In the discussion of whether Symbian and Nokia are fundamentally threatened (or even “irrelevant”) in the face of the huge market buzz around the Apple iPhone, I take no comfort in the fact that Symbian’s share of the global smartphone market is an order of magnitude larger than that of the iPhone. Therefore I disagree with those replies to my previous blog post that highlighted Symbian’s very considerable market share lead, worldwide (but admittedly not in the USA), over the iPhone.
At first sight, strong market leadership should count for a lot. It should trigger a virtuous cycle effect. More phones should attract more developers (who are interested in their apps running on large numbers of phones) which should result in more software tailored to that platform, which should in turn increase the attractiveness of these phones to end users. And that should result in even more phones being sold, and so on – virtuous cycle.
And in reality, a powerful virtuous cycle effect does exist. An experienced and sophisticated ecosystem (“ES”) has grown up around the Symbian operating system (“OS”) and is continuously adding more value to this platform. The OS-ES virtuous cycle does work. However, it’s not invulnerable.
The history of the technology industry is full of examples of companies who were in similar leadership positions to that currently held by Symbian, but whose markets were transformed by disruptive new entrants. Harvard Business School professor Clayton Christensen is deservedly applauded for his description and analysis of how market disruption takes place:
- Celebrated examples include how the leading providers of mini-computers, such as DEC, Data General, Wang, Nixdorf, and Prime, failed to appreciate the significance of the initially small market that grew up around fledgling personal computers. These manufacturers saw little profit in that market. But when PC technology improved and the surrounding ecosystem matured, it was too late for these erstwhile computing giants to take leading roles in the new industry (despite lots of effort which they eventually but unsuccessfully expended on that new cause).
- An earlier example, also told by Christensen (in “Seeing what’s next: using theories of innovation to predict industry change“), concerns the disruption caused by the invention of the telephone to the communications industry of that era (1870s): market leader Western Union evaluated the new technology created by Alexander Graham Bell, but concluded it lacked the power to handle the long-range business communications from which the company made most of its profits. Again, technology improved and new business relationships formed, faster than Western Union could respond – with Western Union being plunged into decline as a result.
And there’s more. MIT professor James Utterback elegantly recounts many intriguing and salutary examples in his book “Mastering the dynamics of innovation: How Companies Can Seize Opportunities in the Face of Technological Change”. The book shows how familiar technologies such as refrigeration, electrical lighting, and plate glass, were all clear underdogs at the time of their initial market introduction, and faced serious competition from entrenched industrial alliances whose technologies (such as large-scale ice transportation, or gas lighting) themselves appeared to be regularly improving.
Could the iPhone fit into a similar pattern? It might. There are possible futures in which, say, more than half of all phones sold in the world have iPhone technology inside them. I don’t see that as the most likely future – far from it! – but it does have a certain logic to it:
- The iPhone is in many ways a simpler product proposition than existing smartphones (just as PCs were simpler than mini-computers). There are considerably fewer applications built into the iPhone than you can find in a standard S60 phone. That relative simplicity means that some feature-focused users will decide not to use the device. But the device taps into a new market that is arguably underserved by previous offerings. This is the very considerable market of users who don’t need every bell and whistle in feature-packed smartphones, but who are ready for a better experience than can be had from ordinary phones.
- The iPhone uses physical components that “break the rules” regarding cost: they’re considerably more expensive to manufacture than most other smartphones, and this makes the device more expensive to purchase. However, again, it may be that now is the right time to break this rule: a greater number of users may be willing to bear this additional cost (in view of the additional benefits that buys them).
- The iPhone isn’t growing its ecosystem from scratch; it can benefit from a crossover effect from various components that were already in place in Apple’s pre-iPhone product offerings. Principally, the highly-evolved iTunes distribution mechanism plays a big part in ensuring a good end-user experience with the iPhone.
- The iPhone has put special emphasis upon a number of usability aspects, including the graphics “wow”, the UI itself, the mobile web browsing experience, and the discovery and installation of new applications. Users have been drawn to these aspects of the device, even though the device lacks other aspects that are present (and well-evolved) in other smartphones.
- Despite what some critics have said, these innovations aren’t (all) easy for other companies to copy. The “look” can be mimicked, but the “feel” is the result of countless small design and implementation details, that are anchored in a sophisticated underlying software system.
For another analogy, the iPhone is similar to the initial Palm Pilot devices, which fared much better in the market than earlier attempts at pen-input handheld devices. The Palm Pilot delivered less than these other devices (such as the Apple Newton, the Casio Zoomer, and the General Magic “Magic Cap”) but provided a much more usable experience.
So, let’s evaluate this scenario. Do disruptive new market entrants always succeed in reaching market leadership position? Of course not. Although it is difficult for market leaders to respond to this kind of change of rules in their industry, it’s not impossible.
Here’s one counter-example: Microsoft and the Internet. Initally, it did look as though Netscape was succeeding in building an impregnable position by bringing a compelling new product to market in an area that Microsoft had previously ignored – an Internet browser. But Microsoft managed to turn around the situation, by dint of two measures:
- Clear internal recognition, from the highest leadership, of the fundamentally changing market landscape
- Swift and effective execution, continued over many years.
I’m loathe to compare Nokia/Symbian to Microsoft, but in this case the comparison has merits.
What’s more, I expect that it will become clear, over the next year or so, just how much the Symbian Foundation is itself changing the rules of the mobile industry – and (crucially) enabling companies who use this software to change the rules even further. If you think the iPhone is innovative, you’re right, but you ain’t seen nothing yet.