Hard Cell

The story of the Kyocera Smartphone is a case study in creativity, design, engineering — and sheer determination. Here's what it takes to launch a hot product in a crowded market.

Gary Koerper was turning red with anger. For nearly a year, he had been leading a small team of engineers in trying to build the next great mobile phone. From its San Diego headquarters, the team had crafted more than 30 prototypes, reworking microscopic details until the engineers felt that they had built something sleek and alluring. Now, finally, Koerper had a fully functioning device on his desk. If he could just get someone in the testing department to validate his design, he could push the phone into production. He envisioned that within weeks, factories would start making 20, then hundreds, then thousands and thousands of these phones — enough to blanket stores across America.

But no one in the testing department seemed ready to help him. We're awfully busy, they said. We've got all these other projects under way, and we don't know when we might be able to get to yours.

So this is how they tell you, Koerper thought. High-tech development projects seldom perish in one abrupt move. They just lose top-level support within big companies. And then each remaining step to market becomes harder ... then harder ... until finally, the last hope of progress is snuffed out. No one was saying so to his face, but Koerper felt sure that the testing delays weren't just minor bad luck.

Stymied within his own company, Koerper decided to try a daredevil alternative. Without telling most of his colleagues, he phoned Pleasanton, California, 450 miles to the north, and signed up Product Quality Partners Inc. to do the testing for him. It would cost $30,000 or more — money that wasn't in any of Koerper's budgets. No matter. "We're just going to do it anyway," he told his engineers.

Those maneuvers took place in early 2000. A little more than a year later, Gary Koerper has found vindication. His company, Kyocera Wireless Corp., has embraced his project — a highly advanced "Smartphone" — and is now manufacturing and shipping it by the truckload. Two of the top wireless carriers in the United States, Sprint PCS and Verizon, are marketing the phone to customers nationwide this spring. With a list price of $500, the Kyocera Smartphone is one of the most expensive models on the market today. But it does something that only one or two years ago would have appeared impossible: It combines a Palm OS digital assistant with a high-end mobile phone in a single device — and it's barely bigger than a deck of playing cards.

In many ways, the Smartphone's evolution is a classic story of high-tech innovation within a big company. It starts with a small team of engineers at Qualcomm Inc. in San Diego, who were given a hazy but intriguing mandate. Gradually, they came to believe that they could produce a breakthrough product — even if outsiders were dubious. Repeated crises erupted along the way, including a near-death experience in February 2000 when their division was sold to the San Diego subsidiary of Japan's Kyocera International Inc. For a while, it appeared that no one wanted the Smartphone project to continue. Yet the engineers pressed on in skunk-works fashion, improvising solutions as needed, until they emerged with a product that attracted enthusiastic mobs at trade shows, media events — and even the passenger lounge at Chicago's O'Hare airport.

But the Smartphone's journey to market isn't simply a testament to electrical-engineering wizardry. The new phone is also a brand-name consumer product, meant to be picked up, fiddled with, caressed, and occasionally slammed down. So crucial stages in its development reflect a tension never felt by earlier generations of engineers who built spacecraft, nuclear submarines, or computer-operating systems. Nowadays, it isn't enough to deliver everything promised on a spec sheet. The soul of this new phone has to be a triumph of design, wooing customers' eyes, fingers, and checkbooks.

As a result, the most intriguing lessons of the Smartphone's launch involve the interplay between the hard-core world of engineering and the rarified world of design. It's possible to conjure up an empty plastic shell that looks great. It's also possible to assemble hundreds of microelectronic components into a chassis and have them meet almost any performance standard. But unless the project's masterminds know how to develop a harmony of engineering and design, the resulting product is likely to be nothing more than a dissonant series of compromises.

"If there is one overarching thing that we did right," Koerper says, "it was to realize that this project was going to live or die on how well we handled the mechanical design. People wanted something that was light and sleek and that felt like a phone." If Kyocera couldn't deliver that, all of the electrical-engineering brilliance in the world wouldn't save the product.

Design Principles: Of "Butt Phones" and "Theft Meters"

Of all the people working on the Smartphone project, Koerper, at 31, was one of the youngest. Just two years earlier, he had been rounding out his education with an MBA and a master's degree in electrical engineering from the Massachusetts Institute of Technology. But he carried himself with the earnest, relentless demeanor of a young Navy officer wanting to do well on his first command. Before coming to Kyocera, he had done everything from aerospace engineering in Los Angeles to microprocessor marketing in Japan. And as team members got to know him better, they discovered that the team leader with the wire-frame glasses and the close-cropped brown hair could be wickedly funny at times and a hell-raiser when the work was done.

Ironically, the Smartphone was built atop the rubble of a previous failure. In late 1998, something called the Qualcomm pdQ Smartphone was first test-marketed to major wireless carriers. The device did combine a mobile phone and a Palm platform in one device, but as one engineer wryly recalls, "It was a brick. It was big, clunky, and ugly." Customer feedback suggested that the design flaws were severe, perhaps even fatal.

So the word went out to people at Qualcomm's San Diego headquarters: Start thinking about how to produce a second-generation Smartphone that would be more appealing to customers. In December 1998, members of a small brainstorming team produced a 24-page "concept definition" for such a phone. Their memo was long on rhetoric about how vast the market for such a hybrid phone might be. But there were no sketches of what such a phone might look like — just a single vague sentence that read, "Design should be optimized so the phone is comfortable to hold."

In other words, no one had any idea how to build it.

By a happy coincidence, Qualcomm had recently hired a cocky mechanical engineer from Hewlett-Packard, named Kyle Halkola. He was a dirt-biking enthusiast who was extremely proud of having helped HP design the casing for some of its printers. "I know plastics," Halkola would tell anyone who was curious. Eager to see just how good Halkola was, senior management assigned him to the Smartphone project.

For more than a month, Halkola, along with design specialist Rob Howe and members of an outside consulting firm, carved blocks of gray foam to produce prototypes of Smartphone designs. Their first dozen attempts misfired, particularly one dark-gray model with two bulging lobes in the back. They nicknamed it "The Butt Phone" and promised never to make something so ugly.

Top-level guidance came mostly in the form of oblique, Zen-like phrases. Koerper had read that Jeff Hawkins, the creator of the smash-hit PalmPilot, had tested his prototypes years ago by carrying them around in his pockets to see if they felt right. So everyone on the team conducted multiday pocket tests of each new version. Meanwhile, Paul Jacobs, then-president of Qualcomm's consumer-products division, urged developers to "make it look like a phone."

As Halkola and Howe kept plugging away, each of their designs needed realistic space estimates for all of the components that would go inside. Squeeze too much in one direction, and problems arose along another axis. When they tried to make a really thin model, it became unbearably wide. When they tried a narrower alternative, it got too thick. Then, around version 19, things began to click.

"You know you're getting close when every model you make starts to disappear," Halkola, 39, explains. "When you're way off, no one wants to touch your stuff. But when you're really on the right track, corporate vice presidents start to come by the lab and walk off with your latest version. We've got a name for it. We call it 'the theft meter.' And all of a sudden, our theft meter was being triggered."

Engineering Matters: Don't Be Surprised by Surprises

Meanwhile, serious work had begun on designing the guts of the phone. More than 600 tiny components would be nestled together on two circuit boards, each of which would be about the size of a business card. Randi de Lara took charge of the PDA; Mike Schnetzer oversaw the radio-frequency, or phone, section. The two engineers worked side-by-side for months — and as they staked out space inside the Smartphone, they felt like two kids sharing the same small bedroom. When Schnetzer needed an extra 3 millimeters to accommodate a "tall" inductor mounted on his circuit board, de Lara had to help him out by agreeing to adjust parts on his board. Finally, after seven attempts to build the boards, both men had designs that were good enough to put into production.

If space inside the phone was precious, weight was even dearer. The original pdQ Smartphone had weighed 285 grams — more than four PowerBar snacks — and that heft made it laughably unattractive. The new phone would weigh nearly 25% less, vowed Koerper and senior engineer George Wiley. This time, the battery couldn't weigh more than 43 grams. The flip element on the phone was allotted just 16 grams. And when de Lara found a new microphone model that weighed just 0.3 grams instead of 0.4 grams, everyone cheered.

At times, even the basic laws of physics seemed to conspire against Koerper's team. Mobile phones work by detecting extremely faint signals in the air and then amplifying and filtering them to the point that they become recognizable conversations. That's nice, but a PDA doing even the simplest task emits electrical signals that are 1,000 times stronger than the incoming calls a phone module is trying to hear. Without an artful interplay of shields, amplifiers, and filters, users trying to make a phone call will hear nothing except the chaotic hum of the PDA in action.

One of the most challenging aspects of the final design called for the phone's circuitry to use filters no larger than a capital O on this page. Suppliers were accustomed to making those parts several times that size. "When I first told them what we wanted, they just laughed and said, 'No way,' " engineer Marimuthu Sivakumar recalls. "But we eventually found someone who could do it."

In hindsight, much of the early engineering work was planned imperfectly — if it was planned at all. Team members meddled in one another's areas, changed their minds a half-dozen times about things as fundamental as battery design, and conducted some of their most important meetings during 90-second hallway chats.

Yet team members said that such improvisation is exactly the right way to guide a project in a fast-moving industry. "No matter how much you think you know at the start, you're going to face surprises almost every day," Koerper explains. "Some things that seemed impossible are going to become practical. And some things that seemed easy are going to be problems. It wasn't until nearly a year into the project that I really knew all of the pieces were going to fit together inside the phone."

By autumn 1999, Koerper felt confident enough in the phone's progress to start thinking about its appearance. He and Halkola wanted colors that projected such messages as "high-end," "serious," and "cutting edge." The body of the phone should be charcoal gray or black. The accent elements could then be a metallic silver. To test their ideas, the two men traveled to Selkirk, New York, where GE has a huge plastics lab.

"They've got millions of colors there," Koerper says. "They can mix up anything you want. It costs thousands of dollars a color, but it's mesmerizing." As he played around with colors, he decided to scrap the bright silver for a more subdued gunmetal gray. At another point, Koerper says he told GE technicians that they were close, but that he wanted something more, um, masculine. "I figured that they would look at me as if I were nuts," he says. "But they didn't. They came back a few minutes later with exactly what we wanted."

Business Model: Underpromise and Overdeliver

All the while, Koerper fine-tuned the Smartphone's business projections. In the mobile-phone business — as in most high-tech sectors — no one really knows how well a new product will sell until it hits the market. But executives must make their best guesses anyway. Koerper's spreadsheets in late 1999 envisioned selling more than 250,000 units of the phone over an 18-month life span, pricing them at about $560 apiece. That would be small fare in an industry that sells 80 million phones a year in the United States alone. But Koerper thought that the Smartphone could be nicely profitable even at that level.

Besides, Koerper would later explain, "The original pdQ phone was just dying in the marketplace back then. There was no sense in raising top management's suspicions by claiming we were going to do great things with this model. I felt that we would be much better off if we underpromised and overdelivered."

For senior executives at Qualcomm, though, the picture was much muddier. Two simpler and cheaper mobile-phone prototypes were racing to market at the same time as the Smartphone. Typically, Qualcomm launched only one model at a time; it had never done three at once. Multiple launches could splinter the company's sales-and-marketing focus, executives worried. In an effort to pitch too many different phones at once, the company might fail to deliver a strong message for any of them.

What's more, Qualcomm itself had embarked on a sweeping restructuring, deciding to sell many operations and to focus mostly on the software and intellectual property that are the underpinnings of certain cell-phone networks. First Qualcomm sold its telecom-infrastructure business to Ericsson of Sweden. Then, in December 1999, Qualcomm agreed to sell its handset division, where Koerper and his team worked, to Japan's Kyocera. The transaction was completed two months later.

Suddenly, new owners wanted to scrutinize everything afresh, including the Smartphone project. Midlevel officials from Kyocera's Japanese labs came to San Diego for extensive briefings. Communication was handled mostly through interpreters, who translated everything the Americans said but passed along little except direct questions from the Japanese executives. At one briefing, Koerper produced a prototype of the Smartphone, hoping to impress his new bosses. No such luck. Across the conference table, Koerper could hear one Japanese executive muttering to another, "Okisugiru ne!"

Koerper wanted to snap back, "No it's not!" Partway through college, he had lived in Japan for a year and a half and had learned a good working knowledge of the language. He didn't need a translator to know the verdict: It's too darn big. For a moment, he wanted to argue the point — to say that while tiny phones might be all the rage in Japan, his model was sized appropriately for the United States. But such a retort would be unspeakably rude. He hadn't even told his new bosses of his Japanese connection. There would be time for that later.

For the next few months, the Smartphone project was in official limbo. Project engineers kept making progress in their specific areas, but there was no clear sense of where the phone fit into Kyocera's plans. Originally, Koerper had hoped that the phone would be tested, approved, manufactured, and shipped in time for the Christmas 2000 selling season. But, as other Kyocera projects raced ahead and his didn't, Koerper knew that even in the best possible scenario, his phone wouldn't reach customers until early 2001.

To veteran engineers, the delays were especially ominous. Their dreams involved being part of a project that would catch the public's imagination and would sell by the millions — giving them a taste of fame and glory within engineering circles. Their nightmares consisted of spending most of their thirties and forties on one doomed project after another, to the point that no one would consider them talented enough to deserve any more shots at the big time.

"It's on everyone's mind in engineering," recalls software developer Jeff Pritchard. "There's always hope at the beginning of a project, but it's hard to keep that hope alive in the middle, especially when you can see politics starting to intervene."

Etched into Pritchard's memory was a grim afternoon from 15 years earlier in his career, when he was working at Eastman Kodak Co. He had been pursuing an early version of digital photography for consumers, and he thought it had great promise. In a way, ultimately, he was right. But he learned over lunch that his project had just been canceled. An older engineer at the table got up, walked back to his desk, and came back with an elaborate set of calculations. "I've been here 11 years," the older engineer said, "and I've worked on 12 projects. Not one of them has ever shipped." For the rest of that afternoon, Pritchard recalls, the older engineer walked around crestfallen, "as if his dog had died."

Launch: "How Many of These Can You Make for Us?"

Just as anxiety reached dangerous levels within the Smartphone team, reasons for optimism emerged. Dean Fledderjohn, the business-development manager, called on Boeing, Ford, and other major corporations and found that they were strikingly upbeat about the Smartphone's potential. Meanwhile, Masahiro Inoue, the new president of Kyocera's San Diego outpost, took a prototype along with him on a Tokyo business trip in May 2000 — and heard rave comments from some of the parent company's top executives. In fact, they commandeered his phone, demanding more samples.

By this time, Koerper could no longer hide his maneuvers to bypass Kyocera's test facilities and get the Smartphone evaluated elsewhere. But his bosses were ready to show a lenient side; if the new phone was likely to become a star product, there was no reason to reprimand its chief developer for his zeal.

In the most cheering sign of all, engineers who tried the phone outside Kyocera's premises found that utter strangers were spellbound by the device. Over a holiday weekend last summer, senior program manager Brett Kayzar whipped out a Smartphone to check his email in one of the passenger lounges at O'Hare airport. All around him, other business travelers were trying to do the same thing — but their attempts were getting tangled up in an electrical maze of laptop computers, power adapters, modem cords, and the like.

As Kayzar, 40, recalls, "One of the other guys in the lounge asked me, 'What have you got there?' I was very coy; I just said, 'It's something new. It's in very early development. It isn't available to the public yet.' He wanted to see it, so I let him hold it. The next thing I knew, half of the people in the lounge were crowded around us with these fascinated looks, passing it back and forth."

Now the Smartphone was almost ready to be mass-produced, but a handful of tasks remained. The device needed to be stress-tested, to make sure that it could withstand almost anything that a customer might do to it. So some phones were put in ovens and freezers, to check thermal ruggedness. Small mechanical jigs pressed buttons on the phones, day and night, to make sure that the number "1" or "5" still worked after more than 100,000 taps. Other phones were dropped, over and over, onto a linoleum floor — from heights as great as two meters — to make sure that they wouldn't break.

Weirdly, all of the vital circuitry of the Smartphone proved crash-proof, but the stylus for the PDA module would sometimes pop out and catapult toward the ceiling. So engineers worked to design the perfect stylus, with a rubber mechanism that would lock it in place. When they spent weeks testing a dozen designs, they were teased as perfectionists. But in the end, they had a no-slip stylus that worked so well that the company's lawyers agreed to patent it.

By this past January, the Smartphone was ready to be turned over to manufacturing boss Mike Barnwell for full-scale production. At their peak, Kyocera's production lines can churn out hundreds of phones an hour — but new models typically start at much slower rates until all of the inevitable glitches are cleared up. Months earlier, in fact, Randi de Lara's circuit board had been kicked back to the drawing boards because it had malfunctioned spectacularly in its initial production tests.

In November 2000, Koerper and Gregg Rowell, Kyocera's senior director of strategic accounts, visited executives at two of the leading wireless carriers, Sprint PCS and Verizon. People at both companies had expressed interest in the Smartphone already, but weren't yet committed to buying it in bulk. With more than 11 million Palm-brand devices in circulation worldwide, though — and with every technology publication crammed full of articles about the wireless Internet — the carriers suddenly were a lot more interested.

At one meeting, Koerper recalls, a carrier executive picked up a sample of the Smartphone, walked out of the meeting, and huddled briefly with his company's CEO. When the carrier executive returned, he had a simple message: "We love it. How many of these can you make for us?"

All of a sudden, Koerper later remarked, "Organizations that at first were lukewarm were now buying out my entire first year of production." Instead of planning to sell no more than 275,000 Smartphones during the life of the project, Kyocera officials realized that they had something much bigger on their hands. With Masahiro Inoue leading the charge, Kyocera's senior managers began calculating how to ramp up manufacturing capacity in a serious way.

A public buzz started to build about the new phone too. In November, the influential personal-technology columnist at the Wall Street Journal, Walter Mossberg, told readers: "Don't despair, however, about phones with big screens and built-in organizers. Another one is on the horizon" — the Kyocera Smartphone. In December, technology reviewer Stewart Wolpin endorsed the Smartphone on CNNfn as a "pocket-friendly" combination of phone and PDA with "no compromises" that hurt either function. Publications ranging from PCWorld.com to Cigar Aficionado also praised the Smartphone's design.

At Palm Computing's main trade show in Santa Clara, California in mid-December 2000, Jeff Pritchard decided to scout several dozen exhibitors' booths to see what other new ideas were afoot. At first, he and a colleague walked around with Smartphones clipped onto their belts. Not a good idea.

"We'd ask people about what they were doing, and all of a sudden, they'd look at us and say, 'What's that phone you've got?' " Pritchard recalls. "Pretty soon, we were giving them a Smartphone demonstration, and we weren't learning anything about what they were doing. We had to hide our phones to get any work done."

When the Smartphone finally went on sale March 5, Kyocera was bombarded with more than 1,000 calls or emails from would-be customers wanting to know where they could get the device. But for all of the recent good fortune, the Smartphone team is hardly guaranteed success. The stumbling U.S. economy could soften demand for all types of mobile phones — and in fact several major cell-phone manufacturers have cut industrywide sales forecasts. Competition is likely to heat up, too, as Samsung Electronics of Korea and others bring to market their own versions of phone/PDA hybrids.

In a way, Koerper says, it's almost easier to be the little-noticed underdog than to be the potential front-runner, highly visible to competitors and highly likely to be a target for rival engineering teams around the globe. At a recent meeting with one of the major wireless carriers, he says, he was taken aback slightly when executives asked whether he could start talking about Kyocera's plans for the next generation of Smartphones.

"What are you looking for?" he asked. The reply: "We have a lot of needs and a big checkbook. That's all you need to know for now."

Koerper was flattered — but wary. "It sounds nice," he says, "but that can be a dangerous situation."

George Anders (ganders@fastcompany.com) is a Fast Company senior editor based in Silicon Valley. You can always reach him on his cell phone. Contact Gary Koerper by email (gary_koerper@yahoo.com), or learn more about the Smartphone on the Web (www.kyocera-wireless.com).

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