new-market disruption

Is Febreze Disruptive? It Might Depend What Job You Hire it For.

I often start by reminding clients and prospects -- anyone who will listen -- that an innovative technology is a nice thing to have, and can certainly enable market disruption if it uniquely enables a large sustainable cost advantage, or a new way of doing things that is easier or more convenient. But technology is neither necessary, nor sufficient for disruption to occur.

Disruptive innovation is not about technology

Netflix was a good example in their early days. Yes, you placed orders for movies through a website, but there was nothing about the website that was novel or necessary in order to disrupt Blockbuster. In fact, they were considered a tech play because of the website, but there was nothing about technology that made Netflix successful (something they would have done well to remember when they tried to force an ill-advised price change on customers last year to combine streaming video and mailed DVDs). When Blockbuster added their own website and copied much of the mechanics of Netflix's ordering, it made no difference to their survival and did not enable them to prevent being disrupted.

Netflix's disruptive innovation was driven entirely by their business model. Apparently inferior to Blockbuster in the lack of physical presence to visit and browse movies and take something home to watch NOW (at least that's how Blockbuster positioned themselves against Netflix), they identified unmet and underserved market needs and created a new business model to serve them. By sending DVDs mail order from a central location, Netflix eliminated the huge cost of stores, and having inventory where it wasn't needed, and in the process enabled:

  • limitless catalog
  • convenience of not having to make a trip to the store either to pick up or return videos
  • low cost for high volume renters aka the best customers (flat subscription pricing rather than per video)

and removed friction in the rental process:

  • no late fees -- the number one complaint against Blockbuster and traditional video rental models
  • frustration when a desired title wasn't on the shelf

Dramatically lower costs could be passed on to consumers (and sustainable cost advantage is one of the key drivers of disruption), enabling rapid growth, and strong word of mouth helped Netflix avoid big marketing costs to grow.

What does this have to do with Febreze? Well, I started with Netflix because it is an example commonly misunderstood to be a technology-based disruptive innovation, when it really has nothing at all to do with technology, but is entirely about the process, the business model and the marketing. It's a company that most of us are familiar with, especially after its recent missteps, and it helps us make the leap to talking about a disruptive innovation that doesn't have any "tech" in it at all.

How the heck is an air freshener in a crowded marketplace an example of disruptive innovation?

Febreze is fascinating, because it started its life doing everything wrong, the way most "big company" new products are introduced to market. It was a product designed to be sprayed on draperies that reeked of cigarette smoke, a smelly sofa that was frequently inhabited by a wet family dog, or a room where cats had done their thing on the floor. It's purpose was to neutralize the odor.

The problem was, this was a made-in-the-boardroom problem. Although it seems reasonable to imagine that people are embarrassed and repulsed by these smells and would want to get rid of them, in the real world, the people who most needed to fix this problem didn't believe that they had a problem to fix. In the real world, people build up tolerances to smells the more they are exposed to them, and may even associate that "wet dog" smell with positive feelings. So, while any visitor to such a home might be hit in the face with detestable odors and wonder how people could live that way, the person who lives there has masked the smells in their mind and has no idea that their house smells like smoke, or like cat pee. And, even if they smell it a little bit, they certainly don't perceive their house to be unclean and in need of yet another kind of air freshener product.

So, when P&G launched Febreze as an odor-killing unscented spray in the mid-90s with ads targeting the homeowner's love for their pets, but hate for their smell, there was no resonance in the market with this messaging (might they have done better to target visiting friends instead?), and it was a complete dud in the market, with sales falling each month, rather than growing.

This scenario is laid out in a New York Times article (see pages 4 and 5 for the bit about Febreze) that details the work of behavioral researchers in understanding habits to influence purchasing decisions. The company was perplexed and sent researchers out to the field to try to understand what was happening with happy users of Febreze who were using lots of it, and what was different about them. Did they have more sensitive noses? Were they more anal about cleaning? Were they more socially embarrassed about the smells when visitors came over?

Febreze became an innovative market disruptor, almost by accident

It turned out that there were some avid users who had built spraying into their regular cleaning habits as a reward for finishing, so when the bedroom was finished being cleaned and tidied, a quick spray of Febreze on the comforter was the icing on the cake. When the laundry was clean, a spray of Febreze confirmed it. When the living room was cleaned and the sofa vacuumed off, Febreze was the finishing ritual. It wasn't that they perceived their homes to be dirty or in need of de-smelling, but that the spray at the end was a finishing detail to signal completion and get that little endorphin high that comes with completing something.

The happy ending is that P&G discovered this counter-intuitive behavior, and built this notion into their marketing. Sales exploded, to the point that it is today a best-selling $1B franchise. The now familiar ad template shows a giddy, self-gratified housewife who has finished the cleaning, gives it a shot of Febreze and closes her eyes to breathe in the warm fuzzy feelings. Or, more prosaicly, a quick spray when finished the task was the reward for finishing - the idea being to associate the product with habit formation and the good feeling of being done with the work and knowing that things were clean. In other words, rather than promoting it as a cleaning product, they are promoting it as something you should do after cleaning was complete.

So, the NYT article is about how statisticians and behaviorists are decoding habits and using them to sell to us, and the Febreze story is just a small piece of it, but it got me to thinking. What's interesting is that the original launch of Febreze was supported by conventional wisdom and conventional marketing. I'm sure they did research that confirmed everyone would like their homes to smell cleaner (a common symptom of bad market research is "confirmation bias", where people selectively remember things that confirm what they already believe to be true, or in this case, remember how much they dislike the smell in everyone else's home even when they don't recognize it in their own). Febreze would have been just another incremental and sustaining cleaning innovation, but for the discovery of this anomalous behavior of a few avid users. It may even have been cancelled for lack of sales had behavioral researchers not discovered the pattern of women using it when finished cleaning a room, rather than as a way to deodorize pet smells.

But hidden in the research story is that Febreze's ultimate success points to some critical factors that all "new market" disruptive innovations exhibit. Most notably:

job to be done. Early on, marketers positioned Febreze as an air freshener because they didn't understand the "job" that consumers were hiring it to do. It turns out that people didn't believe they had a smell problem. But, a quick spray at the end of cleaning a room created a habit-forming ritual that said "I'm done. This is clean and fresh and I can move on to the next room." A reward, and a signal of being clean, rather than a coverup of something shameful. Had the real job not been discovered, Febreze likely would have failed in the market as one of thousands of similar cleaning product innovations. By precisely targeting the job that the consumer identified with, they created positioning that is virtually impossible to dislodge them from. (Download this classic article which describes why identifying the job to be done is so important.)

target non-consumption. There were a small number of people who felt they needed a bandaid solution to mask disgusting smells. However, most people didn't recognize or agree that their house smelled bad, but did see a quick spray as a finishing touch -- almost like putting some sparkle on their lip gloss. By targeting the larger market of people who did not think their houses stunk and needed air fresheners as masking agents, but who did clean their houses, Febreze was able to identify a unique niche to dominate and grow from (now, people do buy Febreze as a quick fix to mask unpleasant odors, but that came later).

serve an unmet need. There was clearly an unmet need to signal "I'm done" and have a little celebration before moving to the next room. I suspect we all have this little celebration, whether we use Febreze or not, we step back and admire our work, smell the air. Febreze sprinkles the fairy dust that completes the job (that's how the ads seem to portray it). Originally unscented (because it was to mask odors, not replace them), Febreze now comes in many perfumed scents to leave behind the smell of "being done".

identify a new market. The new market for a deodorizing spray was people who viewed it as a finishing tool for cleaning. The people who it was originally designed for (those with smelly houses) didn't think they needed it, so the only way to sell it was to identify a new (adjacent) market where there was an unmet need.

Startups who are designing groundbreaking technologies that they believe are "disruptive" do well to remember these lessons. Disruption is a theory about marketing, not about product development or technology. To disrupt a market, you must be able to articulate a "job to be done" for which your target audience believes there is no better solution. You must meet an unmet or under-served need -- it's easier to sell to people who aren't part of the existing market (non-consumers who have opted out, and indicated that no available solution either satisfies the "job to be done" or is priced affordably), than to compete against incumbent solutions claiming to be better. And, you either need to be a "low-end" disruption (one which is targeted at the least demanding market segments based on pricing and sustainable cost advantage) or a "new market" disruption (create a market where none existed before).

Marketing and business strategy drive disruption

None of these characteristics have anything to do with building technology, but everything to do with appropriate segmentation, product positioning, messaging, and the compelling reasons why I would select your solution over all other available alternatives (which aren't necessarily products in the same "category"). Febreze ended up being a disruptive innovation because it succeeded (albeit after the fact) in marketing strategy, not because of how the product was designed.

Your thoughts?


Is Disruptive Innovation important to your business strategy? Download a free copy of the eBook 'Disruptive Confusion Unraveled' to learn:

  • the 6 most common misconceptions about disruptive innovation
  • how disruption creates growth
  • what it means to be disruptive and why the definitions matter
  • how to predict market disruption
  • how to measure the market value of being disruptive

Disruptive Business Strategy: What is Steve Jobs Really Up To?

Two days before the official launch of the iPhone, the pitch of media, pundit and public anxiety over perhaps the most anticipated new product since Windows 95 has reached a level only Steve Jobs could properly describe -- Insanely Great!  And here I am, contributing to the noise, raising it even a decibel louder if that's possible.

How loud is it?  As I finish writing this post, Technorati says that there are nearly 189,000 blog postings (in English -- there are nearly 305,000 in all languages) that talk about the iPhone. 

iPhone Debut Rivals Harry Potter Mania, But Will It Last and Why?

Compare that with 39,170 that mention Motorola's RAZR, a phone that was the previous biggest smash hit and which literally put Motorola back in the cell phone business after years of decline.  Nearly 6 times the level of mention of a phone which has been exceedingly popular, a design hit, has been in the market since 2004 and which exceeded all other flip phone sales within one year of its release. 

And, the number of postings that include mention of the iPhone has been rising by over 1,000 every 4 hours today, and you can count on it growing even faster until the pent up hysteria is released at 6pm on Friday.  And, the chatter certainly won't stop then.

Every major media outlet has weighed in.  The Wall Street Journal, New York Times, USA Today, every computer or telecom related industry trade journal has reviewed it.  Virtually everyone who's been privileged to receive one of the media samples for review has said it's cool -- so cool it almost lives up to its hype. 

Like the mania for video game consoles or Harry Potter books, prospective customers started waiting in line outside flagship stores in New York Tuesday morning.  Unprecedented for a phone.

Think about it -- the entire country seems locked in a heat wave, with most major cities experiencing temperatures in the mid 90s or higher.  Yet, people are so lustful of being one of the first to own an iPhone, that they will camp outside a store for 4 days in the sweltering heat to lock in to a 2-year service commitment from AT&T, the worst service provider in the business (more on that later).

So, does all this mean runaway success -- the game is already won?  Or, will there be an equal and opposite reaction when possibility and excitement about the future gives way to reality, and inevitable issues with service, availability, bugs in functionality and unfulfilled expectations?

Apple fanatics say it will be successful because it is ultra-cool, easy-to-use, a breakthrough in design elegance and software sophistication. Naysayers say nothing could live up to this level of hype, and that when things die down, sales will appear lackluster no matter how good they are.

Virtually everyone notes the stupidity of getting into an exclusive deal with AT&T and warns that this could be the albatross around the iPhone's neck. Almost all of the speculation and predictions are based on visceral and emotional reactions, and influenced heavily by the reality dispersion bubble that surrounds Steve Jobs, and by the majority belief that "better" wins. 

But if we run with that notion reductio ad absurdum, what exactly does 'winning' mean?  Assuming that the consensus is that the iPhone is a better phone, does it have to achieve market dominance as a late entrant the way the iPod has in the MP3 player space?

Surely it doesn't have to match iPod's 80% market share within 5 years! There are over a billion mobile phones already in use around the world.  Is a 10 or 20% market share strong enough to be considered successful? (The RAZR's share is only around 5%.)

Is this even the right yardstick to use?

The iPhone Will Be a Disruptive Winner

iPhone will be successful regardless of the metrics used.  It will be successful beyond the expectations of the most enthusiastic pundits. 

It will be successful beyond what Steve Jobs thinks.  It will be successful in spite of the apparent deficiencies that have already been noted in the reviews. It will be successful despite partnering exclusively with a single carrier, and the one most despised in the industry -- although this will be the biggest road bump the iPhone faces

It will be successful because it will change the game -- actually, it will change many games, and therein lies the secret of its success.  It will do all this because it will be disruptive. 

But, predictions are dangerous. And, mine disagree with those of many people whose opinions I respect and whose theories I borrow from. Even though I'm siding with the majority who believe the iPhone will be a big winner, how do I arrive at that conclusion and what exactly makes it disruptive?

Who Disagrees With Me

Before explaining what the highly respected experts are missing, let me first say who some of them are and try to summarize their positions.


Innosight is the consulting company formed by Clayton Christensen to sell management services around disruptive innovation. Clay developed the original ideas and theoretical framework that underlies disruptive innovation in his series of books - The Innovator's Dilemma, The Innovator's Solution and Seeing What's Next. Saying he (or his minions) have it wrong is like saying that the pope isn't Catholic.

In January, after the original announcement of the iPhone, Innosight consultant Jonathan Barrett said:

  • at $500 or $600, the price is too high
  • Cingular (now merged into AT&T) is incapable of providing the same high quality, seamless user experience that Apple customers expect
  • iPhone won't work on 3G high speed data networks -- only EDGE or Wi-Fi is supported -- so there won't be anything unique or distinctive about the wireless service
  • the deficiencies plus high price point will prevent iPhone from finding a market sweet spot
  • the approach of Apple is a "sustaining strategy" (i.e. incremental innovation of the cell phone), not a disruptive one, positioned against deep pocketed, long time industry incumbents who have a lot to lose if Apple wins and will fight fiercely for share

He reaches his "not disruptive" conclusion while still finding many things to like, such as lack of keyboard, design beauty, novel interface, thinness and coolness factor.

Mike Urlocker

My colleague, and the CEO of The Disruption Group, has a stronger technology, industry and investment background when it comes to the iPhone, having been the original analyst at UBS to identify the RIM Blackberry as a disruptive product and the first to recommend RIM as a strong buy. Mike has worked for and advised software companies on marketing strategy, and at UBS he was executive director and member of the global technology and telecom teams.

In his Disruption Scorecard evaluation of the iPhone, again shortly after the original announcement in January, Mike rates it a B-, and labels it likely a hit, but not very disruptive.  He reasons that the product appeals to people who want status and high design (the coolness factor) and are willing to pay for it, but that it doesn't have much potential to change the game like Blackberry did, or upset incumbent rivals such as Nokia, Motorola or Samsung.

Laura and Al Ries

Branding and positioning experts Laura and Al Ries (Al Ries and Jack Trout wrote the original book that defined the concept of positioning) take a different tack, identifying the iPhone as a "convergence" product, and the iPod as a "divergence" product. The concepts of divergence and convergence come from Evolution Theory -- basically, the idea is that there is a common origin to all species, but that over time the "tree of life" diverges as natural selection creates specializations to adapt to the environment.

Another failed convergence product.

Another failed convergence product.

Similarly, Al and Laura (and other pundits too) argue that the natural trend for all products is towards divergence and specialization to better suit consumer needs.

They claim the iPod was successful because it was a divergence product. Moreover, they argue that most "convergence" products fail -- convergence being when multiple feature categories are combined in a single product (in iPhone's case, an iPod, cell phone and PDA).

Their position is that consumers prefer products that are optimized to do one task well, rather than a lot of tasks poorly, and they further claim that the iPhone has been over hyped and most over hyped products fail to live up to expectations, therefore the iPhone will be a failure.


Most of the others who claim the iPhone will be a failure base it on their own personal biases rather than what the market as a whole is likely to do and why -- "I'm not going to get one because . . .".  Name your complaint here. Price, lack of keyboard, slow data network, AT&T as carrier, touch screen keys too small to hit accurately, it will have bugs in version 1.0, etc.

So, what are they all missing, and more to the point, what is Steve Jobs really up to?

The Label Problem

One of the problems with evaluating anything analytically is that we get hung up on labels rather than thinking about what the labels mean and why the rules of thumb associated with them usually work. In the case of the iPhone, there are many labels and definitions being applied that are throwing people off the scent of what's really happening and my belief is that this is deliberate.

Yes, Steve is trying to fool the experts and fly below the analytical radar, ironically while mounting one of the most pervasive and successful hype build ups of all time.

To start with, the name iPhone is a mislabeling. While iPhone does indeed have phone capability in it, it is not a phone. Suspend disbelief for a second, walk with me a little, and it will all make sense soon.

Is your laptop PC a phone because you can make GoogleTalk or Skype calls using it? If not, why not?

Does it matter that it isn't the only thing you do with it? What if that was the most important thing you did with your PC, because you make a lot of calls to India, and free long distance service is worth a lot to you? Still not a phone?

Well, if your PC isn't a phone, is it a typewriter? I know that the primary purpose for my PC is typing documents, blog posts and html. I print a lot of those on paper. Mine is definitely an evolved typewriter.

Or maybe your PC is really a gaming console, or a mobile email device because you use it at home, at work, at Starbucks and at hotels and other wi-fi hotspots around the world to send and receive emails. Or, maybe it's just another example of a highly unsuccessful convergence device?

Or, do you still think your PC is something else?

The iPhone is Definitely Not a Phone

So, if you were willing to suspend disbelief and suppose that the iPhone might not be a phone, what is it then? Let's start with why it's called an iPhone.

iPhone is both sales positioning and a ruse. iPhone is positioned as a phone because Apple knows that in that niche, the market is sorely lacking for a stylish, easy to use, fun, visual, well-designed and well integrated device. It is a first if only because of its elegance. Don't believe me?

Then why isn't it really an evolved iPod?  One with a really big screen, beautiful graphics and music navigation, and by the way, it includes the ability to make phone calls?

The reason is because Apple believes this is the purpose that you will understand out of the starting gate, and for which it can convince people to shell out $500 or $600 to get the most stylish and coolest gadget on the block. Therefore it is positioned as a phone, and that's the basis on which everyone is analyzing it, and writing glowing reviews. But it isn't a phone.

It's also a ruse, because Mr. Jobs has a much higher goal in mind than selling the world's coolest phone. But this is an effective way to divert attention from the real disruption that is happening until it's too late.

Why This Makes Perfect Sense

Let's get a historical perspective to make a little more sense of this. When Alexander Graham Bell invented the telephone and tried to sell his patents to Western Union in the late 1870s, how do you think he described what it was?

No one had a framework to describe how revolutionary the phone would be as a communications tool. If you wanted to talk to someone, you went across the street, knocked on their door, and if they were at home or in their office, you could talk.

Initially, outside of the securities industry, people couldn't even understand why they would want a phone. Especially since the first version could only work over short distances due to signal loss on the wires. There was no network, there wasn't any need for communications to be sped up that much and nobody else had one, so how much use was it?

Bell considered the telephone to be a way to transmit voice over the telegraph, and that's why he thought Western Union would buy his patents. Bell viewed the telephone, perhaps one of the most disruptive technologies of all time, as an incremental ("sustaining") innovation over telegraphy.

Western Union, on the other hand, viewed it as being worth less than $100,000 since they rejected the offer to buy the patents for that much, although they later tried to buy them for $25 million.

Do you consider your telephone today to be a highly evolved telegraph? If you can imagine that, what about your cell phone, or is it different because it's mobile? What then of the iPhone? Just a space age telegraphy device with no keys or dials?

The important thing to note here is that in the early days, it is difficult to imagine the application and importance of disruptive innovations if they really are, because no one has a framework to understand its value.

That's why the car was positioned as a horseless carriage. That's why TV was radio with pictures. That's why the first computer was called ENIAC -- or the Electronic Numerical Integrator and Calculator. 

That's right, the first computer was just a calculator that cost 200,000 man hours to build, $486,804 in 1946, and used $650/hr worth of electricity to sit idle. Some times the original naming belies the importance of an innovation.

So, positioning of an innovation in the short term is not the same as long-term recognition of value and the salient characteristics that define its use. If not for the need to calculate missile trajectories more quickly and accurately during the war, the first computer might never have been built.

And what of convergence versus divergence? Most consultants and branding experts will tell you that convergence as a strategy almost always fails, because the more things you combine into one, the more compromises you have to make in design, and each individual function is sub optimized at the expense of the whole.

In disruption theory, a parallel idea says that as companies continually add sustaining innovations to better meet the needs of mainstream consumers and/or differentiate their products, they eventually overshoot the needs of most of their customers. Convergent products usually exceed the needs of all but a small minority of any prospective customer base. After all, who needs every tool on a Swiss Army knife?

That's the theory, but the reality is that when you try to apply simplistic labels to categories or products and then assign attributes or success factors based on those labels, you can miss the forest for the trees. In the case of convergence versus divergence, this is especially true, since which bucket you assign a product to varies based on whether the combined elements are truly synthesized in such a way that they cannot be separated and provide the same benefit, or whether they are just bolted together and not really integrated to optimize overall performance.

Ask yourself whether the combination of radio technology, speakers and a cathode ray tube to make a TV represents convergence or divergence? Is it the evolution of radio, or are the elements synthesized in such a way that they create something truly new?

If I turn on the TV, but listen to it from another room, is it still a TV, or is it a radio? Did the TV fail because several technologies converged? What about personal computers?

So what is the iPhone, and what is Steve really up to?

It's a handheld one of these. Fits in your pocket too.

It's a handheld one of these. Fits in your pocket too.

The iPhone is disruptive because it isn't really a phone, or for that matter, an iPod. If it was either of these, then as cool and elegant and nicely designed as it is, it would still just be an incremental or "sustaining" innovation.

Remember that the iPhone has a complete version of the Mac's OSX operating system embedded, plus it lacks a keyboard and has a truly novel interface with seamless integration between different functions. With all that, it can be considered as the first truly personal handheld entertainment and communications computer.

It can also be considered the first handheld business computer powerful enough to replace a notebook for road warriors tied of lugging all their paraphernalia through airport security. In other words, it competes in a different class of products -- not as a phone, not as a smart phone, and not as a computer.

It serves the un- or underserved need for lightness, simplicity, ease of use, true integration and is simple enough that my mother could use all the features without thinking about each being a different application or device. Competing against laptops, it doesn't yet have all the applications my PC has, but it is "good enough" that many will be ready to give it a try.

And, there are already numerous applications you can download to enhance the functionality for your needs, and many more business applications (especially things like bluetooth connectivity to a real keyboard, document editing, spreadsheets and presentation capability) which will run in Safari are likely to come. 

And, when compared to a laptop, it is disruptively inexpensive. Analogous statements are true if you evaluate it as a personal communications and entertainment computer.

This is, I think, what the huge excitement is about. People innately sense that this is much bigger than a phone, they just aren't yet able to articulate what is significant about it, and how we'll look back on Friday June 29, 2007 as one of those days when everything changed. 

And, it looks really cool and I desperately want one.

Steve's End Game

The iPhone is a trojan horse.

Steve lost the first battle between the PC and the Mac because he was less sophisticated as a business person in those days, and didn't fully appreciate how difficult it would be to convince the masses that they needed an expensive personal computer before they had even used one at work. In 1984, the Mac exceeded the needs of most potential customers, and looked like a toy to business (unless your business was about graphics or publishing).

The DOS-based PC was the "good enough" disruptive innovation of its time because it catered to mainframe users used to buying computing equipment from IBM and used to looking at green-screen character-oriented terminals.

This time it's different. Almost all of us use PCs daily. And, most of us are tired of the now clunky-seeming interface which isn't much different or easier to use than the initial Mac interface of more than 20 years ago.

And, we desperately need a single, small pocket-sized device that can handle all our business needs while on the road and enable us to leave our 10 pound paperweights at home. Something that's easy to get through airport security, and makes my life less complicated.

Moreover, at the price point of $500 or $600, this is something that every road warrior can afford today, if only as a style accessory. So, the decision won't be made or inhibited by corporate IT departments.

Sure, they'll try to block connectivity to their servers on security grounds -- they always do, because they think computers are about them, not about the users' needs. Of course, the iPhone includes VPN connectivity, and most have already got their heads around that. But so many executives will have these that just like the Blackberry before it, corporate acceptance will be very fast. And, once you've adopted the iPhone as your traveling computer, how much of a jump will it be to make your next notebook/desktop for office use be a Mac?

My Prediction

As a phone, the iPhone will be exceedingly popular. If production can keep up with the demand, I believe that Apple will sell more than 2 million before year end 2007 -- if they can scale fast enough and have a new version out in time for Christmas, maybe as many as 5 million.

Steve Job's stated target is 10 million sold by end of 2008. Given that there will probably be at least 2 more versions of this product before that, I believe 10 million is a very low estimate, set so that expectations can be smashed -- again, it will depend how fast production can gear up to handle demand and support several different models, but 20 million should be easily reachable.

As additional business applications start coming online, probably early to mid-2008, expect sales to really take off. We will no longer be judging the iPhone as a phone when that happens, but as a true micro-mini sized PC which revolutionizes the entire tech industry and rejuvenates innovation throughout Silicon Valley. At that point, the iPhone will disrupt Blackberry, Nokia, Motorola, Microsoft, Samsung, and maybe even Nintendo (to name a few).

see Seth's Prediction Page


And, what about AT&T? Well, that truly is the fly in the ointment and Steve's Achilles Heel. AT&T is brutish about customer service, slow to innovate and slow to reform. They will try to extort every possible advantage in pricing and contractual obligation that they can. AT&T knows nothing if not how to exercise a monopolistic advantage.

Moreover, AT&T lacks the broadest service coverage, and no single carrier (in the US, at least) is right for everyone. We all know that signal strength and dropped calls vary based on where you spend most of your time.

So, if you live in an AT&T dead zone, tough luck. Their EDGE network is slow, and they don't have anywhere near complete enough coverage with their 3G services (which aren't built into this version of the iPhone anyway).

It's hard to understand why Job's wouldn't let the market decide if he wasn't going to lease his own service. With a single carrier that many will be unhappy with, Apple will take the brunt of service complaints -- if I could go anywhere, I'd blame the carrier, not Apple. 

Verizon has the best coverage and fewest dropped calls. T-Mobile has the best customer service, best rates, and happiest customers.  Maybe AT&T (Cingular at the time) was the only one willing to play ball on the technology changes that Steve wanted.

Regardless, if service complaints and customer mistreatment stories start hitting the press, expect a negative backlash that could take a serious bite out of sales growth and long term success. On the other hand, wide scale Wi-Max is a technology whose time may well have come -- it would make perfect sense for independent Wi-Max providers to bathe cities in their signal, and then AT&T could become almost irrelevant in the equation (if Wi-Fi VOIP capability exists).