Christensen's model of disruptive innovation tells us that when new market entrants offer products that are inferior to incumbents, at a lower price point, targeting non-consumers of existing products with solutions that are simpler, easier to use, more convenient and/or more accessible, that the upstarts will almost always win the competitive battle. We see this recurring pattern frequently, and it's easy to mistake these attributes as causing disruption, rather than as signals that disruption is happening. This two part series examines the root causes that enable disruption to occur.
iPhone's 5th Birthday: The Most Successful Disruptive Innovation. Ever.
Five years ago Apple introduced the iPhone. On the eve of it's introduction, I published a blog article predicting that it would cause massive disruption of several industries and the reasons why.
We predicted it would sell beyond Apple's expectations, and beyond what even the most optimistic analysts projected. It turned out that as bold as we were, we weren't bold enough in predicting how successful it would be.
We predicted it would knock the Blackberry from it's perch as the top (business) smartphone. A prediction that many scoffed at -- especially the executives at RIM.
There were other predictions as well which we'll leave you to read if you're interested.
Although these things seem obvious in retrospect, I made these predictions based on disruption theory, and took a big step out of line, disagreeing publicly with my business colleague at the time, Mike Urlocker, with Clay Christensen, the father of disruption theory, and with other notable marketing experts including Al and Laura Ries -- renowned for their work and books on positioning.
Unbelievably disruptive: iPhone's Accomplishments
While the iPhone today has stiff competition from another disruptor -- Google's Android, and especially the leading purveyor of Android (Samsung), it remains the trendsetter with a list of remarkable accomplishments:
- iPhone alone is a bigger business than Microsoft, once considered the unassailable titan of tech based on its Windows and Office franchises. The same Microsoft whose monopoly market power was considered so strong that the DoJ targeted it with antitrust suits that threatened to break up the company. It's also the same Microsoft whose CEO, Steve Ballmer, mocked Apple for thinking anyone would buy a $500 phone. Who's laughing now, just 5 years later?
- The iPhone has generated over $150B revenue since its release, and has shipped over 250M units.
- At the current run rate, the iPhone will generate about $35B in profit this year. Only one company on the planet (besides Apple) generates more profit than the iPhone -- Exxon Mobil.
- RIM and the Blackberry are on the ropes, probably breathing their last. RIM announced they are laying off nearly 40% of their employees yesterday. The same RIM that as recently as two years ago was still claiming that no one would buy a business phone without a keyboard, and that it had an unbeatable advantage with corporations because of its security features.
- Nokia is also on the ropes. And, most competitors in the PC business have suffered serious setbacks, including Microsoft, HP and Dell. All either as a direct result of the iPhone, or because of its Trojan Horse effect (which my article in 2007 predicted).
- iPhone plus its big brother, the iPad, have made Apple the most valuable company on the planet, completing a 15 year disruptive comeback from near bankruptcy. Sitting on par with Exxon Mobil in market cap just 4 months ago, Apple is now valued at nearly $120B more, and by traditional multiples for "growth companies", could easily be valued at 2 to 3 times more than it currently is. It will likely become the first company in history to have a market cap exceeding $1 trillion within the next 18 months.
- Apps, apps, apps. How many companies owe their existence to the App Store and the rest of the iPhone ecosystem? There are over 600,000 apps available in the App Store -- 600,000 products that wouldn't have existed but for the iPhone. As of March of this year, more than 25 billion apps had been downloaded.
On the iPhone's 5th birthday, we hope that Steve's untimely passing doesn't mean the end of Apple's exceptional innovation and market leadership. The world needs more companies like Apple that anticipate what we want and how we want it, even before we're able to articulate it. Companies that push for what's next, instead of simply copying the best of what's out there (Samsung).
The iPhone isn't just the most disruptive innovation ever, it is symbolic of a state change in what we expect from technology and how we interact with it. It's hard to imagine how different the world was six years ago, almost as hard as it is to remember how we survived without the internet and email.
What does the future hold?
Looking forward another 5 years, we wonder:
- whether Apple can continue its remarkable run of industry-disrupting innovation without Steve?
- if the iPhone will still be on top, or will Android catch and pass it?
- what new innovations are still waiting to come out of Apple that will change the world as we know it -- is there a TV coming? what about home automation? cars? social media? Or, is the era of great new things from Apple over?
- who will pick up Steve's baton and run with it?
What do you think?
Updates
Identifying Disruptive Innovators: Techzinglive Interviews Paul Paetz
On Wednesday, February the 15th, Justin Vincent and Jason Roberts, co-hosts of Techzinglive did a podcast interview with Paul Paetz, founder of Innovative Disruption.
The discussion begins with how to accurately identify a disruptive innovator, and why most companies that claim they are, actually aren't. Our ebook "Disruptive Confusion Unraveled", and Innovative Disruption's analytic tool, the Disruption Report Card are mentioned in the discussion.
The podcast goes on to cover a wide range of material, including discussion of Apple's success and how they fit the disruptive model, why it's almost impossible to find a disruptive large company, to suggestions for how to give Justin's product, Pluggio, more disruptive potential.
The discussion centered around the relevance of key factors in achieving disruption, including:
- sustainable cost advantage / pricing strategy
- market segmentation
- targeting non-consumption
- choosing the right competition to position against
- business model
- convenience
- ease of use
- targeting undesirable users
- identifying the "job to be done" for a product
- addressing unmet or underserved needs
Warning: we get down in the weeds with some deep theory and detailed analysis of examples. If you prefer lightweight, breezy material, this isn't for you.