Innovation, Competition, and Dominant Design in Smartphones

This report delves into the dynamics of the smartphone industry, specifically investigating the concept of a dominant design. It examines whether a single architecture has emerged as the standard, influencing product features and market competition. The analysis explores the evolution of hardware and software, considering the roles of horizontal and vertical innovations. The study uses data from smartphones launched between 2004 and 2013 to assess product differentiation among manufacturers and its implications for industrial dynamics. The report reviews literature on dominant design, discussing its relationship to industry standards and the impact of innovation strategies on market evolution. The conclusion suggests that despite some convergence, product differentiation persists, and a dominant design is yet to fully materialize in the smartphone sector.

Innovation and competition in the smartphone industry:
Is there a dominant design?
Grazia Cecerea
, Nicoletta Corrocherb,n
, Riccardo David Battagliac
a Institut Mines Télécom,Télécom Ecole de Management,9 rue Charles Fourier,91011 Évry,France and Université Paris Sud 11,RITM,54
Bouleveard Desgranges,92260 Sceaux,France
b CRIOS,Bocconi University,Via Sarfatti 25,20136 Milan,Italy
c MEDAlics Research Center for Mediterranean Relations,Via del Torrione 95,89125 Reggio Calabria,Italy
a r t i c l e i n f o
Available online 14 August 2014
Keywords:
Smartphones
Dominant design
Product differentiation
a b s t r a c t
The mobile phone industry is a very innovative segment within the ICT sector and the
smartphone is becoming the standard configuration among the different types of mobile
devices. Technical change and new product proliferation have made this industry
extremely dynamic,even if market shares are highly concentrated in the hands of very
few companies.The present article investigates whether a dominant design has emerged
in the smartphone industry. In particular, it studies the evolution in hardware components
relying upon an original datasetof product characteristics including allsmartphones
launched in the market between 2004 and 2013. Results show that, despite some
convergence in the introduction of vertical innovations, product differentiation still
characterizes the competition among manufacturers and a dominant design has not yet
emerged.
& 2014 Elsevier Ltd.All rights reserved.
1. Introduction
Smartphones have emerged in the market as the standard configuration for mobile devices and currently represent th
fastest growing market segment in the telecoms industry. For the first time, in 2013 sales of internet-connected
smartphones exceeded those for more basic handsets.1 Global mobile phone sales grew by 3.6% to 435 million units in
the second quarter of 2013,for the first time smartphones accounted for more than half of the market.Although devices
offering telephony and computing features were developed in the 1970s,it was not until the end of 2006, when the
Blackberry was introduced onto the marketby RIM, that the smartphone became a commercially successfulproduct.
In 2007 Apple entered the market by developing the first model of iPhone and soon after (June 2008), Samsung released
Samsung Instinct, a direct iPhone competitor. Since then competition in the market has been quite harsh among incumbe
and between incumbents and new entrants. The recent legal battle over patents and designs between Apple and Samsun
a clear signal that smartphone vendors are fiercely competing for leadership in the market, even if Samsung is consolidat
its leadership also thanks to the diffusion of Android operating system.2 Despite the success of the iPhone design in the
Contents lists available at ScienceDirect
URL: www.elsevier.com/locate/telpol
Telecommunications Policy
http://dx.doi.org/10.1016/j.telpol.2014.07.002
0308-5961/& 2014 Elsevier Ltd.All rights reserved.
n Corresponding author.Tel.: þ39 02 58363396; fax: þ39 02 58363399.
E-mail address: [e-mail] (N.Corrocher).
1 〈http://www.ft.com/cms/s/0/eb8ed76e-0500-11e3-9ffd-00144feab7de.html#ixzz2id9vhg8y〉.
2 In August 2012, the court obliges Samsung to pay Apple just over $1 billion in damages for infringing six of the American firm's software and desig
patents.
Telecommunications Policy 39 (2015) 162–175

market, innovation activity among firms continued and many different versions of smartphones currently exist in the secto
This contrasts with the conventional wisdom concerning the emergence of a dominant industry design, which predicts that
imitators tend to follow innovators and, if an innovation is commercially successful and widely adopted, it will become the
dominant design because all products in the market will use that specific technology and design features.
The aim of this article is to discuss whether a dominant design has emerged in the market for smartphones by examinin
the innovation strategies of companies.In light of this,the paper will also investigate the relationship between innovative
activity and industrialdynamics.In doing so, we will answer two research questions.First, has a dominant design in
smartphone (hardware) characteristics emerged over time? Second, what are the implications of firms' innovation strategi
for industrial dynamics? The empirical analysis relies upon the contribution of Koski and Kretschmer (2007) who discuss
product innovation strategies of firms in the mobile phone industry,looking at the evolution of handset characteristics.
Accordingly,we will distinguish among two types of innovation strategies,i.e.,horizontal product innovation and vertical
product innovation.Furthermore,even if our investigation mostly focuses on the hardware side,given the peculiarities of
smartphones,we will also make some consideration on the evolution of software characteristics (operating system) over
time.The remainder of the article is organized as follows.Section 2 reviews the literature on dominant design underlining
the implications for the mobile industry.Section 3 provides evidence on performance of competitors in the market,while
Section 4 investigates whethera dominant design has emerged or instead different smartphone configurationsare
continuing to proliferate,and discusses the implications of firms'innovation strategies for industrial dynamics.Section 5
concludes the discussion.
2. The emergence of a dominant design in the market: a review of the literature
The seminal article by Utterback and Abernathy (1975) refers to dominant design as a single architecture3 that establishes
dominance in a product category. In the early stages of market evolution, high technical and market uncertainty results in
diversity of product designs (Abernathy & Utterback,1978; Dosi,1982; Lee,Neal, Pruett, & Thomas 1995; Smith,1997;
Utterback,1994).A product category evolves due to the processes of variation,selection,and retention (e.g.,Anderson &
Tushman,1990; Tushman,Anderson,& Murmann, 1998).Technologicalbreakthroughs create rivalry among alternative
designs,resulting in a period of design variation or ferment.The emergence of a dominant design is the transition point
between the periods of variation and selection.The article of David and Greenstein (1990) details the different processes
that lead to the creation of standards,underlying the importance of compatibility in the standardization process.
The definition of dominant design is a specific path along an industry's design architecture, which establishes dominanc
among competing design paths.A dominant design usually takes the form ofa new product (or novelset of features)
synthesized from individual technological innovations introduced independently in prior product variants (Utterback and
Suaréz, 1993).A dominant design is a product within a product category that gains general acceptance as the standard for
technical features that other market players must follow if they want to acquire significant market share (Utterback, 1994)
Christensen, Suaréz, and Utterback (1998) explain a dominant design as emerging in a product category when one produc
design specifications (consisting ofa single feature or a complement ofdesign features) define the product category's
architecture.In this respect,it is possible to argue that in complex products such as computers or smartphones,dominant
designs might emerge in relation to a sub-set of characteristics that are the result of either vertical or horizontal innovation
Srinivasan, Lilien, and Rangaswamy (2006) add that a particular product design architecture can define the specifications
the entire product category.Argyres,Bigelow and Nickerson (2013) propose an innovative characterization,according to
which a dominant design appears per se, in the form of a breakthrough that can resist market “shakes” and comprises onl
slight and not radicalimprovements.They define this type ofa breakthrough as a “composition desiderata”,because it
represents a collection of desirable features,and they consider the iPhone to be an example of a composition desiderata.
A large strand of empirical studies documents the emergence ofdominant designs in various productcategories,
including typewriters,televisions,electronic calculators,automobiles (Utterback,1994),VCRs (Cusumano,Mylonadis,&
Rosenbloom, 1992),cochlear implants (Van de Ven and Garud, 1993),fax machines (Baum,Korn, & Kotha, 1995),cement,
glass,and minicomputers (Anderson & Tushman,1990).Koski and Kretschmer (2007) used dominant design theoretical
framework to study innovation in the mobile phone design.Van de Kaa,Van den Ende,De Vries,and Van Heck (2011)
reviewed the literature on the topic and identified how format dominances can emerge using five categories: characteristic
of the format supporter, characteristicsof the format, format support strategy,other stakeholders,and market
characteristics.
Dominant design is satisfying as long as its technical possibilities are driven by the commercial interests of suppliers,
users,and competitors (Srinivasan et al.,2006; Tushman & Rosenkopf, 1992; Wade, 1995).However,the literature shows
that the dominant design is not always the design that incorporates the best features and performance.Gallagher (2007)
underlines the distinction between dominant designs and industry standards.In particular,standards are driven by the
relative importance of network effects, while dominant designs are architectureswith recognized implications for
industries.This implies that standards are often important elements of dominant designs.
3 According to Ulrich (1995),a product architecture is the scheme by which the function of the product is allocated to physical components.
G. Cecere et al./ Telecommunications Policy 39 (2015) 162–175 163