With the iPhone as a glaring example, and stretching through Amazon and e-commerce and more recently blockchain and bitcoin, many innovations have initially been met with derision by big company CEOs. History often proved them wrong.
Sometimes disruption is staring you right in the face and you can’t help but look the other way. That’s doubly true when you’re the head of a legacy business desperate to stay relevant.
Even the tech giants don’t always see the disruption coming. Bill Gates once downplayed Google’s potential to expand beyond search. Jeff Bezos once said that the iPad wouldn’t be a competitor for e-readers.
Though some disruptive tech is still relatively nascent, such as virtual assistants or mobile wallets, it’s clear that they will have a profound impact on their respective industries. In fact, in many cases the companies that initially dismissed these threats have gone on to launch directly competing products.
Here are some examples of big CEOs and executives who minimized disruptive threats when they appeared. When asked about these smaller players at the time (and even now) some companies have remained woefully dismissive.
- iPhone, iPod, iPad
- Cloud software
- Netflix / video streaming
- Wearables / smartwatches
- The connected car / Tesla
- Bitcoin / blockchain
- New protein & meatless meat
- The personal computer
- Mobile Gaming
- Digital wallets & e-payments
- Virtual assistants
- The television
- The telephone
1. THE IPHONE, IPOD, AND IPAD
Perhaps the most glaring example of the tendency to dismiss innovative new players was when Apple’s iPhone hit the market in 2007. It was the first example of a smart mobile phone.
Onlookers were unsure what this device would compete with: Would it hurt mobile phone makers like Nokia or developers of handheld planners like Palm, who were also trying to enter into the phone space?
At the time, both companies refused to admit the threat. Here’s Palm’s CEO:
“We’ve learned and struggled for a few years here figuring out how to make a decent phone … PC guys are not going to just figure this out,” said then-Palm CEO Ed Colligan in 2006, after news that Apple was developing a phone. “They’re not going to just walk in.”
Here’s the head of strategy at Nokia:
“The development of mobile phones will follow a similar path to that followed by PCs,” said Nokia’s Chief Strategy Officer Anssi Vanjoki, in a German interview (translated through Google Translate). “Even with the Mac, Apple attracted a lot of attention at first, but they have remained a niche manufacturer. That will be their role in mobile phones as well.”
Microsoft CEO Steve Ballmer had this to say about the iPhone’s lack of a physical keyboard:
“500 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.”
RIM’s co-CEO, Jim Balsillie, wrote off the iPhone almost completely:
“It’s kind of one more entrant into an already very busy space with lots of choice for consumers … But in terms of a sort of a sea-change for BlackBerry, I would think that’s overstating it.”
As did a Senior Marketing Director at Microsoft, Richard Sprague:
“I can’t believe the hype being given to iPhone. Even some of my blindly-loyal pro-Microsoft friends and colleagues talk like it’s a real innovation and will ‘redefine the market’ or ‘usher in a new age.’ ” Sprague wrote in a blog post.
Of course, let’s not forget that phone manufacturers had been wrongly dismissive of Apple before. Here’s Motorola’s CEO on the iPod:“Screw the Nano. What the hell does the Nano do? Who listens to 1,000 songs?” said Motorola CEO Ed Zander, speaking at a conference in 2006.
Even Apple founder Steve Jobs voiced hesitations about variations on the original iPhone, arguing that phones with larger screens would never catch on:
“You can’t get your hand around it,” Jobs said when Samsung and Google came out with phones larger than the 3.5” original iPhone. “No one’s going to buy that.”
The iPhone X, released November 2017, was a full inch taller than its original iPhone predecessor. The iPhone X also featured a phone screen measuring 5.8” on the diagonal — 66% larger than the first iPhone.
And the iPad drew similar doubts about its competitive potential. Here’s Amazon CEO Jeff Bezos downplaying the iPad’s threat to e-readers:
“The iPad… I think there are going to be a bunch of tablet-like devices. It’s really a different product category. The Kindle is for readers,” Bezos said in a 2010 interview.
Perhaps more than any other internet company, Amazon has embodied internet-based challenges to traditional business and commerce.
From the moment it began shipping books and threatening brick-and-mortar book chains, CEO Jeff Bezos has set his sights on transforming industries with Amazon’s customer focus and obsession with efficiency and logistics. But also from the beginning, Amazon has been underestimated by incumbents.
Here’s IBM’s chairman minimizing how Amazon might transform retail and internet sales all the way back in 1999.
“Amazon.com is a very interesting retail concept, but wait till you see what Wal-Mart is gearing up to do,” he said [IBM Chairman, Louis V. Gerstner Jr.]. Mr. Gerstner noted that last year IBM’s Internet sales were five times greater than Amazon’s. Mr. Gerstner boasted that IBM “is already generating more revenue, and certainly more profit, than all of the top Internet companies combined.”
In August 2017, as news built around the wave of retail bankruptcies and the “retail apocalypse,” Footlocker’s CEO and chairman Richard Johnson claimed on an earnings call he wasn’t worried about vendors going directly to Amazon to sell expensive sneakers.
“We do not believe our vendors selling product directly on Amazon is an imminent threat. There is no indication that any of our vendors intend to sell premium athletic product, $100-plus sneakers that we offer, directly via that sort of distribution channel.”
In January 2018, Amazon launched its automated cashierless Amazon Go store in Seattle. The store leverages technology like machine vision, AI, and sensor technology to allow customers to shop without checking out at a register; instead, shoppers are automatically charged for their items via the Amazon Go app upon exiting the store.
Following the opening of the Amazon Go store, Saks Fifth Avenue president Marc Metrick announced he was unconcerned about the threat automation poses to traditional brick-and-mortar establishments:
“When you think about the online versus the offline experience, we don’t need AI in our stores,” he said on CNBC. “We have ‘I’. We have living, breathing, 4,500 style advisors in our stores.”
Logistics & shipping
On a March 2016 earnings call, FedEx Executive VP Mike Glenn minimized the impact of Amazon’s decision to lease aircraft and buy its own trucks to get into the logistics and shipping business.
“While recent stories and reports of a new entity competing with the three major carriers in the United States grabs headlines, the reality is it would be a daunting task requiring tens of billions of dollars in capital and years to build sufficient scale and density to replicate existing networks like FedEx,” [Mike] Glenn said.
That wasn’t the end of FedEx’s defensive stance on Amazon.
In response to Amazon listing “transportation and logistics services” among competitors for the first time in its 2018 annual report, as well as Amazon’s increasing investment into creating proprietary air and shipping services, FedEx SVP of Integrated Marketing Patrick Fitzgerald eschewed Amazon’s ability to grow its offerings to the size and scope of FedEx, saying:
“We honestly don’t see a world where Amazon would be a competitor to FedEx, [because] there is no sensible way to compare them. You can carve out some local delivery in highly dense markets. That’s in no way a competitive threat to the broad portfolio of business that FedEx does.”
He continued in a similar vein:
“Amazon is a revolutionary e-commerce company, but that doesn’t mean that Amazon can just suddenly decide to become competitive with FedEx in transportation.”
Healthcare & pharmacy
In June 2018, Amazon beat out Walmart to purchase PillPack for $753M. PillPack allows users to buy medications online in pre-made doses. The reported ~$1B valuation for PillPack made the deal Amazon’s fourth-largest acquisition at the time, following its purchases of grocery chain Whole Foods, Wi-Fi-enabled doorbell Ring, and shoe retailer Zappos.
In wake of the news, pharmacy providers Walgreens, CVS Health, and Rite Aid collectively lost $11B in stock the day of the announcement.
When Walgreens CEO Stefano Pessina heard of the deal he said he was “not particularly worried” about the PillPack deal. Pessina continued, emphasizing Amazon’s lack of pharmaceutical infrastructure and stressing the ongoing importance of physical pharmacies:
“I strongly believe, as I have said even because in my closing remarks that the role of the pharmacies, the physical pharmacies, we continue to be very, very important in future.”
Addressing Amazon’s venture venturing into financial services, then-incoming Discover CEO Roger Hochschild said in 2018 that tech players like Amazon and Google weren’t “likely threats,” as reported by Bloomberg.
“I view them as partners with leading-edge capabilities that we need… Very few tech companies want to become a bank, and are keenly aware of some of the challenges and regulation[s] that come with it. So, I think the risk of some of these tech players getting into banking is a bit overstated.”
For more on Amazon in banking, check out our report, Everything You Need To Know About What Amazon Is Doing In Financial Services.
3. CLOUD SOFTWARE
Way back before most enterprise software solutions were cloud-based, Salesforce was offering a new and different kind of CRM product. While it made waves early on, legacy software companies didn’t think too highly of the product.
“Microsoft will roll [Salesforce] over,” Thomas Siebel of Siebel Systems flatly told Bloomberg in 2003. “They get Zambonied.”
Execs have also said they’re not worried about Amazon Web Services (AWS), a cloud services platform that users can leverage to build their own apps. In October 2017, Oracle CEO Mark Hurd went on record to discuss his company’s cloud infrastructure offerings.
“I don’t really worry so much about [AWS], to be very blunt with you,” Hurd told CNBC. “We need to worry about ourselves. We’re in a great position.”
4. NETFLIX/VIDEO STREAMING
Video streaming service Netflix launched as a potential threat to Blockbuster with its DVD mailing service. Not only did it kill the video renting industry, it now has its eyes set on broadcast television. And leaders in both industries were reluctant to admit that Netflix was a real threat.
“Neither RedBox nor Netflix are even on the radar screen in terms of competition,” said Blockbuster CEO Jim Keyes, speaking to the Motley Fool in 2008. “It’s more Wal-Mart and Apple.”
Here’s Time Warner’s CEO:
“It’s a little bit like, is the Albanian army going to take over the world? I don’t think so,” said Time Warner CEO Jeffrey L Bewkes, when asked in 2010 what he thought about the company’s push toward licensed content.
And here’s Blockbuster spokesperson Karen Raskopf brushing off video on demand in 2002:
“VOD is further off than we thought it was. We keep monitoring all this stuff, and when it looks like a sustainable profitable model, we can get into these things” Raskopf said while talking up the “immediate satisfaction” of in-store rentals compared to mail order services.
More recently, traditional TV executives have tried to minimize the risk.
“The notion that [companies like Netflix] are replacing broadcast TV may not be quite accurate,” said Alan Wurtzel, NBCU president of research and media development, as he presented ratings of popular shows from streaming companies earlier this month. “I think we need a little bit of perspective when we talk about the impact of Netflix.”
Movie theater chain execs have also tried to sound brave in the face of the Netflix threat. Here’s Cinemark’s CEO on a February 2016 earnings call.
“We don’t have any concern there,” said Mark Zoradi, Cinemark CEO. “Netflix is a great service, it’s a great in-home service. They’ve had other movies. Netflix is very much a television network and not unlike what HBO and Showtime have done for years, they have some original product that goes out there. So it’s not playing in theaters, it’s playing on Netflix and we hope they have great success with it but I don’t see it as an issue relative to the theatrical business. It’s not one really that we talk about.”
And in September 2018, AT&T CEO Randall Stephenson seemed to disregard a history of Netflix proving critics wrong. At a conference, he implied that Netflix was a low-budget player that could not compare to its fancier competitor: HBO
“I think of Netflix kind of as the Walmart of [subscription video on demand], HBO is kind of Tiffany’s,” Stephenson said. “It’s a very premium, high-end brand for premium content.”
Stephenson doubled down on the statement later in his comments. “HBO is a very unique brand and a very unique property. And I really – I mean what I said, it is the Tiffany’s of media and entertainment.”Critics later pointed out that Wal-Mart is a much bigger business than Tiffany’s. We’ll see who has the last laugh.AT&T’s appointed HBO CEO Bob Greenblatt also took a shot at Netflix’s brand in March 2019, by claiming that it didn’t have one:“Netflix doesn’t have a brand. It’s just a place you go to get anything — it’s like Encyclopedia Britannica.” Greenblatt told NBC.In turn, Netflix’s chief content officer Ted Sarandos has made predictions downplaying the threat from streaming services run by media giants like Disney and WarnerMedia:“I don’t think they’ll be to the detriment of Netflix… I think there’s plenty of room in this business for other players to be successful.” He said during a December 2018 conference.
In the next few years, Airbnb could overtake major hotel chains in total guest bookings, according to a Barclays report noted in Quartz, but hotels are still reluctant to speak openly about the Airbnb threat.
“Our guests don’t want the Airbnb feel and scent,” said Christopher Norton, EVP of global product and operations at the Four Seasons, speaking to Fast Company a couple of years ago. He went on to explain that his customers expect a “level of service that is different, more sophisticated, detailed, and skillful.”
“We have not seen a direct effect [from Airbnb] in any of our hotels … We don’t feel it’s having any impact on our results or that it has hit our radar as of yet,” said Richard Jones, senior VP and COO of Hospitality Ventures Management Group, in 2014.
Marriot’s CEO Arne Sorenson doesn’t see Airbnb as a key threat:
“I think less about Airbnb than I do about Google and Facebook and all these other digital empires who own all of us.” Sorenson was speaking during a 2018 panel in New York
Hilton’s CEO Christopher Nassetta also brushed off Airbnb:
“I strongly do not believe that they are a major threat to the core value proposition we have,” Nassetta said in 2015, “I think it’s extremely hard for them to replicate what we’re doing”
Expedia CEO Dara Khosrowshahi joined in the chorus:
“We don’t see it in the business, it is not affecting us directly at all,” Khosrowshahi said during a 2015 earnings call.
Companies like Wealthfront and Betterment believe their computer algorithms will be better at investing customers’ money than personal financial advisers. But some finance professionals are not believers.
“[Wealth management] services require educated, credentialed, experienced advisors acting as fiduciaries on behalf of clients and actively engaged in a relationship with them,” said Jim Maurer, director of personal finance at Buckingham and The BAM Alliance, writing in an op-ed in CNBC, and he concludes, “I don’t see their services as competing with comprehensive wealth management.”
In a March 2016 note, Citigroup’s fintech analysts said robo-advisors may be all well and good, but that they won’t work for the wealthy clients that are the bread-and-butter of the big bank-wealth management industry.
“We see the advent of robo-advice as an example of automation improving the productivity of traditional investment advisers, and not a situation where there is significant risk of job substitution,” Citi analysts led by Ronit Ghose wrote in their report. “Higher net worth or more sophisticated investors will, in our view, always demand face-to-face advice.”
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The Apple Watch was released last year, and it’s still unclear whether or not it will become mainstream. All the same, wearables are more and more looking like they will have an impact on the traditional watch industry.
The Apple watch is an interesting toy, but not a revolution,” said Swatch executive Nick Hayek Jr., speaking to a Swiss newspaper.
Hayek was also quoted as saying in The Guardian that he doesn’t believe in a watch company handling healthcare data.
“I personally don’t want my blood pressure and blood sugar values stored in the cloud, or on servers in Silicon Valley … I cannot accept the responsibility of whether my device warns a customer in time before a heart attack.”
8. THE CONNECTED CAR/TESLA
Google and Apple are exploring driverless car technologies. Carmakers, however, haven’t been so sure tech companies taking the automotive reigns is the future.
“If there were a rumour that Mercedes or Daimler planned to start building smartphones then they (Apple) would not be sleepless at night, said Daimler head Dieter Zetsche, speaking to Motoring.com.au last year. “And the same applies to me.”
Porsche’s CEO was more blunt:
“An iPhone belongs in your pocket, not on the road,” said Porsche CEO Oliver Blume said.
Jaguar Land Rover:
“We don’t consider customers cargo,” said Jaguar’s head of R&D, Wolfgang Epple, in 2015. “We don’t want to build a robot that delivers the cargo from A to B.”
“I think somebody is kind of trying to cough up a hairball here,” said former General Motors CEO Dan Akerson, when asked about the possibility that Apple was developing its own car. “A lot of people who don’t ever operate in [the car manufacturing industry] don’t understand and have a tendency to underestimate.”
General Motors, of course, later hopped on the autonomous vehicle bandwagon in a big way. And even when they talk about autonomous vehicles, big auto is keen to dismiss the work of newer competitors such as Tesla, which was founded as a software-driven, electrical vehicle company from the start.
“It gives you the impression that it’s doing more than it is,” said Trent Victor, senior technical leader of crash avoidance at Volvo, in an interview with The Verge. “[Tesla’s Autopilot] is more of an unsupervised wannabe.” In other words, Tesla is creating a semi-autonomous car that appears to be autonomous.”
Bitcoin has had its share of troubles — including the Mt. Gox scandal, price volatility, and an increasing concentration of mining activity in China — but even with these challenges it’s still the leading decentralized currency and has spawned financial industry interest in applications of its underlying blockchain ledger tech.
JPMorgan CEO Jamie Dimon opined plainly in late 2015 that bitcoin would not survive:
“This is my personal opinion, there will be no real, non-controlled currency in the world,” said Dimon. “There is no government that’s going to put up with it for long … there will be no currency that gets around government controls.”
Dimon was at it again two years later on September 12, 2017, criticizing bitcoin and calling it a fraud.
“It’s worse than tulip bulbs,” Dimon said of bitcoin. “It won’t end well. Someone is going to get killed. Currencies have legal support. It will blow up.”
Later in September 2017 Dimon also lashed out at the trend toward Initial Coin Offerings, whereby companies issue tokens, many of them based on the Ethereum blockchain, in order to fund blockchain-based products and applications. A few — such as Tezos, which raised $230M — have raised upwards of $200M.
We recently mapped over 100 companies that raised funds through ICOs. But Dimon wasn’t having any of it.
“It’s creating something out of nothing that to me is worth nothing,” he said. “It will end badly.”
Also in late September 2017, Ray Dalio, founder of hedge fund Bridgewater Associates, echoed Dimon’s comments.
“Bitcoin today — you can’t make much transactions in it. You can’t spend it very easily,” Dalio said on CNBC’s Squawk Box. “It’s not an effective storehold of wealth because it has volatility to it, unlike gold. Bitcoin is a highly speculative market. Bitcoin is a bubble.”
The executives made the comments at around a time when bitcoin dropped to sudden lows with bitcoin dropping close to a price of $3,000 per bitcoin. However, just a little over a week later, bitcoin was again over the $4,000-mark. Dimon’s comments also caused some head-scratching since it was reported some JPMorgan traders were buying bitcoin on behalf of clients as the price dipped.
10. NEW PROTEIN & MEATLESS MEAT
The increasing momentum behind the meatless food industry — featuring lab-grown meats, seafood substitutes, and insect protein — spells change for the $90B global meat market. Meat incumbents are facing a rising tide of challenges, in the form of new technology from alternative protein/meatless startups, ethically-focused consumers, and environmental concerns.
However, many leaders in the mainstream beef industry are unconcerned about potential disruption of the industry.
“We’ll see what the marketplace says, but we feel good about the growth of beef and the consumer’s confidence in our product,” said Pete McClymont, executive vice president at Nebraska Cattlemen.
Ann Marie Bosshamer, executive director of the Nebraska Beef Council, agrees:
“Our focus truly is letting the consumer know what a nutrient-dense food beef really is,” she said when interviewed about the impact meatless alternatives might have on Nebraska’s cattle industry.
11. THE PERSONAL COMPUTER
In what is perhaps the most famous failed CEO prediction, executives who built their careers on the mainframe and enterprise computers of the pre-PC era were dismissive of the central idea that they would become the bedrock for the success of Microsoft, Intel, and other PC tech giants: that every desk in an office would have a computer, and that every home would have one as well.
“There is no reason anyone would want a computer in their home,” said Ken Olsen, founder of Digital Equipment Corporation, 1977.
“I think there is a world market for maybe five computers,” said Thomas Watson, president of IBM, in 1943.
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Steve Ballmer is one of tech’s most outspoken CEOs. Early on in Google’s ascendancy, he made his disdain for the search giant known, up to and including discounting its very status as a company.
“Google’s not a real company. It’s a house of cards.”
In the early years, Microsoft founder Bill Gates was skeptical of Google’s ability to expand its services:
“[Google] are in their honeymoon period and anything they announce gets hype,” Gates said in 2006, “they will obviously branch out beyond internet search, but I think the expectations won’t live up to reality.”
Stan Shih of Acer claimed that Apple’s foray into computers was an aberration and that the company would fail to make a niche for itself.
“Apple is like a mutant virus, escaping from the traditional structure of the PC industry, but the industry will still eventually build up immunity, thus further blocking this trend, and we believe the size of the non-Apple camp will exceed Apple’s, because this is how the industry normally evolves.”
Before Facebook’s exponential growth from 2008-2009, MySpace dominated the online social media space.
Sold to News Corporation in 2005 for $580M, MySpace had a $12B valuation in 2007. In 2011, News Corporation sold MySpace to advertising firm Specific Media for just $35M.
Shortly before Facebook surpassed MySpace in unique visitors in 2009, MySpace founder Tom Anderson dismissed Facebook in an interview with The Guardian:
“I wouldn’t single out Facebook as a concern, because we’ve got different local competitors around the world.”
Pandora was once the go-to online music streaming and artist discovery platform. It has since lost a massive amount of listeners to Spotify and Apple Music, losing about 6M listeners in 2017. In 2018, Pandora had only 5.5M subscribers to its paid subscription service — far less than Apple Music’s 38M and Spotify’s 71M.
In 2012 (just a year before he abruptly stepped down), Pandora’s then-CEO Joe Kennedy expressed confidence in Pandora’s security in the music streaming space, and a lack of concern about potential competitors.
“We haven’t seen evidence of Spotify or any other player affecting the growth that we’re seeing… services such as Spotify are fundamentally complementary to Pandora, just as Rhapsody, iTunes, etcetera have been for the 7.5 years since we first launched Pandora.”
16. MOBILE GAMING
Mobile gaming is another industry legacy execs didn’t see coming. While app hits like Angry Birds have become huge, for a long time companies like Nintendo — though aware of the app’s monumental rise — didn’t see any lasting value there and hesitated to get involved.
These mobile games are “candidly disposable from a consumer standpoint,” said Nintendo president Reggie Fils-Aime, speaking in 2011.
The Kindle was a bold bet for Amazon: from a start selling books, Bezos and the company apparently recognized the potential that ebooks had to offer. Making the ereaders in house was one of the best ways to assure that the burgeoning market could take off. Almost no one saw it coming, though. Not even the often-prescient Steve Jobs, who decried the venture.
“It doesn’t matter how good or bad the product is, the fact is that people don’t read anymore.”
18. DIGITAL WALLETS & PAYMENTS
Tech giants are moving deeper into financial services, driven by apps like Apple Pay and Google Pay, and in March 2019 Apple announced Apple Card, its own credit card. Banking incumbents have so far appeared unmoved.
Here’s Cathy Bessant, Bank of America’s Chief Operations and Technology Officer, responding to Apple Card:“My reaction when I saw the announcement was, first competitively, all of the features that are in that card are offerings we have today,” Bessant told CNBC.
19. VIRTUAL ASSISTANTS
Some new technologies are initially dismissed only to be later emulated. Here’s Google’s SVP of Mobile at the time remarking upon Siri’s potential:
“I don’t believe that your phone should be an assistant,” said Andy Rubin in 2011 at a conference
And Andy Lees, then president of Microsoft’s phone division, had a similar response:
“[Siri] isn’t super useful,” Lees remarked.
Since then, both Google and Microsoft have launched virtual assistants, in the form of Google Assistant and Microsoft’s Cortana.
20. THE TELEVISION
Daryl Zanuck, co-founder of 20th Century Fox thought that the TV itself wouldn’t catch on.
“Television won’t be able to hold onto any market it captures after the first six months. People will soon get tired of staring at a plywood box every night.”
21. THE TELEPHONE
This one is a real throwback, but in 1876, Western Union Telegraph company was offered the chance to purchase the patent on Alexander Graham Bell’s telephone. William Orton, President of Western Union, failed to see the value of the newly invented device.
“What use could this company make of an electrical toy?”