QUT

FACULTY OF SCIENCE AND ENGINEERING

IFN 502
IT INNOVATION AND DISRUPTION ASSESSMENT 2
DISRUPTIVE INNOVATION CASE STUDY

Thamalee Nilakshi Senadheera

N9861076
27/09/2017
Executive Summary
iPhone is a product of Apple Inc. which is an American multinational corporation.
Apple introduced iPhone in June 19,2007. That was Apples first ever phone. But at
that time Nokia and Motorola was leading the phone market. Steve Jobs did not have
much confident about it. Microsoft CEO laughed at the it is underestimating the first
iPhone since it did not have a key board (Warren, 2017. In addition, Googles Android
and Linux Mobile were new entrants as new players. There were few wireless
disruptors like Clearwire. So, the primary goal for them was to survive by gaining a
share from the market. But the price of iPhone was $499 which was expensive
compared to the other smart phones (Rogowsky, M., 2017. But iPhone disrupted the
phone market despite the price point. Not only the phone market but also computer
industry. However, most business managers and individuals misinterpret the word
disruption. According to Christensen disruptive theory We cannot manage
innovation effectively if we dont grasp its true nature (Christensen et al., 2015).
Therefore, it is important to understand the concept disruption and how it changes
lifestyles and industries.

According to Jobs iPhone is a three in one product which is "a widescreen iPod with
touch controls, a revolutionary mobile phone and a breakthrough internet
communications device" (Rogowsky, M., 2017). With the innovation of this disruptor,
it has changed the way people communicate. This report critically analyses why
iPhone is disruptive, using Christensens theory of disruptive innovation in the first
section. Then it illustrates the adoption categories which divide the iPhone into
different phases in its diffusion and relate three characteristics according to the
behaviour of its adaptor. In the second section, this report illustrates a retrospective
analysis of the innovation. Firstly, it evaluates the design of the iPhone using Ex Ante
and Ex Post phases by introducing two methods for each phase. Furthermore, the
design methods will be analysed accordingly using naturalistic and artificial methods.
Then the original entrepreneurship and start-up potential will be analysed using three
different strategies like crowdsourcing, virtual agent and self-service technologies.
Finally, the report discusses how the business analytics can be beneficial for iPhone in
pre-designing stage and post-designing stage using customer relationship
management, supply chain and marketing.
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Table of Contents

1.DESCRIBING THE SELECTED INNOVATION.....................................1

1.1 INTRODUCTION TO THE INNOVATION................................................................1
1.2 EXPLORATION OF ADOPTION CATEGORIES.......................................................2
2. RETROSPECTIVE ANALYSIS OF THE SELECTED INNOVATION
................................................................................................................................4
2.1 EVALUATION OF THEIR DESIGN........................................................................4
2.2 EVALUATION OF ORIGINAL ENTREPRENEURSHIP AND START-UP POTENTIAL5
2.3 EVALUATION OF THEIR APPLICATION OF BUSINESS ANALYTICS.....................6
CONCLUSION....................................................................................................6

1.Describing the selected innovation

1.1 Introduction to the innovation
Apple launched its first phone in 2007 and that technology disrupted the whole phone
industry. That time Nokia was dominating the market of mobile phone. Nokia was the
first to create the new smart phone. Not only Nokia but Motorola, Sony-Ericsson and
Blackberry were giants in the cell phone market as well. But with the launch of iPhone
those giants lost their power in the industry. iPhone became the turning point in the
Fourth Industrial Revolution (Gilbert, M.,2017). At first, the price of an iPhone was
starting from $499 (Rogowsky, M., 2017). The most interesting features were touch
screen and dropping the physical keyboard. This was apples first phone ever.
According to Forbes, Steve Jobs was not very confident about the product at the
beginning. But with all the features that has been squeezed to the phone made the
iPhone stood high among all the other smart phones. Steve Jobs calls his unbelievable
product as three in one "a widescreen iPod with touch controls, a revolutionary
mobile phone and a breakthrough internet communications device." Among all the
smartphone users of people use iPhones and around 2 billion people are
smartphone users (Rogowsky, M., 2017). The latest version of iPhone is iPhone 8 and
iPhone 8 Plus. Apple has released 13 models by 2017.

When we talk about iPhone we often hear the word disruption. Disruptive innovation
has been broadly discussed by vast number of people, specially the business managers
and leaders. But it seems that they try to use the word disruptive for each new
technology without having any sense about the word disruptive. According to Clayton
We cant manage innovation effectively if we dont grasp its true nature
(Christensen et al.,2015). Therefore, it is very crucial to analyse disruptive innovation
and its effects on industries and lifestyle of people. In this context, we are going to
analyse it on iPhone which has disrupted the phone industry.

Clayton has pointed out two types of innovation. Sustaining innovation which
consists of evolutionary and revolutionary innovation. Evolutionary is an innovation
which improves a product according to customer needs whereas revolutionary is an
unexpected innovation which has no effect on the current market. The second type of
innovation is disruptive and it impacts the existing market significantly (Christensen,
1997, p. xv). Initially Clayton has classified iPhone as a sustaining innovation but later
he himself has admitted that it was a wrong judgement. Because he has seen iPhone
as an improved version for Nokia and Motorola (Christensen, Raynor & McDonald,
2015). But we all remember the first iPhone was not appealing to customers. So, the
phone leaders like Nokia underestimated the iPhone. In 2007, when first iPhone
created the Microsofts former CEO Steve Ballmer has laughed at it saying it will
never success since it doesnt have a keyboard (Warren, 2017). iPhone was
inconsequential for the market leaders. But the mistake they made was considering it
as a sustaining innovation for phone market when it was a disrupter to laptops
(Denning, 2012). Furthermore, Clayton has described disruptive innovation as
typically cheaper, simpler, smaller, and, frequently, more convenient to use
(Christensen, 1997, p. xv). But this theory cannot relate to iPhone as it was never
cheaper compared to Nokia and RIM. But iPhone offered functions which were not
available on other smartphones. But I argue that iPhone is still cheaper because it has
variety of built in functions. So, one does not have to spend money on buying laptop,
digital camera, scanner, iPod and many other equipment. iPhone architecture has
designed in a new way of engaging with handheld devices.

Thus, can we describe iPhone as a disruptive innovation? The answer is yes. When
iPhone entered to the market it was very low in performance. No one believed on it.
Neither Jobs did talk big on it (Warren, 2017). It was inconsequential to the

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incumbents of the phone market as I proved above. As I argued above it can be still
considered cheaper, easier to use and smaller and available to wider market. In early
days, we hardly saw someone having an iPhone. In 2007 iPhone sales in unit were
1.39 million. But today iPhone is very popular and has sold 231 million units in 2016
according to the statistics. The journey of iPhone has reached its version 8 and 8 plus
using the most durable glass, 12 megapixel dual lens and Qi wireless charging
("iPhone 8", 2017). It is evident that iPhone has improved their performance steadily
and has significantly affected the existing market. Therefore, we can classify iPhone as
a disruptive innovation.

1.2 Exploration of Adoption Categories

According to Rogers diffusion theory, the population can be divided into five
different segments based on the tendency to adopt to a given innovation. They are
innovators, early adopters, early majorities, late majorities and laggards. Each of the
adopters has their own personality (Dibra, M. ,2015) It is very crucial to identify the
factors and groups who will embrace the innovation. If a design team can identify the
usability and how people adopt the innovation, there is a higher possibility of user
acceptance and spread to other users. iPhone also has these adoption classifications
to identify their targeted market segment and to implement their marketing
strategies. The diffusion of innovations theory has five characteristics which helps to
determine whether a group of people or an individual will tend to adopt it. They are
relative advantage, compatibility, complexity, trialability and observability (Pant, A.,
Chiu, H., Hsieh, Y., & Huang, Y. ,2011).

When we consider iPhones, innovators are the people who are waiting in ques over
night to get the first piece of new release (Dibra, M. ,2015). These adopters are
typically with higher income or wealthy. Because iPhone is an expensive product
compared to other phones. They are the people who make trends and do not stick to
the same phone for long. When a new phone releases they go for it. A person who
buys the iPhone at first release should be a person who is updated about current
innovations and technologies. They are the people who are keen to try new
innovations. These days owning an iPhone is prestigious in society. So, the people
who care about social status among their groups have more tendency of buying the
product at its first stage.
Out of five characteristics of Rogers theory, the most appropriate three
characteristics to innovators will be relative advantage, compatibility and complexity.
When we consider relative advantage, how iPhone fulfil this requirement is by giving
the social prestige via marketing and advertising. Through that, iPhone acts as a
status symbol. The innovators in iPhone are concerned about the social prestige. They
spend big on a phone to maintain their social status. The new product needs to be
compatible with values, norms and past experiences of iPhone users. They prefer a
simple technology as they do not have much time to allocate to learn the innovation.

Early adopters are the consumers who use the innovation later to the innovators and
they are judicious than innovators. They see a necessity of change in innovation and
product. They have more similarities to the innovators (Dibra, M. ,2015). To buy an
iPhone after few months they should be wealthy and has a good income. When they
buy the iPhone, they see usefulness of that product. They are often opinion leaders.
So, they are educated. and have a very good social status. They spend a big amount of
money to gain the social prestigious. The characteristics of innovation which relevant

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to early adopters are triability, complexity and relative change. Triability is more
relevant to this group. Because they buy the product by seeing the usefulness. Once
they visit the apple store they can analyse it with vision since these people are
educated. They prefer a simple technology as they do not have much time to allocate
to learn the innovation. Relative change is relevant since they care about their social
status.

Early majority, are the people who take suggestions from early adopters. They take
much time to adopt an innovation (Dibra, M. ,2015). For them latest version of
iPhone is not strange but they do not adopt to it easily. They need someones guide on
how to operate the iPhone. They are not rich so less likely in taking risks of buying a
new version of iPhone. They have less influence by society. Therefore, do not worry
about social status. The characteristics of innovation which are related to early
majority are observability, complexity and compatibility. Release of new iPhone is
widely advertised in social media and tele-communication media. Mostly this
category tends to get feedback from their colleagues, friends and media. Because they
are fear to fail of buying an expensive product as they are not well off. They need to
see lots of benefits of buying the iPhone. Therefore, observability plays a major role.
By the time the early majority purchase the iPhone it might be no longer an
innovation. Early majority is not fond of technology and less technical skills. So, it is
very important the product to be simple. The iPhone should be compatible with their
lifestyle since they are less likely to change. Because they have barriers with money
and social norms.

Late majority are the adopters who are not easily convinced by the innovation. They
are not ready to embrace the innovation till they see both early adopters and early
majority (Dibra, M. ,2015). For them to buy an iPhone they wait till its price
reduction. They are below the average of income and no money to dispose. Social
status is below the average as well. They are unfavourable to risks and less likely to
adopt. The most relevant characteristics of innovation will be observability,
compatibility and complexity. They buy an iPhone after seen others using it. Thus,
observability is relevant. Compatibility is relevant since they are less likely to go
beyond the traditional frame. Complexity comes into play since they are not masters
in technology and unlikely they will grasp a complicated technology. Thus, it is
important to be simple.

Laggards are the last to adopt to the technology. They are very suspicious and worry
about the technology. They are generally low in disposable income and isolated from
innovators or early adopters (Dibra, M. ,2015). They do not use the new technology
unless someone forces them to use it like making it mandatory. iPhone might seem to
be useless for them. They will not spend money on it since it is useless to them. The
closest characteristics for this group are compatibility, complexity and trialability.
Compatibility is crucial to this group since they might think that people are not meant
to use iPhone to reach friends and relatives. They prefer meeting them rather than a
call. Thus, they are stuck in a frame with social norms. Since they do not familiar with
the technology, it is very important it to be simple and easier to use. Triability is a
critical factor for them as they suspicious about new technology. They do not have
much social contacts with innovators and early adopters. Therefore, to convince the
laggards, trialability is a critical factor.

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2. Retrospective Analysis of the selected innovation
2.1 Evaluation of their Design
Evaluating a design artefact is crucial since it can have a potential impact on
innovative artefact. Evaluation should be conducted along with the design because
there can be impacts like user satisfaction, financial and efficiency at work (Venable,
J., Pries-Heje, J., & Baskerville, R. ,2016).
Ex Ante evaluation considers the proposed technologies before they implement,
design or build. It is a predictive method. This evaluation gives a clear justification
whether to design the product (Venable, J., Pries-Heje, J., & Baskerville, R. ,2012).
Artificial is a good evaluation method to investigate the iPhones Ex Ante stage.
Because there is no physical product to evaluate the design. Hardware testing a
critical factor in iPhone. To test the iPhone a high-fidelity testing will be required. To
do that they need to use virtual devices. This will help the engineers to uncover many
potential issues relating to timing, conflicts among priorities and bottlenecks of
logics. Since the operation of a physical device occurs in a physical environment it will
be very complex to grasp real time interruptions and issues using a simulator.
Therefore, we will need to adopt an integrated system using robotic power(AI) and
human interactions to simulate unpredictable crashes and test those situations.
Therefore, simulation will be an appropriate method to evaluate the iPhone at ex ante
stage.
Workshop with users will be another effective way to evaluate the iPhone in ex ante
phase. A hands-on accessibility to iPhones workshop will give a clearer understanding
about users experience (Hansen & Nicolay, 2017). Because users experience cannot
be fully detached from device (Churchman, 2017). This will help to evaluate the
human risk and technical risk and efficacy of the innovation.
To take the maximum benefits at the ex-ante stage, artificial method can be used to
stick to the budget of the project and escalate the schedule and quality of the product.

Ex post evaluation considers a developed technology after they designed,

implemented or build. This refers to the timing same with ex ante stage and it will use
real world facts to evaluate whereas ex ante uses hypothetical scenarios (Venable, J.,
Pries-Heje, J., & Baskerville, R.,2012).

Naturalistic is a good method of evaluating Ex Post stage. We can use surveys and
interviews to collect data regarding the user experience on iPhone. It will be very
effective to conduct interviews and surveys among iPhone users to evaluate the Ex
Post stage rather than artificial evaluation method. Because artificial evaluation
results may not relate to real use since it uses unreal scenarios and users
(Churchman, 2017). Naturalistic evaluation can offer a high validity and can
guarantees a thorough evaluation of the effectiveness of the iPhone.

To evaluate the performance of the iPhone we can use the big data analytic method
which will be more effective and efficient than interviews and surveys (Olsson, N. O.
E., & Bull-Berg, H. ,2015). Through big data analysis process Apple can gather data
regarding internet traffic on iPhone, related data movements on iPhone, Commercial
activities like payment methods and age groups who purchases the iPhone, country,
area, etc. Then they can analyse the data using data visualization tools and get a
thorough understanding about user experiences, user types and performance of the
product. They can predict the future predict the future patterns as well. This will be
cost and time effective compared to other naturalistic methods.

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2.2 Evaluation of original Entrepreneurship and Start-Up
Potential
The start-ups with higher ambitions usually becomes larger companies. But for a
start-up to become a larger company they need to use technology supported
strategies.

Crowd sourcing
I would consider crowd sourcing as a strategy under the limited budget and resources
to promote iPhone. iPhone has performed well in using crowd sourcing. iPhones built
in GPS function helps users to use crowd sourcing naturally. They do not require
separate google maps to find their way (Terdiman, D. ,2017). Therefore, users will not
go anywhere with their phone. We can see new apps on the App store every day. Most
of those apps involve in crowdsourcing. With the crowd sourcing sky is the limit for
apps in iPhone. Due to that iPhone users can find any app to solve their issues and
make the life easier. Few universities and the Apple has created an app to use on
iPhone which helps blind people to make decisions about their surroundings. As a
result, the app VizWiz allows blind people to take a photo and post a question
regarding the photograph. They can receive an answer within second (Bright, 2017).
App will be available soon in the app store. Apple has put another step forward by
trying to crowdsource iPhone damage data to create resistant screens in future. This
invention can detect damages on touch sensors. Then user is asked to verify the
locations of cracks by marking a circle using their finger. This will help designers to
create more resistant displays and users will become more satisfied with the product
(Hardwick, T. ,2017). In 2015 Shot on iPhone ad campaign which used crowdsource
became a hit among customers. It highlighted iPhone users over the technology.
iPhone used its own users to do the advertising campaign using crowd sourcing
without spending a penny to gain popularity (Dormehl, 2017). By relying on crowd
sourcing iPhone has become the most popular phone in the world.

Virtual agents
I will use virtual agents as another strategy. iPhone is using its virtual agent called Siri
making the mere fantasies a reality. The users can give verbal commands to their
iPhone to get a job done which will eventually make their life simple. Now iPhone
users do not have to press so many buttons to get a job done. iPhone has utilised the
voice recognition technology (Cody, 2017). Siris functionalities can complete number
of tasks in our daily life. It can check our daily schedules, message friend while
driving, purchase tickets, hotel reservations, email, set alarms, get driving directions,
check weather, search google and use apps (Gill & Kazmucha, 2016). The above are a
bit of what Siri can do. Even though Siri is a virtual agent for iPhone, it acts as a
personal assistant to iPhone users for free of charge.

Self Service Technologies

As a start-up company with the budget constraints it will be extremely difficult to hire
staff to handle customer inquiries. Using self-service technologies, we will be able to
reduce the cost. iPhone support website which is available under Apple support has
integrated enormous amount of options to support the users ("iPhone - Official Apple
Support", 2017). By using this service customers can find a solution by themselves
rather than waiting hours to get it fixed. Since users can ask the issues relating to
iPhone via iPhone support, Apple can identify all the issues easily and potential
solutions. It is efficient in both ways. Customer does not have to waste their time and
the company makes the customer satisfied with lower cost.

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2.3 Evaluation of their Application of Business Analytics
By using descriptive analysis, iPhone designers can gather important key points in
their designing phase. First, they need to understand their target customer profiles.
That is their age, gender, income, educational level, social status and their interests.
By using the above information marketing team can create proper marketing
strategies prior to their launch of new product. They use big data in their internal
system to strengthen their design process (Marr, 2015). Data that has been collected,
reveal what are the new features to add to provide a logical and best user experience.

With the use of internet, customer relationship management has become very easier
and on the other hand very difficult. Because if a customer is not satisfied with a
product they can inform it to millions of users by a single tweet. But Apple, iPhones
parent company has gone beyond the customer relationship management by using
analysing their personal information and cookies. As a company, it has become top
for several years in customer service and customer relationship management because
they Get closer than ever to your customers. So close, in fact, that you tell them what
they need well before they realize it themselves. Steve Jobs. To achieve this, they
offer genius bar which helps them to understand customer needs rather than selling a
product and personalized experience via social media where everything works
together to offer a complete solution (Berto, 2014).

iPhones parent company Apple uses different suppliers for one component in their
supply chain strategy. This strategy is a key point when competing with its
competitors since it helps to mitigate delays and disruptions of the supply chain
letting them to maximize their gross-margins. They can provide iPhones correspond
to the customer demands and get the best price from customers since they are
competing. They evaluate the performance of supply chain by analysing inventory
turnover and cash conversion cycle (May 2015). Apples current research is on closed-
loop supply chain. Therefore, in future iPhone will be built using recycled materials or
renewable resources. They are trying to achieve this using a robot called Liam (Green,
2017). Using this BA strategy suppliers can be benefited by being able to reduce their
energy usage.

It is very interesting to notice that Apple have a minimal allocated budget to market
iPhones. They use a strategy called Exclusivity Technique which is a low-cost
marketing strategy at all time. What they do to market their phones is they make it
available exclusively from just one mobile service provider. When a new iPhone
released people had to cue outside Apple stores since it is first come first serve basis.
These ques attract the attention of media and the customers who must wait till the
next batch release vocalized over the web infects the desire of people who did not even
bother to buy one (McCormack, 2013). This creates a huge demand to iPhone without
incurring any cost. Apple has proven this method is successful through their figures
on sales.

Conclusion
When Apple first introduced iPhone, it was ridiculed and confused by most reviewers
and consumers. But it was a beginning of another revolution which disrupted the
phone and laptop market. iPhone quality and functionalities are upgrading everyday

7
by burning out the competition. iPhone has always gone extra mile in providing an
innovative product. iPhones company Apple is always a market pioneer not a
follower. Using iPhone, we can do many things that other smartphones cannot do.
App store has more than 2.2 million apps available. You can check the calorie intake,
go to sleep smoothly with sleep pillow, New burner app creates a disposable phone
numbers, drop box helps to save valuables, games, google maps for routing and many
more (Dogtiev, 2017). Therefore, it is evident that iPhone has disrupted not only
phones and laptop industry but many more. But according to Claytons disruptive
theory he suspects that iPhone will keep up the innovation for another ten years
Denning, S. (2012). According to him any industry in their mature stage starts to
dissipate their leadership. But with the great phones and continuous study of its
customers, still they are holding the dominance. The only change left to do is to make
it affordable for low-income earners

8
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Appendix 1: Infographic
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