By Josh Ong

Published: 09:44 PM EST (06:44 PM PST)

Microsoft's head of software design for Windows Phone has admitted that the company completely redesigned its mobile operating system platform as a response to Apple's iPhone and the "sea change" it created in the industry.

Joe Belfiore, one of the first engineers brought to the new Windows Phone team when it was formed, made the comments in an interview with The New York Times.

“Apple created a sea change in the industry in terms of the kinds of things they did that were unique and highly appealing to consumers,” he said. “We wanted to respond with something that would be competitive, but not the same.”

According to the report, "once the iPhone exploded into the marketplace, Microsoft executives knew that their software, as designed, could never compete." In December 2008, Microsoft's then head of mobile engineering called a meeting to decide the fate of its aging Windows Mobile software. Seven hours later, Myerson and his team decided to scrap the OS and start again from scratch.

“We had hit bottom,” said Myerson, who recently replaced Andy Lees as head of the Windows Phone division, adding that doing so gave the company "the freedom to try new things, build a new team and set a new path.”

Former Microsoft manager Charlie Kindel compared the decision to start over to mountain climber Aron Ralston's now famous accident where a boulder fell on his arm and he was forced to amputate it.

“This boulder comprised of Apple and Blackberry rolled on our arm,” he said. “Microsoft sat there for three or four years struggling to get out.”

While designing the new operating system, Microsoft deciding to strike a balance between Apple's highly-controlled approach and Android's more permissive strategy. It upset handset makers by instituting strict rules on the level of technical specifications required for Windows Phone devices in an attempt to avoid the fragmentation and performance issues that had plagued Windows Mobile and, to some extent, Android.

“It’s not just about software,” Albert Shum, general manager of the design studio for Windows Phone, told the Times. “It’s about the whole end-to-end experience.”

Microsoft CEO Steve Ballmer experienced "some hesitancy" after his first look at an early version of Windows Phone, according to Myerson, but the team made revisions to address his concerns.

The decision to start over was costly, as the two years that it took the software giant to create Windows Phone left iOS and Android with a huge opportunity in the smartphone market. Android held 25 percent of the worldwide smartphone market and iOS 16.6 percent in the third quarter of 2010, while Windows Mobile had dwindled to 2.7 percent. Windows Phone's first year on the market failed to reverse the trend, with Android holding 52.5 percent share an iOS claiming 15 percent, while Microsoft's portion slid to 1.5 percent in the third quarter of 2011.

The first reviews of the platform praised Windows Phone for its unique tile interface when it arrived in fall 2010, but they also noted that the operating system was several years behind Apple's iOS and Google's Android. Sales of Windows Phone devices since then have failed to gain significant momentum.

Myerson himself admits that the platform has faced an uphill climb because of the time it lost. “Entering the market so late with this experience has created some special challenges for us,” he said. “I think if we were there earlier it would be different.”

The mobile OS will have a second chance in the U.S. market early this year when the first Windows Phone-based Nokia devices arrive. Nearly a year ago, the Finnish handset maker announced that it was abandoning its Symbian OS in favor of a close partnership with Microsoft, but the first phones resulting from the deal have yet to arrive in the U.S..

The two companies are reportedly set to unveil the flagship Nokia Ace smartphone at the Consumer Electronics Show next week. The handset is also rumored to receive a $100 million marketing push from Microsoft, AT&T and Nokia, but even AT&T's own executives have confessed their belief that Windows Phone will see "a lot of challenges" in going up against its more-established competitors.