Business Lessons From the iPhone’s First Decade

There's one more thing...

Blame those leaks and rumors, but Apple events aren't quite what they used to be. New products were once shrouded in secrecy. And when the time came for the big reveal, Steve Jobs knew how to impress time after time, delighting the audience with that now-famous one-liner, "one more thing..." and the latest lust-worthy device or service. Here's a look at every announcement Jobs surprised us with from 1998 on.
Photo: Jerome Brunet/ZUMA Press/Corbis

Steve Jobs’ famous iPhone introduction—10 years ago today—kicked off one of the most successful business runs in history, lifting Apple to its current position as the most valuable public company in the world.

Few aspects of the iPhone’s design, or Jobs’ subsequent strategies to ensure its continued popularity, followed the conventional wisdom of the day. At the time, Nokia dominated the mobile phone market with slick-looking handsets. As the market was just hitting 1 billion units in sales a year, Jobs said Apple (AAPL) was aiming to grab 1%, or just 10 million phones. The product beat that target in its second year and reached a peak of 231 million phones by 2015. Last year, the momentum finally crested, but the iPhone remains an incredible profit-generating machine.

And that’s made it perhaps the most scrutinized product case study in recent business history.

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“Too often, only modest advances are overhyped as ‘world-changing’ and ‘revolutionary,’ but I believe those phrases understate the impact of the iPhone,” Sprint CEO Marcelo Claure told Fortune. “Steve Jobs and Apple didn’t just create a product and then market its features. They sparked a true technological revolution because they’ve always had a laser focus on providing billions of people a better way to do the things they do every day.”

To Harvard Business School professor David Yoffie, Apple has been able to flourish for so long because it never considered the iPhone in isolation as the thing it was selling. Instead, Apple saw the iPhone as a general computing system that could offer a bevy of software apps, quickly opening the system to outside developers as well. Beyond apps, the phone was also a new vehicle to sell media and online services, not to mention lucrative accessories.

“The most important lesson of the iPhone’s success is that it was never just a product,” Yoffie said. “Apple built a platform and entire ecosystem around the iPhone, which enabled it to withstand the powerful forces of commoditization which struck every other firm in the industry worldwide.”

Other hardware vendors have tried to take the platform lesson to heart, but not every product can become the center of its own ecosystem. The recent struggles of Fitbit (FIT) and GoPro (GPRO) demonstrate some of the challenges.

And Apple’s success wasn’t guaranteed from the moment Jobs revealed the iPhone, either, Yoffie points out. Apple made some early mistakes, and Jobs had to be flexible. Initially, there was no app store or third-party software, the phone was priced at $600 ignoring the subsidy system prevalent at the time and it lacked high-speed 3G connectivity, Yoffie noted. Some flaws were by design, others caused by technological limitations. Apple had to move quickly.

“Apple, at least in the early days, was flexible and nimble in adjusting the iPhone strategy, after a slow start,” Yoffie said. “In other words, unlike many companies when things go wrong, it didn’t get stuck.”

Throughout, Apple kept its focus on the users, another key lesson according to Michael Cusumano, a professor at MIT’s Sloan School of management. Companies need to focus on the way users will interact with their products as much as the technology inside, he said, crediting Steve Jobs for recognizing that “the user experience is king.”

Unlike Microsoft founder Bill Gates or Apple co-founder Steve Wozniak, Jobs was not a hardcore geek. He cared less about the iPhone’s technical specs and more about creating the easiest-to-use phone ever made.

“All the earlier PDAs and handhelds like the Palm Pilot or the BlackBerry or Microsoft’s phones were hard to use,” Cusumano said. “The iPhone was so elegant, so simple to use. The ease of use of the iPhone really made it stand out from everything else that had existed before that.”

Competitors didn’t take the iPhone seriously at first. Then-Microsoft (MSFT) CEO Steve Ballmer laughed at Apple’s first effort. BlackBerry (BBRY) executives derided its lack of a physical keyboard. And Nokia’s chief executive Olli-Pekka Kallasvuo took to calling it a “niche” product. Ultimately, though, the Apple’s relentless focus on ease of use won out.

But Jobs’ strength has also proven to be a weakness in one way, because the more recent lesson of the iPhone is that any great design will be copied, Cusumano said. Despite Apple’s numerous patents and trade secrets, the company was unable to prevent to Samsung and others from collectively far surpassing the iPhone’s market share with almost identical products.

“A stand-alone product cannot stand alone very long,” Cusumano said. “It may become a platform, but it will still be copied.”

For more about this year’s expectations of rumored iPhone, watch:

Apple decided to maintain its profit margins and has not expanded by offering cheap models or licensing its software to others, leaving ample space in the market for the copycats to dominate.

Still, Apple continues to garner huge profits–$46 billion in its most recent fiscal year–and many analysts think the 2017 iPhone upgrade will be the best seller yet.

“It’s not a 30-year run like Microsoft Windows has had but it’s a pretty good run,” Cusumano said. “And it’s not over yet.”

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