Single major innovation in iPhone was ability to perform reasonably high precision user interaction using grossly imprecise input method, i.e. Human thumbs. My theory is that people in WinMo team didn't used iPhone when it came out because everyone carried WinMo in their pocket. I think most people just didn't believed it was perfectly possible to use touch keyboard with thumbs with reasonable precision. So the reaction to new design was slow. Once Verizon told Microsoft how they were bleeding customers over iPhone, people realized the significance of what had happened. But then there was long battle for how to evolve. Should old WinMo code be modified or do we need new OS or do we combine desktop and mobile OS? This would have been difficult decision in itself because you also need to support vast number of existing WinMo customers. This struggle took years to resolve and by that time ship was sailed. If there was one person in charge who understood what was going to hit the world and gave order to unify entire army behind creating new mobile OS without worrying about compatibility or merge with desktop then we might have had different story. Of course, in hindsight every thing looks crystal clear about what should have been done but if you were sitting in Ballmerd chair with data you had in hand your call could have been the same. On the other hand Android chief realized what was going to hit them and they turned around their execution overnight which was possible because they didn't had legacy OS used by millions or desktop OS diverging from mobile. Anyway, this is just my theory. I have no insider information like the author.