How, and Why, Apple Overtook Microsoft

HughPickens.com writes James B. Stewart writes in the NYT that in 1998 Bill Gates said in an interview that he "couldn't imagine a situation in which Apple would ever be bigger and more profitable than Microsoft" but less than two decades later, Apple, with a market capitalization more than double Microsoft's, has won. The most successful companies need a vision, and both Apple and Microsoft have one. But according to Stewart, Apple's vision was more radical and, as it turns out, more farsighted. Where Microsoft foresaw a computer on every person's desk, Apple went a big step further: Its vision was a computer in every pocket. "Apple has been very visionary in creating and expanding significant new consumer electronics categories," says Toni Sacconaghi. "Unique, disruptive innovation is really hard to do. Doing it multiple times, as Apple has, is extremely difficult." According to Jobs' biographer Walter Isaacson, Microsoft seemed to have the better business for a long time. "But in the end, it didn't create products of ethereal beauty. Steve believed you had to control every brush stroke from beginning to end. Not because he was a control freak, but because he had a passion for perfection." Can Apple continue to live by Jobs's disruptive creed now that the company is as successful as Microsoft once was? According to Robert Cihra it was one thing for Apple to cannibalize its iPod or Mac businesses, but quite another to risk its iPhone juggernaut. "The question investors have is, what's the next iPhone? There's no obvious answer. It's almost impossible to think of anything that will create a $140 billion business out of nothing."

Comments

Create a $140 billion business out of nothing?

[Chas]

Uh. They most certainly did NOT create the smartphone sector. And they sure as fuck didn't do it out of "nothing".

Now I admit, yes, Apple's been disruptive, in a good way, for the industry. But can we stop slobbing the Apple knob?

Re:Create a $140 billion business out of nothing?

[peragrin]

right and touchscreen smart phones were widely used before the iPhone? yes you had business phones. they had shitty web browsers, could barely display one email at a time, and were a joke.

The apple introduced the iPhone, and all those companies what had smartphones before are either gone, or fading away. So yes you are technically correct apple didn't create the smartphone sector. Apple turned a tiny niche, into a massive piece, showing companies how doing something right all the way through can lead to massive profits.

So when you turn a few thousand units a year into a few billion units it is building it out of nothing.

Re:Create a $140 billion business out of nothing?

[Mr D from 63]

I think its pretty simple. Microsoft overlooked the entertainment part of the market, and stuck with the business/productivity focus almost exclusively. Microsoft remains dominant in business. Apple got it when it came to entertainment and social aspects, and has reaped the benefits of addressing that part of the market. Even when Microsoft tried to create entertainment products, they failed because they launched them from the business/productivity based platform.

Re:Create a $140 billion business out of nothing?

[ohieaux]

While there's no denying Apple helped build the sector into $140B (or whatever it is), the real innovation was bringing data to users at a reasonable price.

I had some lame windows smart flip phone prior to the iPhones coming out. But, it wasn't subsidized by my employer. The browser was garbage, and the email was rudimentary. I lived in fear that something would misbehave and I'd get slammed with $100's of dollars in data fees from AT&T. I bought an early iPhone and lost that fear. Ultimately, the closed ecosystem drove me to Android. Now, I struggle to get to 10% of my monthly data cap.

For me, opening cell companies to reasonably priced data (by jumping in at the right time and locking in with AT&T) is what Apple did to open the market.

Re:Create a $140 billion business out of nothing?

[sphealey]

- - - - - That's not creating a new business out of nothing, nor is it being particularly visionary. It's a natural improvement on an existing market segment. - - - - -

One has to be careful about trusting accounts written later, whether written by the winners or the losers. But multiple sources have reported that the response to the introductory demo of the iPhone at the highest levels of both Nokia and Blackberry was "that's impossible - they must be faking it". Nokia and Ericsson at least did a reality reset within a year and tried to get back in the game, but Blackberry only realized the iPhone was for real 18 months ago - say early 2014, 7 years after the iPhone was introduced.

I'd call that creating, or recreating, a new segment.

sPh

Re:Create a $140 billion business out of nothing?

[Rob Y.]

It's not that Microsoft overlooked the entertainment part of the market. Microsoft routinely 'overlooked' all parts of the market when those parts were in their early stages.

Prior to the iPod, they were able to get away with letting everybody else figure out what the new areas of personal computing were going to be. Then they picked the already established winners and used their monopoly tying power to overcome them. It worked for integrated dev tools. It worked for office software. It even mostly worked for web browsers. It didn't work for the iPod, because there was nothing that Microsoft could use to tie their late-to-market Zune players to. Apple made an appealing product, and they won the market. Plus, most iPod users were tied by their music collections to Apple.

And the iPod begat the iPhone - which was too complex for Microsoft to play quick-enough catch up and use, say, 'real IE' or exclusive connectivity to exchange to succeed. In fact, the success of the iPhone and iPad killed IE as a selling point by solidifying the notion that web sites had better not be IE specific if they wanted to get the hits. Once exchange connectivity and good enough MSOffice viewers became available on iOS and Android, the window of opportunity closed.

Re:Create a $140 billion business out of nothing?

[Rob Y.]

I think the iPhone was successful before they supported 3rd party apps. They already had the entertainment basics built in - which at the time meant playing your iTunes collection on your phone. But yeah, 3rd party apps are what prevented Microsoft from copying the iPhone and stealing the business. Apple won that one by playing one of Microsoft's games - lock in the developers and let them sell your system for you.

Microsoft tried to use Windows 8 to do that. They were able to count on selling Windows 8 to new PC buyers - and they figured that would get the deveopers back from Apple. Hasn't worked out, though. The desktop didn't need new phone apps.

In fact, other than the apps that are already there, desktops today may as well be Chromebooks. That's why Mac sales are also booming. Most home PC users are just using them for the web, email and streaming video. PC's, Macs and Chromebooks do all of these equally well. PC's still win for users that need 3rd party apps - and for gamers. Macs are fine if the particular 3rd party apps you need happen to be there. And even Linux is fine if the only 3rd party app you need is Office - and you find LibreOffice compatibility good enough for your needs.

For everybody else, Chromebooks get the job done. Even if many Slashdotters can't wrap their minds around that, Microsoft can. That's why they're trying to kill off Chromebooks with an equivalent stripped-down Windows platform. Not sure if it even matters any more, though, since it's the change in how PCs are used, not the specific competitor, that's changed the landscape.

They always [conveniently] miss facts...

[bogaboga]

"Unique, disruptive innovation is really hard to do. Doing it multiple times, as Apple has, is extremely difficult."

"Unique, disruptive innovation is really hard to do. Doing it multiple times, as Apple has, is extremely difficult." That's why Apple has had its share of failures..."

Additions mine. This is one fact that a simple google search would have shown. One may ask, are the authors of these pieces paid?

Different markets...

[VendettaMF]

Microsoft sell to people who want to use computers without learning how they work.

Apple sells to people who want to look richer than they really are.

In reality, Apple is competing with the makers of fake jewelery.

Re: Different markets...

[asliarun]

I disagreed about apple being jewelry alone. Microsoft made products that people grumblingly put up with - so they could get the job done and be more productive.

Apple made products that people finally liked to use, and could use it easily enough, and fairly intuitively. When you create a great user experience like this, especially with a very low learning curve, people will adopt and use it in extraordinary ways. Once they feel good about using your products, they will feel special, like it was their private special thing. They will then become your biggest marketing team.

If anything, the industrial design aspect of Apple's products and even high price were side effects. The first was a nice to have, the second not so nice to have. But it didn't change a damn thing. It was always about the core user experience.. And how even most of the third party apps gave you the same sense of familiarity and consistency.

In a cynical way, this is like marketing a drug. You give the first few doses for free and make people realize how easy it is to use the drug and how shiny their world becomes when they use it regularly. Then step back and enjoy the fun. Apple gave people a tiny little pill yto swallow and even gave them little travel packs. Microsoft made people goto the doctor and get the drug injected up their backsides.

Re:Different markets...

[BarbaraHudson]

No, Microsoft are making Windows 95 with a few tweaks and Office 97 with a terrible icon bar added they call a ribbon, minor tweaks to two decade old products. Apple make popular well designed products. You might want to dismiss them as mere trinkets, but users with money know better.

From the one-button mouse to the hockey puck mouse, the "style over functionality" of the toaster mac to the gooseneck mac, the oh-so-greatly engineered antennagate phone to the latest bendable phone ... so let's look at the software side. From updates that crash the computer to phone updates that didn't check to see if there was enough free space before attempting to install ... and lets not forget the holes in their cloud storage ...

Every player in the industry has had products that are poorly designed and/or poorly implemented. And that includes the free / open source ones. The price you pay is not a direct correlation with the quality of what you get in the end.

Let's glorify genius when incompetence is to blame

[KDiPietro]

From where I'm sitting, it seems like Steve Jobs is getting credit for Steve Balmer's profound and pervasive ineptness.

You may not have noticed...

[CaptainOfSpray]

....but Steve Jobs has passed on.

Those that follow, are exactly that, followers. Neither Apple nor Microsoft has anybody capable of the vision thing.

My money is on the Next Big Thing coming out of the Maker movement.

Japan: and the $0.02 market analysis.

[Anonymous Coward]

NTT had them in Japan.

Apple did make smartphones a mas consumer device, added more functionality, and made them easier to use than the others.

And there is their marketing - well, Jobs' - genius.

Jobs made the smartphones sleek, stylish and into a fashion statement and luxury product. Apple's market share is dwarfed by Android's, but Apple's profitability makes the Android people look like peasants.

Re:Japan: and the $0.02 market analysis.

[ClaraBow]

Apple's market share is dwarfed by Android's, but Apple's profitability makes the Android people look like peasants.

One major reason for this is that the Android market is inundated with very low-end Android phones. These phones are often underpowered and have very little storage. I work at a large public school corporation and have kids come to me asking for help on installing apps on their phones or asking why they can't load music or download games. The hardware just doesn't support it, which limits the app and content Android market.

Both Apple and Microsof started as "Makers"

[localroger]

Both companies started in the world of garage built computers. They entered a field dominated by well funded business partners like IBM and DEC and showed that "toys" affordable to ordinary mortals could be fun and useful. Now Apple and Microsoft are today's IBM and DEC, and twenty years from now there will probably be new players in their place.

Without Steve Jobs ...

[Taco Cowboy]

I'm sure they are working up a neurocannula down there in Cupertino...the iJack

Without Steve Jobs Apple is just like Microsoft

No matter how you hate Steve Jobs, that guy is the one with the radical views

The world already got its walkmans for decades but it was Steve Jobs who knew he could do much better than the Sony Walkman (and all the copycats) and iPod was the answer

There were already smartphones (actually what was available before iPhone should not be categorized as smartphones, they were more like featurephones than smartphones) with the a-z keyboard on the keypad

It was Steve Jobs who moved the keyboard from the keypad to the screen

Let's compare Bill Gates with Steve Jobs

Bill Gates is from a very wealthy family, with a mother who knows people in high places

Steve Jobs is adopted. His birth dad is from Lebanon, and after knocking up his birth mother, abandoned his birth mother and went back alone to the Middle East

That is why Steve was put up for adoption because his birth mother couldn't bring up a son on her own

Steve Job's adopted parents are middle class people. Financially stable, but in no way can be compared to the wealth of Bill Gates' family

Bill Gates was enrolled into the first class university, and dropped out - he dropped out because he has no fear, after all, he got his wealthy family to fall back on

Steve Jobs didn't make it to first class university - there wasn't enough $$$ anyway. His 'university' is Reed College in Portland, Oregon

When Steve Jobs dropped out, he did not have a $$$ filled family to support him, he needed to find the money himself

When Bill Gates created Microsoft he could afford to rent comfortable office space and hire people --- Bill Gates got so much money that he could even afford to buy a program, called QDOS, from Tim Paterson

On the other hand, Steve Jobs started Apple with his pal, Wozniak, in a garage

Bill Gates' successful break was from his mom's link to IBM's hotshot

Steve Jobs' break is based on his ingenuity and determination

Steve Jobs was kicked out of Apple once - and without Steve Jobs around, Apple Inc turned into a pool of Apple jam - they actually brought out a dud - the Apple Newton

Only when the Apple Inc was in rock bottom that they brought Steve Jobs back --- and promptly with Steve's Macintosh Apple rebound

Microsoft ? With or without Bill Gates Microsoft will still be Microsoft, because Bill Gates, unlike Steve Jobs, has little or no vision

On the other hand, Apple with Steve Jobs is a jar of Apple jam

Since the departure of Steve Jobs, Apple Inc hasn't come up with any new stuff that make sense - all it got is iteration of the same-old-shit, iPad and iPhone, that's all

Re:Without Steve Jobs ...

[Plumpaquatsch]

Nice theory - but Jobs didn't actually come up with any of those ideas, but his engineers did. What Jobs did was to reject stuff like Google Glass.

“People think focus means saying yes to the thing you’ve got to focus on. But that’s not what it means at all. It means saying no to the hundred other good ideas that there are. You have to pick carefully. I’m actually as proud of the things we haven’t done as the things I have done. Innovation is saying ‘no’ to 1,000 things.”

And whether Apple without Steve Jobs is just like Microsoft remains to be seen - he trained enough people to say no to half-baked products.