What You’ll Find This Week

Garmin's stock traded above $120 a share in 2007. A year later, after Apple shipped the iPhone 3G with a GPS chip built in and opened the App Store, letting outside developers build the navigation apps that came next, Garmin's stock was under $16.

The camera industry felt the same mechanism, just slower. By 2023, it was shipping about 6 million units a year, down from 120 million in 2010, a 95% collapse. Canon, Nikon, and Sony never got the chance to compete for those buyers, because the iPhone's camera arrived as a free feature bundled into a phone, a product none of them would have considered a competitor.

Garmin and the camera industry had every chance to compete. Neither one took it, because what replaced them showed up looking like a phone, not a rival product. This week looks at why, and at how the iPhone Christensen called a sustaining innovation against Nokia and BlackBerry took down three other markets through three different mechanisms.

Here’s what you’ll find:

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This Week’s Article

In 2007, Garmin's automotive GPS business brought in $2.3 billion, 74% of the company's total sales. Its stock traded above $120 a share. A year later, after Apple shipped the iPhone 3G with a GPS chip built in and opened the App Store, Garmin’s stock was trading under $16. Garmin lost roughly 87% of its market cap in a single year.

Apple's only move against Garmin was adding a GPS chip to the next iPhone, then leaving outside developers to build the rest. XROADS G-Map, the App Store's first dedicated navigation app, didn't ship until March 2009, eight months after the 3G launched, but the market didn't wait for a finished app to price the threat. Investors saw a phone with GPS built in and an app store already open for business, and they started discounting Garmin's entire category before a single navigation app even existed on iPhone. Garmin's own leadership later confirmed that investors had it right: Dawn Iddings, the company's VP for business development, told MIT Technology Review…

Last week's article covered how the iPhone, measured against the handset market Nokia and BlackBerry controlled, was a sustaining rather than disruptive innovation, as classified by Christensen's own framework. Against Garmin's market, however, it wasn't sustaining anything. The iPhone carried GPS navigation as one feature buried inside a device built for an entirely different purpose. There was never an Apple GPS device on the market for Garmin to identify and compete against.

A phone with GPS built in wasn't new. Nokia's 6110 Navigator shipped with GPS in 2007, a year before the iPhone 3G, and its release barely moved Garmin's numbers. What Garmin had no reason to see coming was a GPS-equipped phone paired with the App Store (which opened the same month) that let outside developers turn a “phone” into a free navigation device, almost overnight.

By 2013, Garmin's market value had fallen to under a third of its 2007 level, and overall company sales had shrunk 15% since the iPhone's launch, confirming what the market had already priced in five years earlier. Four years after the iPhone 3G, in December 2012, Google's Maps app arrived for free on the iPhone with native turn-by-turn navigation.

It was downloaded 10 million times in its first two days.

Apple's entire response to a $2.3 billion GPS business was one chip and one open platform. Nobody at Apple built a navigation app or ran a single ad aimed at Garmin. But none of that mattered. Apple set the stage, and the development community filled in the gaps.

The iPhone's built-in camera did the same thing to a much bigger industry. CIPA, the industry body for Canon, Nikon, and Sony, tracked worldwide camera shipments (compact and interchangeable-lens combined) at roughly 120 million units in 2010. By 2023, total shipments across every camera type were down to roughly 6 million, a collapse of roughly 95%.

In absolute terms, people take roughly 5.3 billion photos a day worldwide. That’s about 2.1 trillion photos per year, up from a paltry 660 billion a year in 2013. Almost everyone who used to buy a camera as a separate purchase has stopped. They say the best camera is the one you have with you. And nobody leaves home without their phone.

Garmin and Canon lost a market to a feature that never set out to compete with them. The iPod's story runs the opposite direction: Apple owned this market outright and chose to cannibalize it. The iPhone shipped with an iPod built in, and Jobs said so from the stage. Unveiling the iPhone at Macworld 2007, he introduced it as three devices in one: "a widescreen iPod with touch controls... a revolutionary mobile phone... and a breakthrough internet communications device." The iPod wasn't a footnote in the pitch. It was the first of the three things Apple was asking people to buy, at the exact moment Apple was replacing it. As a result, iPod unit sales peaked at 54.8 million in fiscal 2008, then collapsed. The iPod's share of Apple's own quarterly revenue fell from roughly 40-50% at its 2006 peak to roughly 2% by mid-2013, and Apple officially discontinued the iPod in 2022.

Companies almost never do this on purpose. Their own processes and incentives work against it. Protecting what's already working, the revenue, the team, the internal power that comes with owning a category, is the default reflex. It's the same reflex that cost Nokia and BlackBerry their entire market.

Apple broke it. No separate division fought to keep the iPod relevant against the iPhone's built-in player. Apple never slowed down how aggressively it bundled the feature that was replacing it.

Garmin and Canon didn't get that choice. What replaced them never showed up looking like competition. Apple did: protect the iPod, or build what would replace it instead. Protecting the thing about to get replaced, or building the replacement yourself, is the one variable in this piece a company actually gets to control. Apple is the only company in it that got that choice right.

Last week's article argued that Christensen correctly classified the iPhone as a sustaining innovation against Nokia and BlackBerry's handset market, and that the classification alone didn't mean Nokia and BlackBerry were safe from losing that market to it. Schmidt and Druehl's high-end encroachment theory shows that an innovation Christensen’s theory would deem “sustaining” can disrupt a market too, entering at the top and pushing prices down until it owns the whole thing.

Against Garmin and the camera makers, the iPhone hit Christensen's bottom-up and gap entry points directly, the same mechanism Canva used against Adobe and Square used against the legacy payment processors. Against Nokia and BlackBerry, it took the market through high-end encroachment instead. Against its own iPod, it used neither mechanism. Apple made a clear decision to cannibalize its own market share instead.

Four markets, three different mechanisms, and four different verdicts, because the market you measure against decides the answer, not the product being measured.

Cases like this are contributors to Christensen’s other well-known idea: Jobs to Be Done. Instead of asking what category a new product belongs to in order to determine its disruptive potential, Jobs to Be Done (JTBD) considers what job a customer is “hiring” a product to accomplish. Garmin's customers weren’t rushing out to buy a GPS device. They were hiring the product as a tool to get from here to there without getting lost. The job doesn’t have a specific category attached to it at all, and Apple proved that a “phone” could manage the task the moment it had a map.

Running product and strategy decisions through a JTBD lens instead of a competitor list solves exactly this problem. A competitor list only updates after a competitor announces itself. Thinking in terms of jobs would have told Garmin, Canon, and Nikon that their actual competition was anything that could do the underlying job better, years before any of them had a name for the thing that did it. The next feature that ends a market probably won't call itself a competitor either.

The market you're competing in is defined by whatever job your customer is currently paying you to do, not by who else makes your product. Garmin, Canon, and Apple's own iPod all learned that the hard way: the thing that replaced them was never on their list of competitors because they never considered a “phone” to be a threat. Until the day it was.