We are all after big ideas. There is no doubt that the iPhone idea is a big one. It has been the driver of transforming Apple from nearly bankrupt to a multi-trillion-dollar company, reaching an over $4 trillion market capitalization by the end of November 2025. In addition to offering a significant stock price gain, the iPhone has been generating highly profitable and considerable revenue. In 2024 alone, the iPhone generated $201.2 billion, accounting for 51% of Apple’s total annual revenue. Besides, iPhone’s gross margin is generally estimated to be high, with recent models ranging from 50% to 60%. Furthermore, the iPhone concept has revolutionized the entire mobile handset industry. Such a remarkable performance makes us intrigued about the lesson of finding big ideas.
Does it mean that iPhone emerged as a big bang? Surprisingly, no. Most of the analysts expressed skepticism. In the era of smartphone dominance by BlackBerry, Nokia, and Motorola, the entirely touch-based interface of the iPhone was seen as impractical, even frivolous. Notably, Steve Ballmer, then CEO of Microsoft, laughed off the iPhone. In those days, abandoning physical keyboards was beyond imagination. Besides, the high price and likely resistance from mobile carriers to Apple’s vision of an all-in-one device led to analysis in favor of “Why the iPhone will Fail.”
Precursors to iPhone Idea: Marked with Failure
Despite a magical performance, the iPhone was not a Eureka moment, emerging as a creative spark in the mind of Steve Jobs. Before the debut of the iPhone in 2007, several predecessors emerged and ultimately failed to achieve any business success. Notable ones are Apple’s Newton and IBM’s Simon.
Apple’s Newton: In 1993, Apple released the Newton, a keyboard-free personal digital assistant. It had a large screen and a touch interface with a stylus. Besides, it had handwriting recognition capability, although it was buggy. Newton devices were pre-loaded with a variety of software, including applications such as Notes, Names, Dates, a calculator, conversion calculators, and time-zone maps. In version 2.0 of the Newton OS, in addition to refining these applications, new ones were added, such as a word processor.
Most importantly, the Newton Internet Enabler and the inclusion of bundled 3rd party applications were notable enhancements. Unfortunately, the sale of Newton was very slow. As a result, Steve Jobs, as a CEO, directed the discontinuity of Newton in 1998. However, despite commercial failure, Newton’s many ideas seeded Apple’s later popular products, the iPhone and iPad. Hence, it could be argued that the iPhone idea is not entirely new.
IBM’s Simon: IBM introduced the first smartphone in 1994. Its name was Simon. With features like a soft keyboard, application icons, a touch screen, PDA capabilities, and a cellular phone, the Simon qualified as the first smartphone. Although Global smartphone unit sales in 2024 reached approximately 1.22 billion to 1.23 billion units, IBM Simon faced sales of only 50,000 units. Consequently, IBM anticipated no significant demand for the smartphone idea and discontinued it.
The iPhone Idea was not New—discarded by others: As explained, devices similar to the iPhone surfaced long before the iPhone’s birth in 2007. Even Apple itself brought one, the Newton. Due to commercial failures, they were discarded, making the iPhone a largely unprofitable venture.
Rise of Discarded Ideas as an iPhone Idea
As explained before, iPhone-like products could not resonate with high-volume sales. Hence, they retired without generating profitable revenue. By the way, like them, more than 70% innovative products face a similar fate. More importantly, the first version of the iPhone (iPhone 1) sold a little more than a million units. By the end of the first year of release, sales had dropped to almost zero. No estimate suggests that Apple made a profit, after recovering four years of development costs, from the sale of 6 million units. Such a reality raises questions about how the iPhone idea succeeded as a big idea. Here are a few reasons:
Resonating with consumer-unfolded latent demands: Unlike the period when Newton and Simon were released, in 2007, consumers were looking for a large screen to browse the internet, send emails, and watch videos. Unfortunately, the keyboard-centric design of smartphones may not meet the requirements due to the limitations imposed by the small size of the palm. Hence, the iPhone’s keyboard-less design resonated. Additionally, the stylus-free design also offers an added advantage for intuitively manipulating visual objects, scrolling, and zooming.
Fusion of multiple products: iPhone was a fusion of four essential products: (i) iPod, (ii) PDA, (iii) Internet browser like a laptop computer, and (iv) mobile phone. By 2007, all four products had become indispensable to target customers, even as they were on the move. Hence, the iPhone, as a single device serving the purposes of all four products, became highly attractive.
Development of cellular network: To take the full advantage of iPhone as a fusion of four products, there was a need for access to high-speed cellular internet services. For this reason, the release of the iPhone 3G version saw a sharp increase in sales, with 1 million units sold over the first weekend. The subsequent advancement of the cellular network provided a positive Externality Effect.
Development of complementary technologies: It would be unfair to attribute the entire credit for the rise of the iPhone idea as a groundbreaking concept solely to Apple. Advancement of complementary technologies played a vital role. Size, weight, and poor display resolution were significant limitations of iPhone predecessors like the Newton and Simon. To be a favorable palm-top device, the iPhone also faced those barriers. They were addressed by others, including battery innovator Panasonic and display innovators such as Samsung, LG, and Japan Display. Additionally, the increasing popularity of later iPhone versions was primarily driven by the advanced camera module, developed in collaboration with Sony. Furthermore, apps developed by 3rd party developers also created a positive network externality effect.
Evolution through the release of successive better versions: The iPhone idea was not a big hit on its first release. Instead, within one year, the sale of iPhone dropped to almost zero, and Apple could not recover the R&D costs. This remarkable idea is illustrated by the behavior of seasonal crops. Its success stemmed from its evolution through the release of successive, better versions. This evolution has been at the core of driving revenue and profit growth, making it a remarkable Innovation success. As a result, Apple’s stock price experienced exponential growth from 2009 to 2024.
Lessons for Big Ideas
There have been many valuable lessons from the rise of the iPhone idea as a big idea from humble beginnings and repeated failures of its processors. Here are a few:
Big ideas do not appear as a Eureka moment: Like the iPhone, invariably, all big ideas emerge in a primitive form. Hence, despite the uniqueness, they are rejected by the mainstream market. Therefore, there is a likelihood that inventors will face failure and give up.
Big ideas are free: To be big, they should be far different than existing ones. Hence, innovators face significant barriers to roll them out at a profit. Instead, they face rejection like Newton and Simon. Therefore, after suffering from loss of money, time, and interest, they give them up, making initial versions of great ideas free.
Ideas become big through evolution: Although the iPhone 1 was considered a groundbreaking idea, its sales dropped to almost zero within one year, without recovering the R&D investment. It has evolved significantly over time, due to the release of successive, improved versions.
Demand the development of complementary technologies: Irrespective of the greatness, a single idea does not become big. For its blooming, there has been a need for complementary technologies to create a snowball effect.
Timing for Resonance: To create a resonance between consumer preferences and the idea of alternatives, timing plays a crucial role. The growth of multiple ideas should complement creating resonance, much like the way the iPhone benefited.
It seems that big ideas do not always appear as big ones, creating a Eureka moment. Like the iPhone idea, their predecessors suffer from failure, resulting in them being left free. Success depends on evolution and timing to create a snowball effect. Hence, managing the life cycle has been at the core of growing big ideas.
