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The iPhone didn't start out as Apple's "next big thing." Steve Jobs had to be talked into building a phone. It had been a topic of conversation among his inner circle almost from the moment Apple launched the iPod in 2001. The conceptual reasoning was obvious: Why would consumers carry two or three devices for email, phone calls and music when they could carry one?

But every time Jobs and his executives examined the idea in detail, it seemed like a suicide mission. Phone chips and bandwidth were too slow for anyone to want to surf the Internet and download music or video over a cell phone connection. Email was a fine function to add to a phone. But Research in Motion's BlackBerry was fast locking up that market.

Worst of all, if Apple wanted to make and sell a phone in the United States, it would be at the beck and call of the U.S. wireless carriers. Back then, phone manufacturers such as Motorola were the serfs of high tech in the United States. They depended on carriers' marketing dollars to get consumers into stores, and then they depended on carriers to make the phones affordable by subsidizing their purchase price. That made manufacturers powerless to resist carriers' meddling in how each phone should be built.

Jobs was personally offended by this way of doing business and wanted no part of it. "We're not the greatest at selling to the Fortune 500, and there are five hundred of them—five hundred CIOs [chief information officers] that are orifices you have to go through to get" that business. "In the cell phone business there are five. We don't even like dealing with five hundred companies. We'd rather run an ad for millions and let everyone make up their own mind. You can imagine what we thought about dealing with five," he said during an onstage interview at the All Things D conference in May 2003.

That sounded tough and principled. But by the end of 2003, as the iPod became Apple's most important product since the Macintosh, it was also starting to look misguided. Cell phone makers were putting music-listening applications in their phones. And companies such as Amazon, Walmart and Yahoo! were beginning to sell downloadable music. Executives such as iPod boss Tony Fadell worried that if consumers suddenly gave up their iPods for music phones, Apple's business—only five years removed from its flirt with bankruptcy—would be crushed. "We didn't really have a hit on our hands [with the iPod] until late 2003, early 2004, so we were saying maybe we don't have the market domination—the retail channels—to expand the iPod's business properly," Fadell said.

It's hard to imagine a time when the iPod wasn't an iconic product, selling more than 50 million units a year; but back then Apple had sold only 1.3 million devices in two years and was still having trouble getting retailers such as Best Buy to carry it.

By summer 2004 sales exploded. It sold 2 million during the quarter that ended September 30, 2004, and another 4.5 million in the final quarter of the year. By the end of the year, Apple building its own phone no longer seemed like such a bad idea. By then it looked like most homes and cell phones would soon have Wi-Fi, which would provide high, reliable bandwidth over the homeowner's DSL or cable connection. And outside-the-home cell phone bandwidth looked like it would soon be fast enough to stream video and run a fully functioning Internet browser. Phone processor chips were finally fast enough to run cool-looking phone software. Most important, doing business with the carriers was starting to seem less onerous.

The first iPhone prototype was not ambitious. Steve Jobs hoped that he would be able to develop a touchscreen iPhone running OS X. But in 2005 he had no idea how long that would take. The prototype was an iPod with a phone radio that used the iPod click wheel as a dialer.

The second iPhone prototype in early 2006 was much closer to what Jobs would ultimately unveil. It incorporated a touchscreen and OS X, but it was made entirely of brushed aluminum. Jobs and Ive were exceedingly proud of it. But since neither of them were experts in the physics of radio waves, they hadn't realized they'd created a beautiful brick. Radio waves don't travel through metal well.

It all made the iPhone project so complex that it occasionally threatened to derail the entire corporation. Many of the top engineers in the company were being sucked into the project, forcing slowdowns in the timetables of other projects. Had the iPhone been a dud or not gotten off the ground at all, Apple would have had no other big products ready to announce for a long time. Worse, its top engineers, frustrated by the failure, would have left Apple for other jobs.

Even Apple's experience designing screens for iPods didn't help the company design the iPhone screen. After much debate, Jobs decided the iPhone screen needed to be made of hard Plexiglas. He and his executives thought a glass screen would shatter when dropped—until Jobs saw how scratched a plastic prototype had gotten when he carried it around in his pocket with his keys. "Jobs goes, 'Look at this. Look at this. What's with the screen?'" said an executive who witnessed the exchange. "And the guy [a midlevel executive] takes the prototype and says, 'Well, Steve, we have a glass prototype, but it fails the one-meter drop test one hundred out of one hundred times, and blah blah blahÉ' Jobs cuts him off and says, 'I just want to know if you are going to make the fucking thing work.'"

There was a good reason the executive argued with Jobs. This was September 2006. The iPhone would be unveiled in four months. And Jobs wanted to rethink the phone's most prominent component.

Through his friend John Seely Brown, Jobs reached out to Wendell Weeks, the CEO of glassmaker Corning in upstate New York, invited him to Cupertino, and told him he needed the hardest glass ever made for the screen of the iPhone. Weeks told him about a process developed for fighter-jet cockpits in the 1960s. But Weeks said the Defense Department never ended up using the material, known as gorilla glass, so it had never found a market. He said Corning had stopped making it decades ago. Jobs wanted Weeks to start production immediately, convincing Weeks that he could in fact get Jobs the glass he needed in six months. "We produced glass that had never been made. We put our best scientists and engineers on it and we just made it work," Weeks said.

On top of all that, Jobs's obsession with secrecy meant that despite being exhausted from working 80 hours a week, the few hundred engineers and designers working on the project couldn't talk about the project to anyone else. If Apple found out you'd told a friend in a bar, or even your spouse, you could be fired. Before a manager could ask you to join the project, you had to sign a nondisclosure agreement in his office. Then, after he told you what the project was, you had to sign another document confirming that you had indeed signed the NDA and would tell no one.

"My favorite part," said one of the early iPhone engineers, "was what all the vendors said the day after the unveiling." Big companies such as Marvell Electronics, which made the Wi-Fi radio chip, and CSR, which provided the Bluetooth radio chip, hadn't been told they were going to be in a new phone. They thought they were going to be in a new iPod. "We actually had fake schematics and fake industrial designs," the engineer said.

One of the most obvious manifestations of Jobs's obsession with secrecy was the growth of lockdown areas all over campus—places that those not working on the iPhone could no longer go. "Each building is split in half, and there is this corridor that runs through the middle of them with common areas, and after one weekend they just put doors around the common areas so that if you were not on the project, and you were used to using that space, it was now off-limits," senior engineer Andy Grignon said. "Steve loved this stuff. He loved to set up division. But it was a big 'fuck you' to the people who couldn't get in. Everyone knows who the rock stars are in a company, and when you start to see them all slowly get plucked out of your area and put in a big room behind glass doors that you don't have access to, it feels bad."

And no one outside Jobs's inner circle was allowed into chief designer Jony Ive's wing on the first floor of Building 2. The security surrounding Ive's prototypes was so tight that employees believed the badge reader called security if you tried to badge in and weren't authorized.

The four months leading up to announcement day were particularly rough, Grignon said. Screaming matches broke out routinely in the hallways. Engineers, frazzled from all-night coding sessions, quit, only to rejoin days later after catching up on their sleep. Forstall's chief of staff, Kim Vorath, slammed the door to her office so hard that the handle bent and locked her in; it took colleagues more than an hour and some well-placed whacks with an aluminum bat to free her. "We were all standing there watching it," Grignon said. "Part of it was funny. But it was also one of those moments where you step back and realize how fucked-up it all is."

To Grignon's amazement and to that of many others in the audience, Jobs's iPhone demo on January 9, 2007, was flawless. He started the show saying, "This is a day I have been waiting for two and a half years." Virtually everyone in the audience had been expecting Jobs to announce a phone, yet they were still in awe.

He used the iPhone to play some music and watch a movie clip to show off the phone's beautiful screen. He made a phone call to show off the phone's reinvented address book and voice mail. He sent an email and a text, showing how easy it was to type on the phone's touchscreen keyboard. He scrolled through a bunch of photos, showing how simple pinches and spreads of two fingers could make the pictures bigger or smaller. He navigated Amazon's and The New York Times' websites to show that the iPhone's Internet browser was as good as the one on his computer. He found a Starbucks with Google Maps—and called the number from the stage—to show how it was impossible to get lost with an iPhone.

By the end, Grignon wasn't just happy, he was drunk. He'd brought a flask of Scotch to calm his nerves. "And so there we were in the fifth row or something—engineers, managers, all of us—doing shots of Scotch after every segment of the demo. There were about five or six of us, and after each piece of the demo, the person who was responsible for that portion did a shot. When the finale came—and it worked along with everything before it, we all just drained the flask. It was the best demo any of us had ever seen. And the rest of the day turned out to be just a shit show for the entire iPhone team. We just spent the entire rest of the day drinking in the city. It was just a mess, but it was great."

Excerpted from DOGFIGHT: How Apple and Google Went to War and Started a Revolution by Fred Vogelstein, published 2013 by Sarah Crichton Books, an imprint of Farrar, Straus and Giroux, LLC. Copyright © 2013 by Fred Vogelstein. All rights reserved.

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