According to former Apple iOS chief, Scott Forstall, “The iPhone had a very circuitous route. We’d been working on a tablet project… It began because Steve hated this guy at Microsoft. Any time Steve had any interaction with the guy, he’d come back pissed off.”*
Fire in the belly (during usually laid-back Californian dinner parties) may well have ignited the spark, but it would probably have sputtered and died by the pudding course (plenty of fruit and nuts) without that other elemental force ‘Creative Destruction,’ also known as ‘Schumpeter’s Gale’ after the Austrian economist who popularised the term in a book in 1942, a time of unprecedented non-creative destruction:
‘The opening up of new markets and the organizational development from the craft shop and factory to such concerns as US Steel illustrate the process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one ... [The process] must be seen in its role in the perennial gale of creative destruction; it cannot be understood on the hypothesis that there is a perennial lull.’**
Schumpeter’s Gale was beginning to carry ill winds towards Apple’s iPod (just as the iPod had snuffed out the Sony Walkman before it) and Jobs was terrified that music lovers wouldn’t need iPods if mobile handset makers built music players into them. Or as Jobs put it: “The device that can eat our lunch is the cell phone.”
He also had a noisy neighbour, nine miles down the road. Like Jobs, Google that also had no illusions about the future of mobile…
So rather than go full speed on their current project, a little trinket called the iPad, Jobs diverted his team’s focus on the iPhone.
In 2005, the leading smartphone operating system was Symbian, which started (in 1998) as a joint venture between mobile handset providers (including the market-leader, Nokia) and a small London software firm. These handset manufacturers were terrified that the Windows mobile operating system would dominate the market, and they’d all end up paying Bill Gates extortionate license fees. But because of its joint ownership model, and the multiplicity of system variations and specs that sprang from it, Symbian couldn’t incorporate the kinds of innovations that were ‘driving the PC and web economies..’*** Furthermore, each Symbian model variation then had to be approved by the mobile carriers (who distributed 90% of handsets) and who could themselves insist on thousands of additional tweaks.
Faced with this chronic lack of an efficient development eco-system, in 2005 Jobs entered into a partnership which included Motorola, who would manufacture a phone with a built in iPod, and Cingular, then the biggest US mobile carrier, who would distribute it. Apple released the Rokr E1 (or iTunes phone’) in September 2005. But no-one was ‘rocked’ by it, and the poor reviews made prospective consumers ‘tune’ out.
So once again, Jobs got angry.
And sixteen months later he previewed the iPhone at the Macworld Conference, complete with iTunes music-player, Google Maps and YouTube (among other features) and the CEO of Cingular also got up on stage to announce that they’d signed a multi-year contract with Apple.
Although a lot of management gurus, from Mark McCormack onwards, have stressed the importance of taking emotion out of business, sometimes the penalty for not getting angry can be massive….
Take RIM/Blackberry for instance.
In 2007, RIM had a 40% share of the global smartphone market and its revenue grew 47% to $3.04 billion. The Canadian firm had been founded in 1984, by Mike Lazaridis and Douglas Fregin, and at its peak (in 2011) there were 85 million users worldwide.
When shown a video of the iPhone preview by co-CEO Jim Balsillie, Lazaridis is reported as saying`; “These guys are really, really good. This is different.” To which Balsillie replied: “It’s okay, we’ll be fine.”
Later, RIM’s COO, Larry Conlee added: “It wasn’t secure, it had rapid battery-drain and a lousy keyboard.”
Or maybe Nokia…
While lacking any real US presence, in 2007 Nokia had 49.4% share of the global mobile phone market. Originally a paper mill, that had ‘evolved’ into The Finnish Rubber Works Ltd and then The Finnish Cable Works Ltd, before moving into the (then) new electricity generating business. As a cable supplier, Nokia had done extremely well from contracts with Finland’s neighbour, Russia, but the Cold War put the Kremlin in a somewhat different light and the Finnish military invested heavily in Nokia’s telephone-tech research.
Like Blackberry, Nokia were seriously sceptical that anyone would be willing to charge an iPhone battery every day (compared to the Nokia phone’s weekly charge) and left it too late to take the fight to Apple. As one senior manager reflected, some years later: “Finnish are good in the sense, ‘OK, let’s make a good standard and good technology stuff and then build the products.’ Americans are much better at selling the idea to the customers that ‘Hey, we’ll solve your problem.’”
In 2016, Blackberry ‘evolved’ from the smartphone business entirely and moved into security software.
In 2014, Nokia sold its mobile phone business to Microsoft. Microsoft then also ‘evolved’ out of the smartphone business entirely in 2020.
Other factors aside, what both Blackberry and Nokia had in common was that their focus was their technology, rather than the potential end products of that technology.
Whereas Apple and Google, in their very different ways, were both in the business of building global mobile platforms which would became indispensable to users through the ease with which they enabled exchanges between consumers, content providers and e-commerce
..and at time of writing, Apple is the most profitable tech company in the world and Alphabet, Google’s holding company, is number two.
David Thomas 9th Jan 2025
*during a talk at the Computer History Museum, California
** Joseph Schumpeter, ‘Capitalism, Socialism and Democracy’, 1942. Schumpeter’s work was built upon evolutionary principles such as those propounded by the failed/evolved doctor/country parson who was the subject of last week’s post ‘The Reluctant Iconoclast’ (Charles Darwin) and the far less reluctant former journalist Karl Marx, officially a resident of 28 Dean Street but more often to be found getting hammered with Fred Engels in the appropriately named Red Lion pub, Great Windmill Street.
***’Matchmakers: The New Economics of Multisided Platforms’ David Evans and Richard Schmalensee, 2016
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