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Apple’s (not so) Stupid Strategy

2010 January 12
by Greg Satell

Apple is one of the most successful companies in the world today by almost any measure, except one.  They seem oblivious to the wisdom of today’s business experts.

Sure, everybody loves their products and they are  immensely profitable.  Yet they fail to answer basic strategic questions that management gurus believe are key to running a successful business.

Where’s the Blue Ocean?

W. Chan Kim and Renée Mauborgne of INSEAD sold more than a million copies of their book, Blue Ocean Strategy. They point out that many markets are very competitive. Companies battle it out for decreasing profit margins in a managerial fight to the death.  This creates a bloody, red ocean where survival is doubtful.

The solution is clear:  Find a blue ocean without all of those vicious fish.  Here you can be a “value innovator” and offer lower cost and better quality for your consumers.  Their logic is compelling and their argument persuasive.

Apple, however, seems to completely ignore the blue oceans and want to dive into every red ocean they see. They launched their iPod music player years after MP3 players had become commonplace and dozens of companies had been attracted to the category.

Apparently not satisfied with just one strategic misstep they went to the even more competitive mobile handset market.  This category offered entrenched competition from some of the most innovative companies in the world.  The industry appeared to be consolidating while Apple was formulating it’s plans to enter.

Surely Apple must not have thought things through or just chose to ignore the advice of respected business experts.  How can they be so stupid?

Of course,  both the iPod and the iPhone have been enormous successes, but that isn’t really the point.  The book says that they should look for Blue Oceans, it says nothing about making great products.

What is their Core Competency?

Most management consultants have read Hamel and Prahalad’s 1990 paper on core competencies (pdf) in which they point out that successful companies do specific things better than their competitors.  In effect, they argue that companies can be defined by what they’re good at.

Many others have built on the core competency concept and use it to define fertile ground for new product launches.  It makes a lot of sense.  Figure out what you’re good at and apply it in as many places as you can.

Apple certainly has strong core competencies in areas such as technology and design.  Yet, why do they launch a brick and mortar retail business with an emphasis on customer service?  Apple is famously secretive and it’s management is known more for megalomania than for touchy-feely customer coddling.  According to the core competency theory, they have no realistic chance to compete in the hyper-competitive, low margin retail business.

It shouldn’t matter if people love their stores.  The wise men say that you should focus on core competencies, not build new ones.

Why Can’t They Mind Their Matrix?

Even the most mentally challenged CEO should be able to understand Boston Consulting Group’s well known “Growth-Share Matrix.”  They separate business units into nice little boxes that tell you what to do with different business units.

Stars: Some businesses are market leaders who grow fast.  These are the good guys.. You should buy drinks all around and make sure the bonus checks arrive on time.

Question Marks: Some business units are growing fast, but aren’t beating the competition. You should yell at them, sell them or both; depending on how much you like them.

Cash Cows: The lovable old granddads of industry, Cash Cows are market leaders, often with well know brand names, but their day has come and gone.  They aren’t growing as fast as more vibrant upstarts. Keep them happy, but don’t give them any money.

Dogs: Unable to achieve significant market share or growth, these mangy mutts should be thrown out in the street!

The matrix is often supplemented with cute little pictures so that even the dullest of managers can get the idea.  Apparently, it was still to complicated for Steve Jobs.  When he returned to the company in 1996, the Macintosh computer unit was an obvious dog.  Instead of getting rid of it, he actually turned it around.

Over a decade later, Apple’s computer division remains a question mark according to the BCG matrix because it still hasn’t achieved dominant market share.  Of course, the business is growing and makes a lot of money as well, but that’s not the issue.

The matrix is about growth and market share, not profits. Come on Apple, get with the program!

Apple’s(not so)  Stupid Strategy

If Apple has any strategy at all, it seems to be the following:

  1. Find an established market with entrenched competition (most profitable categories do tend to attract companies).
  2. Build competencies that you don’t already have.
  3. Make a better product and charge a premium.

It seems that Apple wants to be successful by simply building better products.  Unfortunately, they don’t teach that in business school so no credit can be given.

Whatever talents Steve Jobs might have as a visionary CEO, he fails as an MBA.

– Greg

64 Responses leave one →
  1. March 19, 2010

    Apple’s classic move is not only to innovate the product but to centrally innovate the *ecosystem*. With the iPod, they recognized that the ecosystem includes: the portable player (iPod), the PC/laptop based player (iTunes player), and the content on the music store (iTunes store). For other MP3 players these were 3 different, and at times, uncooperating systems. Apple made them work together.

    Sometimes decentralized ecosystems work well, other times they require a company like Apple to unite them.

    Understanding products as systems isn’t necessarily part of the frameworks you mentioned.

    But some of us had a chance to learn some good stuff during our MBA’s… 🙂

  2. March 19, 2010


    It’s a valid point.

    What’s interesting is that in the past, Steve Jobs was vilified for not letting people clone Macs and insisting that Apple build the hardware and software. Pundits pointed to his need to control his “ecosystem” as a primary reason for Apple’s downfall.

    – Greg

  3. Subham permalink
    March 24, 2010

    Nicely put, Greg. I (too?) am not a great fan of strategic models and theories… they are like Grammar rules and books… they follow usage.

    Most theories study what businesses have been doing (successfully, or otherwise) and then try to model their behaviour or extract the essence.

    As someone said, there are two kinds of people – the ones that read the news and the ones that create it.


  4. March 24, 2010


    I couldn’t agree more.


    – Greg

  5. ashok lulla permalink
    March 24, 2010

    The vast majority of us fall in the category of news readers…amen

  6. Frank Schwartz permalink
    April 6, 2010

    Loved the post, and the comments that followed.

    I read an article many years ago about some research on important historical figures (business, sports, entertainment, politics, science etc) that put together a list of 15 Traits of People who made a difference. I wish I could offer credit to the authors, but alas, I no longer have it, just the key points posted above my desk. Since I have always felt like companies tend to adopt the personality of the person sitting on the top, is it possible the list can be co-opted?

    Note! They are not all positive traits:
    1) Committed
    2) Determined
    3) Focused
    4) Passionate
    5) Risk Seeker
    6) Made lots of people mad
    7) creative, quirky & peculiar
    8) Flouted Chain of command
    9) Irreverent, Disrespectful
    10) Thrived on chaos
    11) Asked forgiveness, not permission
    12) Bone honest
    13) Flawed
    14) Tuned in to others’ needs
    15) Damned good at what they did

  7. April 6, 2010


    Great list! Thanks for sharing.

    – Greg

  8. March 23, 2011

    It is obvious to me that the author of this article is the kind of person that goes by the book to generate results. But, there is other kind of people like Jobs that don´t care much about the book, they create their own ways and are very successful.

    I recommend to the author reed some unwritten pages, he may learn something.


  9. March 23, 2011

    Thanks for your input.

    – Greg

  10. Ashok Lulla permalink
    March 24, 2011

    Well, calligraphy seemed to answer Jobs’ creative urge. Calligraphy, the script, the strokes, the spaces, particularly in Arabic calligraphy, epitomised what Jobs was seeking to develop, and what he has gone on to develop. The clear, sharp, clean-cut type was carried over to the first Mac, which after the green dot-matrix style of type, came across as a revolution. And as is built into Microsoft’s DNA, was slavishly copied by Windoze in 1995. Apple, I think, filed a suit, for plagiarism against Microsoft, but Gates, with huge resources, managed to stall the case. Pixar existed, sure. But it moved to rarefied heights after Steve Jobs acquired it.

  11. July 17, 2012

    I would seem that Apple reaches for Blue Ocean in the technology of its product – looking for clear space where new tech has not been effectively applied to consumer electronics. It also seems adept at mining the ocean by locking up inputs and logistics so others can’t reach it. Blue Ocean Strategy misses the multi-dimentional nature of competition. Apple can sit in a Red Sea and experience all the benefits of a Blue Ocean. A shark in a pool of minnows weakened by thin margins and competition.

  12. July 17, 2012

    Good points Don!


    – Greg

  13. July 17, 2012

    Hi Greg,

    I just finish reading a book that can throw some light on this matter, it is called Start With Why, by Tom Sinek. You can also find a video in Ted. An interesting point of view on how leaders can inspire others to take action, and how that translates on companies inspiring their costumers to buy from them not just for the specs of their product.

  14. July 17, 2012

    Thanks for the tip Miguel! I’ll check it out.

    – Greg

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