https://www.youtube.com/watch?v=qycUOENFIBs
Balmer says:
Five hundred dollars fully subsidized with a plan I said that is the most expensive phone in the world and it doesn't appeal to business customers because it doesn't have a keyboard which makes it not a very good email machine now it may sell very well or not I you know we have our strategy we've got great Windows Mobile devices in the market today we you can get a Motorola Q phone now for $99 it's a very capable machine it'll do music it'll do internet it'll do email it'll do instant messaging so I I kind of look at that and I say well I like our strategy I like it a lot.
Why was he wrong?
People give Balmer a lot of crap, and while most of it is well deserved, I think people give him too hard a time for his comments about the iPhone. It's essential to consider the context of the time. When he made that statement, BlackBerry was dominant in the business sector due to its keyboard and secure email features. Windows Mobile devices were also pretty competitive, and the concept of a touch-only device was foreign to many people. Balmer's comments were reflective of the prevailing business sentiment at the time.
The lesson here is not just that Balmer was wrong, but that any executive can be if they become too myopic, focusing only on what has been successful in the past without considering the disruptive potential of new technologies.
The value proposition of something is not in what it already has in comparison to other items, but in what it offers that other items don't.
Let's talk about programming languages for example.
In APL [1] there are no loops, no keywords, but that is not the value proposition of APL.
It's value comes from the fact that you can think about complex programs very effectively and write complex programs in very short statements in a quick amount of time.
Let's also talk about luxury brands like Louis Vuitton bags/shirts. It's not that the buyers get those bags/shirts at 10x - 100x the price of a normal bag because they are stupid. They do that because LV bags/shirts are for signaling wealth i.e proof of riches not proof I am not naked.
Now lets go back to the iPhone what was it's value proposition. I would suggest they are the following.
1. The iPhone was aesthetically superior to other smartphones in terms of both the hardware & software. I believe this came from Steve Jobs's formal background in fine art and it's intersection with his interest in technology.
2. Over the years the iPhone has built a trust worthy reputation for the masses as "a device that doesn't suck". If you buy an iPhone it is very unlikely you will experience buyers remorse. I reminds me of the phrase corporate people used to say "No one ever got fired for buying IBM".
So, it is a brand you can trust, you can't say the same for Android, what brand, if sumsung? What model, they have hundreds.
If the masses buy a cheap android phone that freezes apps or sucks in touch response, they will generalized the sucking to all android phones and them being "cheap", they won't waste any time & money exploring the different hundreds of brands and models looking for the best android phone.
iPhones however though more expensive make sure the hardware & software are decent. And entry level iPhone will always better than an entry-level android phone. So consumers will trust it more.
3. It the third world it's a signalling/good or fashion accessory. I also heard in the USA kids in school are bullied for having Green Bubbles in SMS texts? [2]. So, the peer pressure among superficial adults & teens definitely drives sales.
The dynamic island for example is nothing more of a gimmick. It has no real technological value. But it's cute and fashionable to have a phone with a dynamic island.
I recommend you read Rory Sutherlands "Alchemy" if you want to understand more about branding. [3]
[1]: https://tryapl.org/
[2]: https://youtu.be/BuaKzm7Kq9Q?si=kd7FT6yeGwFUUumU
[3]: https://www.amazon.com/Alchemy-Surprising-Power-Ideas-Sense/...
I had the Moto Q. Windows Mobile 5 did all that but not well. Safari in the first version of iOS was ahead by miles just in terms of rendering websites. Windows Mobile 6.5 was behind the iPhone, and at that time iOS has been around for a few years.
Windows Phone 7/8 had some good ideas but developer adoption was abysmal.