds, remain. Read Fortey’s “Life” or Knoll’s “Life on a Young Planet”. Or “When Life Nearly Died”, about the whole series of mass extinctions this planet has experienced. The Permian extinction should make your blood run cold. Natural selection is directionless and unplanned. Its easy to imagine success in nature is somehow linked to virtue or planning but its simply not true. Artificial selection based on human agency is quite another matter. Too many people still mistake their momentary success for virtue. (Talking about you, Steve Balmer). After a couple of generations, you can see what’s got staying power and what’s just random variability. But survival in extreme conditions may depend more on random factors than planning or wisdom.

      • Walt French

        “But survival in extreme conditions may depend more on random factors than planning or wisdom.”

        You make so many good points in this comments. I’ll add the fact that isolated ecosystems such as the Galapagos Islands help us imagine “parallel worlds” where different rules apply—the 30-foot tall shrubbery evolved from daisies don’t appear elsewhere almost certainly because they don’t actually have any advantages when there are many more alternative forms. Exotic fauna in Australia—yes, birds and mammals—and the South Pacific disappeared shortly after humans wandered over, bringing diseases, dogs and weapons, acting too quickly for the local populations to adapt.

        Which is pretty much exactly BlackBerry’s problem. It quickly moved into a niche and adapted exceptionally well to it (in part due to planning & wisdom), but then Apple opened up the floodgates that’d separated the PC and phone markets (which notably, neither Nokia nor Microsoft had figured out how to breach, despite trying).

        I noted Horace’s very first posts a bit back. One frame of analysis was the time it took to build out a platform’s features, what we casually call an ecosystem today, and that Nokia’s 5–8-year cycle could be disrupted by a 2–3-year cycle entrant. Which Apple didn’t have either. (They claim a 5-year development before announcing iPhone.) They just kept it under wraps until it was too late for even the savviest competitors to realize how to counter.

      • William Benjamin Abbott IV

        Thank you for the nice review, Walt. Your points about parallel worlds and different rules are spot on. Apple changed the definition of the market, I loved my first Nokia- big fat “do it” button under my thumb, 12 dial pad buttons, maybe an arrow key or two. I could run it with one hand, without looking. But it was laughably bad as a pocket carry. And it was no more, or less than a phone. By the time I needed a replacement, there was nothing like it available, new, in the USA. Screens had color, built-in cameras, complex functionality unrelated to basic phone calls. I *should* have thought, “Oh, gosh, now Moore’s Law will apply to this product category too!” but I didn’t.

        If Nokia had a 5-8 year cycle and Apple could beat them by a year, then Nokia were the walking dead. Once you’re in a time-to-market knife fight, strength, endurance, customer base and even quality are all heavily discounted. First it kills profitability and then cashflow crashes.I used to make a product used by the disk drive industry- they’re all about time to market, because the profitable part of their product lifetime is measured in weeks. Go back to the store in a year and none of the disks you can buy today will still be available.

      • mr bojangles

        You obviously love the sound of your own voice (also seeing your own posts)
        Surely you would argue in an empty room
        Twerp

      • Michael Bellis

        Yes: I listen to myself because people like you make me look/sound more intelligent.

  • http://www.totemint.com/ firoze zia hussain

    excellent analysis –question is when do u disrupt your product —-when u are comfortable or going gung ho or when chips are down

    • Michael Bellis

      when do you disrupt your product: when the going is good: before the sales drop,

      Any company knows this: why do you think Canon and Nikon keep pushing their Pro-Camera development. Even when they are selling they are developing.

      BB management=INEPT: this is FACT based upon what happened !!!

      • Oliver Marc Schirach

        About Canon and Nikon. They have to be carefull. Lots of Pros are jumping ship to Sony, Leica, Olympus due to size of camera, interchangability of lenses and the picture quality is the same.
        I love my Canon gear and it s great to use… But I wished there is a smaller pro camera which is handier. If it¨s not coming soon… I’ll check out the competition. Olympus has very competitive objectives for afordable prices

      • Michael Bellis

        Size has nothing to do with it: if you understand what a pro-camera offers you: as a pro-photograph.

        Leica are high-end life style cameras for people with too much money to spend and only see the “Brand” as an extension of their wealth.

        The quality is of these cameras are very different: you certainly lack knowledge in this area.

        One thing is clear, you certainly don’t understand about “price points” and what value they add to a top-end camera system.

        If you want small, buy a 4/3rds, and stop sounding like a child with too much money.

        A photograph is taken by a photographer: NOT the camera.

        Give me a BB (as crap as they are) and I will take a better photograph than you can with you Canon, Sony, or Leica.

      • Guest

        @Michael Bellis,
        So you don’t know me. And you dare saying that I
        suck in photography and have no Idea of professional cameras. Good
        accepted. I will practice and keep on learning.
        Looking at your profile picture I guess you don’t know either.
        Anyway.
        Feel free to call up TWIP (This week in photo podcast in case you
        didn’t know) and have a chat with Frederick and the other professional
        photographers on how crappy a Sony NEX, Olympus OMD etc are compare to a
        Nikon D800 or D4, Canon 1DX or 5D mkIII.
        I will make sure and listen to it.
        And
        yes it is the photographer which takes the pictures. Combined with the
        quality smaller cameras have and the abilities of customization, size,
        price etc Canon and Nikon seem to be hard pressed. Yes they might go to
        medium format all Hasselblad. But where are the high end professional
        small sized mirror less cameras from Nikon and Canon?
        That marked seems to be owned by others….
        Please correct me I am always interested in learning. But make sure to write nice. Attacking people does not help. :D

      • Michael Bellis

        I don’t need to know you to make a comment.

        I didn’t mention anything about your photography being “sucky” that is your statement.

        Profile photograph: what is yours? a blank !!!

        Why would I waste my time listening to some idiots on podcast: when I’m happier making photographs.

        You can not compare 4/3rd camera’s with pro-DLSR, they are so different on many levels.

        Once again your inept attitude suggests you are dim !!!

        Pack up and go home: you will not win this discussion.

      • Walt French

        Opinions differ as to what is “pro,” but a lot of pros wouldn’t consider cutting their sensor size in half by going from full-frame down to APS. Elementary physics haven’t been repealed by all the advances in sensor tech: a large sensor still takes a MUCH better photo.

        And all else equal, that double-area sensor means 40%–50% more weight. (That’s more math than physics.) But if your job is to have the photo of the game-winning goal or the bride’s extended family, you do it.

        That is obvious, so I think that if you were actually earning your living from photos you’d know that and worry about other aspects of your work. You’re more likely a consumer, as I am, and noting that Canon’s best APS cameras are heavy and big, too, wish for something lighter.

        But you spoil it by not noting the mirrorless EF-M that’s roughly comparable to the brands you say “Pros” are buying (which I kinda doubt, at least not for their pro work). The EF-M weighs about half what the popular Rebel SLR series does, a third of the top pro 5D. The missing Canons aren’t.

        Meanwhile, I’m forced to note: the smartphone has savaged the point-n-shoot market that provides the bread and butter revenues for camera companies. Sales are maybe half of what they were just a couple of years ago. Even SLRs are hit by the rapid advancements in phones’ cameras—in my case, I seldom bother to pull my older SLR out of the closet because the iPhone is just there and will likely get the shot.

        You *do* get to vote with your wallet. If you want a more-compact, but good quality camera, get one of the mirrorless single-lens cameras. Or an iPhone or Lumia.

      • obarthelemy

        the iPhone doesn’t really rank up there any more. Lumia 1020, GS4, GN3, Z1… have noticeably better cameras

      • bulky

        http://asia.cnet.com/smartphone-camera-shootout-apple-iphone-5s-vs-htc-one-vs-lg-g2-vs-samsung-galaxy-note-3-vs-sony-xperia-z1-62222509.htm

        Looking around, it seems kind of a wash. What you say doesn’t seem to be true (leaving aside the 1020 which is absurdly bulky and runs an OS that nobody wants).

      • Walt French

        Trying to be disagreeable? I merely note that Apple and Lumia make a good-enough quality camera for many users. That’s totally incontrovertible.

        But to feed the trolling: the comparisons I’ve seen make the 5s look very good against other smartphones’ cameras. Especially the new software features are handy and effective in letting casual users get better shots.

        The Lumia 1020 is a great camera in many regards, but there are some potential real weaknesses that will prevent broad acceptance —as a camera, not just because it’s WP. At least one test found very poor indoors white balance, producing garish faces.

        Even worse, for many an absolute show-stopper, however is that with its shot-to-shot time somewhere around 4 seconds, you can forget about trying to capture snaps of your kid’s moment of fame on the hockey rink. People aren’t buying smartphones as replacements for studio cameras (which the Lumia could almost claim to be); they’re using them for ad hoc shots where such things matter.

  • Rohit

    From where I see, BB never had a direct competition from Apple iPhone. iPhone was in its own league. Why BB & Nokia kept climbing high till 2010, was because Android came late & was progressing slow, untill in 2010 their Galaxy phones just blasted the market, their ability for Multitasking and for so many Timepass apps & games made them so popular that Galaxy lineup captured the market from lower end to higher end. It was ANDROID that killed BB & Nokia, Apple was always in its own league.

    • :)

      u mean samsung… not android

      • Rohit

        Yes, I mean Samsung, but can u think a Sumsung phone widout Android? ;)

    • Michael Bellis

      What planet have you been living on these last 10 years: MARS?

      BB had competition, but their management failed to recognize it.

      Which is why you can buy a BB share for just 1dollar.

      NO: it was the ability that new “smart phones” used apps that took the market away from BB.

      BB with its dinosaur style key board and tiny screen was always going to be doomed.

      Wish I made that statement 5 years ago.

      • ama75

        I am addict to ” dinosaur style keyboard ” and am not the only one.
        Angry virtual keyboard-hater.

      • RickardOGrady

        That’s mostly because you haven’t tried a real touchscreen phone yet. Trust me in this, there is a vast difference in being able to use the screen effectively, and being forced to use archaic designs that were old before their time.

        Every single blackberry user bar two, that I have converted over the last two years have come back (within a week of being convinced to try it) to say they don’t want to go back to the stone age. Those two that didn’t return enthused? They decided to try the Storm… and both are now ghastly iPhone users.

      • Walt French

        Of course, BlackBerry holds no patents on keyboards. Many of the earlier Androids offered phones with them.

        But sales were poor enough that the models languished. Ergo, virtual keyboards rule the day.

        We all have our preferences, but it seems that the many people who’ve expressed views like yours were either more wedded to BlackBerry or else resentful of having to lose their established MO, than were actually independently interested in first class, clickable keyboards. Otherwise, those Android models would’ve sold better than their virtualized stablemates, no?

        Keyboards take a couple of square inches and Jobs grokked that with a first-class internet browser or equivalent, people would want as much screen as possible. That was true. And even the phablet monsters don’t try to do a physical keyboard, even though they have hugely more area than the iPhones. You know that Samsung would put a first-class, large keyboard on a phablet if they thought it would sell.

        When BB drops out of the hardware business (a matter of days or perhaps weeks, I’d guess), I imagine the carriers will ask at least one of their OEM buddies to make a keyboard model of Android (basic hearse-chasing mode). If those models fail to sell well (which I *also* predict, albeit less confidently), you’ll want to stock up on a lifetime supply before they disappear for good.

      • James King

        “You know that Samsung would put a first-class, large keyboard on a phablet if they thought it would sell.”- Walt French

        No it wouldn’t, for the same reason virtual keyboards supplanted physical ones on smartphones: screen real estate.

        Once a device is large enough to faciliate a physical keyboard, other problems crop up with device physical dimension and screen aspect ratio. You could comfortably have a phablet with a physical keyboard but it would likely have a 4:3 or 3:2 aspect ratio. Screws up the video consumption aspect.

      • Walt French

        I’m gonna go out on a limb and guess that people who stubbornly stick with BlackBerry aren’t watching a lot of videos on them. Job To Be Done & all that.

      • Rohit

        BB failed to evolve, yes, but there is nothing wrong with a BB, its a Classic & you might know that there will be always a classic lover society. I wud’v loved to see BB evolving into an iPhone/Android killer, but hell they were ignorant & paid the price!

      • AC88

        “Of course, BlackBerry holds no patents on keyboards.”

        Not to argue that others don’t have keyboards, but BlackBerry actually holds many patents on keyboards.

        Ask Handspring and Palm.

        http://news.cnet.com/rim-sues-handspring,-good/2100-1041_3-958550.html

      • JohnDoey

        His point is that none of those patents prevented the iPhone from having the 10,000 accessory mechanical keyboards that it currently enjoys.

      • Rohit

        so am I. and I still use a physical QWERTY phone, a BB.

      • Rohit

        Dont bother about which planet I was living on, you just learn to read & understand English first. Read again what I wrote!!!

  • Alex Pierre-Traves

    Love my durable, reliable Blackberry and having a proper keyboard. I would never get an iPhone.

    • Michael Bellis

      Buy a Samsung or Sony then!!!

    • MrBlank

      A Frog in a Well, Never knows the outside World :) No Harm ;)

  • Jacqueline Drew

    A PDA is really a part of a suite of product devices people use. If you don’t sync, you won’t swim.

  • Manu

    hello friends me also a blackberry lover yesterday i face the irresponsibility of their QA dept…. i bought a brand new BB Z10 the retailer opened the new pack in front of me and given that mobile to me, unfortunately am not noticed or not checked its speaker… when i reach my home i noticed that its speakers aren’t work…… i paid 30K but now am waiting for companies approval for a replacement.

    • Michael Bellis

      You’re an idiot !!!

      Do you usually throw away your money down the drain?

      Can’t understand anyone buying such a “failure of a product”.

  • Riaz ur Rehman

    We are debating either iPhone or Android behind BB decline. It is BB own internal vision and product planning failure. BB was dead on the day when first touch screen arrived.

    • Michael Bellis

      I agree: BB buried their heads in the sand for so many years, by the time they actually removed their heads the company was doomed !!!

      All down to INEPT management/planning !!!

  • Name

    I have both a Blackberry (for work) and an iPhone (my personal phone), I can’t stand the Blackberry, it isn’t user friendly and I cant handle the keys – I much prefer the touch screen.
    Senior Management in my company are given the Z10 and there have been never ending problems with them from the very beginning, my boss has had to have his handset replaced twice in 6 months.
    It is of no surprise of me that BB is in the position it is in now and have been, for a long time, no competition against the iPhone or Samsung.

  • name

    I used to love my BB, it was great.
    When other smartphones appeared, with other services like Skype, Viber etc that you could talk to everybody with 0 charge they lost the war.
    Apart from that, we had to pay around 10-20GBP per month for the blackberry service to check our emails? Then it came for free from Android.
    I think BB lost because of Adroid and cheap Samsung phones/etc. Iphone was never a thread to BB i suppose.

  • Tammy

    Wow — so many great though-provoking insights in here. One of the best articles I’ve read in a long time. Thank you!!

  • dtro

    It’s as if RIM came to think that it was a “railroad” when it was actually (originally) in the “transportation” business. RIM simply did not/does not/will not have the same level of ingenuity, speed and delivery that Apple has – as more and more Apple product has been/is developed and delivered over time RIM has/will drift further behind until that railroad finally runs out of trestle.

  • Srikanth Rajagopalan

    Fantastic piece, Horace – as always!

  • Juice

    Very good article!!!

  • David Makropoulos

    Some good points and thinking in that article.

  • Walt French

    Another take on this story at wp.me/p31nkB-bm.

    Very different style (Microsoftian); a wonderful complement.

    • http://www.asymco.com Horace Dediu

      Indeed, worth reading. (Microsoftian is also an interesting way of putting it. There is something of that culture which is reflected in the writings from alums. Can’t quite put a finger on it. Crude and unsatisfying characterisation would be verbosity or complexity in writing and thought. Always seems to require many words. Absent of poetry?)

      • obarthelemy

        Honestly, and this is not a troll, that post has the merit of being clear, if a bit pedestrian. I often struggle to decipher your one-liners (rather, few-worders), I guess because you assume a commonality of culture and mindset that just isn’t there.

      • Walt French

        Without actually answering your question, I’ll mention that I broke into my (old-boy-dominated) field through applying Principal Components Analysis on a certain dataset.

        PCA takes (usually) large sets of data and extracts out the key themes. Not just what they are, but their relative importance. Maybe, looking at all the foreign exchange rates around the world, you see a US effect, a non-US developed-world effect, a Japanese effect and an Emerging Markets effect, each with its own magnitude and the label that you supply. The method doesn’t work on many useful datasets but the concept is killer for many things I need to understand. (It’s also closely related to Google’s Page Rank algorithm and eHarmony’s matching system; valuable where you mightn’t expect.)

        And Sinofsky’s post is a near-perfect opposite of it. He lists out a dozen concepts and dutifully notes there might be more or fewer. “Microsoftian,” covering all the issues in turning a battleship, nothing if not methodical and (actually quite) comprehensive. But in reading through it, I get more of a sense of the overwhelmingness of what BlackBerry faced, rather than how a more agile firm might have prioritized issues and been able to have withstood the challenge.

        He’s writing primarily to entrepreneurs who need to make their own decisions, highlighting how so many assumptions are embedded our thinking. Tremendously helpful, and a pleasure for me as an ex-entrepreneur. But I also like this site’s commitment to sussing out the decisive moment, the elemental characteristics in tech today.

      • poke

        The problem is that his analysis completely misses the fact that the iPhone was a coherent product, rather than a bunch of unrelated reversals of various assumptions characteristic of an existing market. That very coherence was the reason the iPhone was successful: customers do not think in such a pedantic way. Actually, I think his analysis is a nice example of the kind of thinking that leads to being disrupted, because it leads to not being able to see the forest for the trees. What was needed was the naivety to see the iPhone for what it was. Clearly some people saw it, but as a culture they weren’t capable of assessing a product as a customer would.

      • charly

        iPhone was not a coherent product. Apps was forced onto Jobs by iPhone users. They never intended to allow apps.

      • Tatil_S

        Yes, sure, they never intended to do it, but once they were forced, they managed to come up with the best mobile SDK in six months. I’ve read some crazy praises for Apple, but this takes the cake.

      • JohnDoey

        Totally untrue. 3rd party native iPhone apps were always planned. They simply were not available in the first year. There is an article out yesterday in NY Times where it was revealed that the original Jan 2007 demo was choreographed around known crashes. The phone barely functioned when it shipped as 1.0. The browser could not stay up for more than 10 minutes at a time.

        The main thing that held up the SDK was that Apple could not allow unrestricted native software development. They had to create new ways to restrict 3rd party native apps.

        Keep in mind, other phones have Java VM apps, NOT native. iPhone apps run on the actual OS and hardware. It is not even a little bit surprising that the SDK was only released with iOS 2.0.

    • obarthelemy

      Thanks for pointing that one out.

    • Davel

      As Horace pointed out before and the RIM executives identified, they brought a knife to a gunfight. For Apple they had to bring a capable email system and other features but a beautiful web browser was key and availability of YouTube made the device. When the App Store came out all the little time wasters flooded the market and as crude as they were, they were mostly free and light years better than the ‘apps’ on the other devices.

  • big wastrel

    some typos in this post:
    “Android not first serve the low end of the market”
    “It’s tempting to suggest that this disruption happening again”

  • http://beautyandthesoftware.blogspot.com/ Adrian Constantin

    Another reason why the disruptive nature of iPhone was difficult to spot is the distribution channel. Most analysts look at iPhone as being distributed through the operators, but that is only half of the story.

    The carriers are the main channel for the hardware, but the main channel for distributing the software is fully owned by Apple. The majority of the iOS devices have an up to date version of the OS, meaning that people download 4-5 or more updates during the lifecycle of an iPhone. Compare that to 1 initial version of the OS distributed through the operators. The fact that most iOS devices are up to date also proves that the channel is very effective. Add the AppStore and the app updates on top of that and the story of the iPhone distribution channel changes dramatically.

  • rationalchrist

    Vision without execution is day dream. Microsoft, Nokia, and Blackberry certainly lack visions. But after original iPhone, they must have started planning counter actions and catch ups. Up to date, they all fails. Yet Google manages to catch up iOS with Android. What are difference between Apple Google and Microsoft, Nokia, Blackberry? Coding. Apple and Google can code, but Microsoft, Nokia, and Blackberry can’t code.

    Exhibit 1: Apple can code. No dispute here. MachOS, NeXT, Mac OS X, iTune, Safari, iOS, along with many libraries (Cocoa, Core …, WebKits, …) and SDKs, accumulated since 90′s. If someone think any company can duplicate all these in two or three years, he is nuts.
    Exhibit 2: Google can code, though not elegant UI. Search, big table, map reduce are the bases, and Linux and Java Runtime, libraries, all are ready for engineer to change Blackberry wanna be to iOS wanna be in two years.
    Exhibit 3: Microsoft can’t code. Yes, they have Windows. But it is ugly, spaghetti style code. Crash of device driver can bring down the whole OS, joke. Stupid decision back in 90′s to use DEC as the base for a modern OS. Revenge of modular, minimalist Unix. Took them three iterations to shrink down to phone, WP6, WP7, and WP8 still bloat.
    Exhibit 4: Nokia can’t code. Yes, they ported Linux to Nxx. I have ported Linux to MPC860, base OS only. But they lacks all those libraries, SDKs, etc. I tell you it ain’t easy.
    Exhibit 5: Blackberry can’t code. Realtime OS is for toys, and industrial applications, not a general purpose computer. Where are all libraries, SDK, WebKits, UI libraries? None for RtOS.

    To success forward, one must master the software and code.

    • obarthelemy

      Mmmm actually, I’ve had very few graphics driver crashes these last few years, and they didn’t crash Windows, just froze it while the driver got restarted.. My last 3 blue screens over the last decade traced back to failing CPUs.

      I’m not sure your generalization of each companies coding skillz is accurate at all. Politics/management are probably way more meaningful.

      • rationalchrist

        If engineers can deliver in time and turn around agilely, one can afford certainly degrees of politics and management missteps. Look at Apple turn around time for iOS7, in a year, amazing, though still have few bugs here and there.

  • Jimmy Murphy

    Also interesting to note is 2009/10. To me this is the beginning of the 2nd hand iphone market. People who couldn’t afford the first handset now could, this widened the user base and it grew and grew as new handsets were introduced.

  • scotthumble

    It would seem to be that there was a convergence of complimentary services that boosted the adoption of mobility. Namely, social media services seemed to be a perfect fit for a new form factor. Over the past few years, changes have been iterative. Luck certainly has something to do with it when devices and services converge. While devices are a strong suit for Apple, the don’t have a great track record with services. It will be interesting to see how this plays out in the next 2-3 years.