What, if anything, did the iPhone Disrupt?

Clayton Christensen, author of The Innovator’s Dilemma and The Innovator’s Solution, initially argued that the iPhone wasn’t disruptive because it was high-end. Later, he concluded that he had been wrong, and that it was disruptive, but to PCs rather than phones. James Allworth (a Christensen student) and Ben Thompson (author of Stratechery), on episode 60 (Beyond Disruption) of their Exponent podcast, discuss this and Ben asks “so what did happen to Nokia?”

Spoiler: it was disrupted by the iPhone.

In The Innovator’s Dilemma, Christensen defined disruptive innovation very carefully. His theory is significantly more complex than most business theories, and seeks to explain how well-managed leading companies in established industries come to be replaced by scrappy start-ups. I think by far the most important part of Christensen’s disruptive thesis is that the (disruptive) entrant produces something that is worse on the established metrics for the product category, but better on different metrics. The successful entrant establishes a niche market, usually comprising non-consumers of the existing product, within which the alternative metrics are more important. (Christensen’s lead examples were drawn from the disk-drive industry where the established metrics were capacity and speed. Manufacturers of physically smaller disk drives had products that were worse on these criteria, but better on the alternative criteria of size, weight and power requirements, which were relevant successively to PCs compared to larger computers, then to laptops compared to PCs, then to iPods compared to laptops.)

Christensen’s crucial insight was that as technology advances, very often both the original and the new technologies improve with respect to the original metrics, frequently leading to a situation in which the original technology over-serves the mainstream market, and the new technology meets its needs on the original performance criteria. At this point, the new technology is good enough on the old metrics, and better on the new metrics, so is often more attractive even to the mainstream market overall. (If the disk is big enough and fast enough but physically smaller and less power hungry, that’s even better.)

There are a number of other parts to Christensen’s formulation, including disruptors often being low-end; managers in the incumbents being rational listening to their best customers and getting driven up-market; the entrant having a lower cost culture and seeing the incumbent’s markets as lucrative, while the incumbent sees the entrant’s markets and low-margin and unattractive. All of these, however, are less important than the fundamental insights about different metrics, technological improvement and over-serving.

The iPhone was (is!) not a high-end phone

I had the original iPhone (8GB!). It was amazing. It was a computer in my pocket (like the Sony Clié, a PalmOS device, it replaced for me), it was a full web browser, it was a music player, it was an email machine, it was a (crappy) camera, it was a database and it was a phone. But it wasn’t a good phone. That didn’t matter to me, because I didn’t use a mobile phone much. But it was a huge obstacle for people who did. When the iPhone launched, the metrics people used to measure phones were battery life, signal strength, and perhaps things like number of bands and physical robustness. Sure, there was some internet capability (remember WAP?), and apps and things, but mostly people bought Nokias because they had great battery life (1–2 weeks for my 6310i, easily), good cellular radios, would survive a drop and work around the world. The iPhone, by contrast, had terrible battery life, poor signal strength and call quality, was easy to break and had very limited band options.

It was not a high-end phone. Even today’s iPhone 6s is not a high-end phone on the old metrics (though it is way better than the original iPhone). It was, and is, a high-end pocket computer, with a decidedly low-end phone app that was good enough for people like me who didn’t really care about the phone very much, but cared deeply about all the computer stuff. Over time, as all the other capabilities of the iPhone have increased — web; video playback; 4K, slo-mo, and time-lapse video recording; IP-calls including video calls; games; podcasts; ebooks; social media and a choice of (literally) millions more functions, through apps — ever more people have found the non-“phone” features more compelling, and decided that the improving-but-worse-than-Nokia-10-years-ago phone functionality (admittedly, enhanced with internet calling and messaging) is “good enough”.

The iPhone and Alternative Metrics

I would argue that a good way to understand the iPhone’s success is to look at the metrics by which we value it. It’s a terrible phone relative to the old criteria. But it’s a better phone measured against alternative phone critera and broader messaging criteria: it can do IP calls, it can do video calls, it can call anywhere in the world free on wifi, its address book is better, you can use Siri to dial by speaking to the phone, you can send iMessages faster and free and to non-phones (though, obviously, only to Apple users), and it has full email capabilities. Similarly, its cameras, while better than they were, don’t compare to DSLRs for picture quality, but beat them hands down for being always available, by being online, for ease of use, by having a massive viewfinder and with features like built-in effects, geotagging and instant sharing. This is true across almost all the iPhone’s functions. Browsing the web on an iPhone isn’t as good as browsing it on a computer (mostly), but what it lacks in screen-size and keyboard input, it makes up for with portability, omni-avilability, cellular accesss and pinch-to-zoom. It’s good enough. It doesn’t have the best GPS, but it’s good enough. It’s audio isn’t great, but it’s good enough. It’s video recording is actually so good that I hesitate to say it’s merely good enough, but it’s certainly good enough for most people most of the time.

So yes: the iPhone did disrupt Nokia and all the other non-smart phone focused phone manufacturers. And the camera makers. And the GPS makers, and watch makers. Mostly with inferior capabilities on the old metrics. But it improved on all the original metrics (except battery life) over time, and is more than good enough at most of the things most of the time.