One of a handful of product case studies I wrote last year to help understand successful product launches.
Apple’s iPhone was announced December 9, 2007 and released June 29, 2007. It was $499 for the 4GB version, $599 for 8GB. After 8 years it had captured 50% of U.S. smartphone market and >66% of sales, with 100 million users.
(1) Value created — Simply describe the innovation. How did it create value?
The iPhone is a pocket computer. It has typical phone capabilities including phone calls and text messaging, along with cellular internet connectivity. Differences between other smartphones at the time were:
- Large multi-touch screen with no tactile keyboard, no need for stylus — this allowed full use of screen when not using keyboard
- Ability to browse normal, non WAP, websites (can zoom easily using multi-touch)
- Ability to run desktop-class applications
- Multiple sensor inputs — proximity, light, accelerometer
(2) Value captured — Competitive advantages, barriers to entry. Why didn’t incumbents have a reason to fight them?
- Extension from existing Apple network — iTunes, Mac OS, iPod.
- Brand attachment to Apple.
- Economies of scale exist with integration and complexity of engineering.
- Switching costs once owning an iPhone.
- Strong habit attached to usage many times / day — strong attachment to UX.
- Phone makers saw it as toy for rich people at first. Computer makers didn’t see it as a computer (low-end disruption).