Smartphones aren't really phones, that's just the name that stuck. They are hand computers that happen to include phone functionality. This is exactly the point so many pundits and phone industry insiders missed at the time.

They thought the iPhone was just a phone, and judged it in those terms. A massive mistake that allowed Apple to walk away with over 90% of the profits of the entire industry right under their noses. Their network effect advantages didn't help them, because they were obsolete. It's like hoping the network of stables, fields, saddle makers and horseshoe manufacturers will save the horse drawn carriage from the car. The network effects that matter to smartphones are app stores, app developers and services for apps.

This was a key insight that I missed as well when I watched the debut of the iPhone. Much of the industry had wrapped their head around the idea that a "smart phone" was really just a personal digital assistant with calendar, email, and notes grafted onto a phone. After all, Palm was super successful with their Pilot and Blackberry dominated this market with their "phone with a keyboard for email."

The iPhone vision of a hand held computer that happened to make phone calls was way broader than I could get my head around at the time. I remember predicting that there were maybe 10 apps that would ever make money on such a device :-).

Did we? I was happy with my phone back then. It made calls and received SMSes. Having to use T9 was not so good but not even so bad.

Of course my phone does much more now, calling and texting being the least of it. I wouldn't go back ( * ), but I also won't go back to the cars of the 70s. This doesn't mean I hated my dad's car.

Apple invented a new phone which is not a phone as intended before 2007 and one that people liked. That's why they got so successful.

HP and Xerox are probably still good at what they used to do (I'm happy with my ZBook and LaserJet) but they are probably not where the bulk of the market is nowadays. So they seem to be fading away.

(*) Except that phones got so light and small around 2000 that they could almost fit in a closed fist and I'm missing that.

I share the sentiment but I cannot deny that I somehow wanted an iphone kind thing around the time it happened. We all bought phones who had one more feature, color lcd, fancy games, internal mp3 player, photos..

I somehow hate smartphones nowadays because of the "more is less" dimension but the iphone was a normal thing to happen.

In 2007, Apple already had manufacturing and supply chain experience producing 100 million devices. Had locked up enough flash memory to have a pricing advantage, had a direct relationship with consumers through the Apple Stores and when the App Store was introduced had millions of customers use to doing micro transactions via iTunes. They had about the same number of credit cards on file as Amazon.

In a way, the current smartphone industry is not primarily the successor to the "dumbphone", industry. It's one of the industries it absorbed, but wasn't more important to the current industry than e.g. the MP3 player industry.

Good point but Apple is not a tiny startup at that time. Also they benefited for a huge amount of internal synergies too. Ipod gave them knowledge about pocket ~computers, plus decades of personal computer design.