Apple Computer has done something rather amazing. Fewer than 10% of companies that hit a growth stall ever regain growth. But Apple has done it spectacularly.
Just a few years ago Apple was described as one company caught in the grips of the Innovator’s Dilemma by Clayton Christensen. Sales of Macs became so large that the company abanded its efforts to develop what became the very large PDA market (remember the Newton?). Apple began focusing on Defending and Extending its Mac business, and innovative product markets were abandoned. Then Macs fell victim to a market shift toward Wintel PCs and Apple faultered horribly – with layoffs and a risk of failure.
Now, after a series of CEO changes, Apple has taken the lead in the on-line digital music business with its iPod. Third quarter sales were up 75% versus a year ago, leading to a five-fold increase in profits (see Chicago Tribune report.) And share prices are near 5 year highs. That’s great…. so long as Apple doesn’t succumb to the siren’s song of now trying to be just an iPod company. What turned around Apple was using white space to find a new product market overlooked by Sony and other traditional music industry players trying to defend and extend their outdated business model.
What Apple must do is continue disrupting itself, creating white space projects and developing new product markets. In the fast cycle-time world of personal electronics, the requirements for success are applying the Phoenix Principle and avoiding the lure of trying to defend and extend a hit product/market.
