The evolution of cell phones to software-centric smartphones has changed the economics of production and competition. The leveraging of economies of scale, scope, and externality effects has powered the evolution of smartphone as Disruptive Innovation. It has disrupted a number of products and their producers because of the growing underlying natural tendency of convergence and monopoly. It has also been diffusing as growing progressive waves.
The cell phone timeline is marked by the evolution of the smartphone as disruptive innovation. Its evolution history includes the disruption of personal digital assistants (PDAs), digital cameras, and portable music & video players. The evolution of the smartphone has also caused disruption to the appeal of laptop and desktop computers. The underpinning of the accumulation of smartphones’ disruptive power has been due to the transformation of hardware innovation into software gadgets. Moreover, its evolution force also got momentum from the externality effects like the increasing speed and ubiquitous availability of mobile internet at a decreasing cost. Unlike the evolution of the light bulb, the smartphone has been conversing several discrete products.
In fact, software-based user interface features, like multitouch, played a vital role in smartphone evolution. The far higher usability of the iPhone’s multitouch-based user interface empowered Apple to cause disruption to the demand of keyboard-centric design, subsequently making Nokia bankrupt. Besides, software-based innovations offered economies of scale, scope, and externality advantages. As a matter of fact, mobile phone handsets’ transformation to software gadgets is at the core of the evolution of smartphone as a disruptive innovation.
Key takeaways of smartphone evolution
- Smartphone innovation–a fusion of mobile telephony, wireless data communication, and personal digital assistants started the journey of smartphone innovation in 1994 as IBM’s Simon. Despite humble beginning, Apple has turned it into a disruptive innovation by uleashing the creative destruction force of iPhone.
- Smartphone evolution–smartphones have been evolving due to the fusion of a growing number of products, the change of mechanical technology core with software, the availability of apps, and the advancement of cameras, displays, batteries, and processor.
- Smartphone is a disruptive technology–smartphone has been a disruptive technology because it has unleashed disruption to various products, services and businesses.
- Smartphone disruption examples–the disappearance of demand of PDAs, music players, feature phones, FM radios, and cameras and loss of business of Nokia, RIM and a few other firms are examples of smartphone disruption. However, the list of smartphone disruptions has not yet ended. Payment, financial services, ECG machines, and many other services are targets of smartphone disruption.
- Software technology powers smartphone disruption–smartphone has been unleashing disruptive effects due to growing Economies of Scale, scope, and network externality effects out of the growing role of software.
False start of the evolution of smartphone as disruptive innovation—IBM’s Simon
In the long journey of cell phone evolution, the unveiling of Motorola’s DynaTAC in 1984 was a profound milestone. In today’s standard, this device weighing 2 lbs and costing $3995 (equivalent to $9,831 in 2019) was highly primitive and expensive. However, the rapid of growth of silicon technology and lithium-ion battery opened the opportunity of making the product better, lighter, and also less costly. Although the cell phone was a predominantly electronic device for making a voice call, IBM envisioned the opportunity of bundling other complementary features making it a multipurpose gadget. This led to the turning of cell phones into smartphones, with the subsequent release of Simon, in 1994.
Simon combined mobile phones and PDAs into a single device. It allowed a user to make and receive telephone calls, facsimiles, emails, and cellular pages. A set of preloaded software applications, each for the calendar, address book, notepad, maps, stocks, and news, was a remarkable jump in cell phone evolution. In fact, Simon unveiled a new phase in the timeline of cell phones—the smartphone era. However, IBM got disappointed with the sales figure. In comparison to the sale of millions of PDA and cell phone units, the sale of 50,000 units of Simon in the first year seriously dented the confidence of IBM’s managers. Instead of releasing successive better versions to boost sales, IBM withdrew the product from the market. In retrospect, it was a grave decision-making mistake. It was a mistake due to not focusing on keep redesigning and releasing successive better versions to turn the loss-making beginning into magic.
Economies of scale, scope, and Externality Effect fueled the Natural tendency of monopoly
To make cell phones better and cheaper, innovators focused on changing existing hardware features with software and adding new software-centric features. Continued advancement of silicon technology and design of cell phone-specific central processing units led to turning cell phones into general-purpose computers. As opposed to electronics, operating systems and a set of software applications started dominating cell phone innovation. By the late 1990s, cell phones evolved as software-intensive smartphones–opening the door of scale due to the zero cost of copying software. This scale effect is at the core of turning the loss-making journey of Startups into profit. Moreover, the continued advancement of lithium-ion batteries kept meeting the energy need of growing computational requirements.
On the one hand, the zero cost of copying software offers a high-scale advantage. Software-centric innovations also opened the opportunity of getting Economies of Scope. Hence, innovators started developing smartphone features to make them suitable to serve the purposes of other individual products, like PDA. Due to this ease of convergence, the smartphone has grown as one of the great examples of disruptive technology.
Externality effects like the availability of content to be used by smartphones and also the unfolding of high-performing mobile broadband connectivity started to add further momentum to the evolution. As a result, at the dawn of the 21st century, business strategies for increasing the appeal and monopolizing the smartphone industry started driving smartphones’ evolution through software-centric innovations. As a result, it has been penetrating all the customer segments as a series of wavelets.
The uprising of personal digital assistants and its disruption by the evolution of the smartphone
In the mid-1990s, we witnessed the emergence of personal digital assistants. These software-centric gadgets got very high popularity for maintaining the calendar and sending e-mails. One of the notable PDA makers was Palm. The first PDA, the Organiser, was released in 1984 by Psion. Apple also introduced a PDA, called Newton. Many of those PDAs, including Newton and Plam Pilot, featured a touchscreen instead of a keyboard. They relied on having only a few buttons for user interactions—usually reserved for shortcuts to often-used programs. The user used to interact with the device by tapping the screen to select buttons or issue commands, or by dragging a finger (or the stylus) on the screen to make selections or scroll.
For taking the scope advantage, in 1996, Nokia introduced a PDA with digital cellphone functionality, the 9000 Communicator—giving birth to its smartphone series. Gradually, Nokia started imitating major PDA features starting from the touch screen, stylus to the full qwerty keyboard. On the other hand, PDA makers like PALM and also Blackberry started adding cell phone modules to their popular models. However, PDA makers could not compete with dominant cell phone makers like Nokia, due to scale and scope effects. Hence, both PDA and PDA makers suffered from the disruptive effects of the uprising of smartphone evolution. Such a success of mobile handset markets has been systematically ferreting out value from the market, as opposed to experimenting with random ideas.
Evolution of smartphone as a disruptive innovation to a digital camera—both still and video
The digital camera caused disruption to the film camera and its inventor Kodak. However, the success was short-lived. For taking the scope advantage, in 1999, Japan unveiled Kyocera VP-210, the first cell phone with a built-in camera. Soon after it, smartphone makers integrated camera features. Along with the progression of camera sensor resolution, compact plastic lenses started to emerge. Smartphone markets took this advantage and started to cause disruption to the compact still camera market. Smartphone makers began using increasingly powerful processors to support software innovations for capturing video images from the camera. Hence, the smartphone started evolving to disrupt portable video cameras. Through this evolution, both digital cameras and their producers suffered the burn of disruption.
Due to scale and scope advantages, smartphone makers kept causing disruptions to one after another device maker. Hence, it has turned smartphones into one of the great examples of disruptive innovation. Due to the software-centric approach for leveraging scale and scope effect, the smartphone has emerged as a disruptive technology. It has become quite easy to add software features or Apps to making smartphones substitute to many products, even torchlight.
A disruptive force to portable radio, music player, and iPod
For taking scope advantage of further, innovators started adding radios and music players to the smartphone. On the one hand, the marginal cost of adding each of those features to the smartphone was far less than the production of each of them as a separate product. On the other hand, the convergence offered better convenience to users. Hence, individual makers of portable radios and music players suffered disruptive effects from smartphones’ evolution. Its effect was so much so that Steve Jobs got afraid of the future of the iPod. It’s a great example, indeed, that a great idea grows through a Flow of Ideas. Besides the technology, the competition has been playing a great role in creating this flow. The competition force has been compelling all smartphone makers, including iPhone, to keep releasing successive better versions. Hence, it has turned iPhone into a seasonal crop.
Evolution of smartphone as a disruptive innovation to smartphone makers
With the release of the iPod in 2001, Apple avoided the impending threat of bankruptcy. However, within a couple of years of its successes, Steve Jobs got a clear signal that the ongoing evolution of smartphones was posing a threat to the future of Apple’s main revenue-generating iPod. Hence, as a survival strategy, Apple pursued the option of exercising the scope advantage. Apple embarked on adding phone features to iPod.
However, in addition to adding phone features, Apple also focused on multi-touch-based user interfaces. iPhone’s adoption of the multitouch-based user interface, as a replacement of a full qwerty keyboard and stylus, created significantly higher appeal than other dominant designs. Hence, the iPhone emerged as a force of disruption to both existing smartphone designs and their makers. Within just a couple of years, the iPhone emerged as the role model of next-generation smartphones. The disruptive force was so powerful that once-dominant smartphone maker Nokia suffered from liquidation.
Why was the first smartphone considered a disruptive technology?
As it has been explained, the smartphone started the journey as a fusion of PDA and feature phones. Hence, the intention of smartphone development was to cause disruption to major products: PDA and feature phones. Subsequently, smartphones became a disruptive technology to power several disruptive innovations. For example, as it has been explained, the digital camera feature of smartphones has caused disruption to both still and video cameras. It has caused disruption to portable music players, including iPod. Being a payment device, smartphones have been progressing to cause disruption to several financial service products. Having built-in vital health monitoring features, smartphones are also fueling apps causing disruption to several healthcare devices. Furthermore, the availability of numerous apps has been expanding the scope of making smartphones a highly powerful disruptive technology.
Apple leverages the natural tendency of the monopoly of smartphone
As explained, the increasing role of software has been expanding the economies of scale, scope, and externality effects on smartphone evolution. On top of it, Apple adopted a third-party complementary application plug-in feature. Subsequently, Apple established the apps store and started promoting the app developer community. As a result, the iPhone’s perceived value kept increasing with the availability of a growing number of apps on the app store. Consequentially, these effects are creating a natural tendency of monopoly in the smartphone industry. Apple is one of the most significant beneficiaries of this underlying characteristic. Apple has been creating this critical success out of its sustaining innovation strategy of the iPhone.
Upon following the footstep of Apple, Google released Android OS for imitating the iPhone features. In course of time, along with Samsung, many other smartphone makers started offering multitouch user interface-based smartphones. The race also continued in adding new features and also improving existing ones. For this reason, Apple has been releasing successive better versions. Some of the most visible ones are increasing screen size, growing camera resolution, offering additional cameras, adding the photo and video enhancement features, and offering folding screens.
It seems that the evolution of the smartphone as disruptive innovation is unstoppable. Over the last 20 years, innovators have turned it into a software product creating high economies of scale, scope, and externality effects. The journey of evolution has disrupted several products and their producers. The march is on. The transformation of services to digital space adds a further moment to this evolution of smartphones as disruptive innovation.