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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. Marty K. permalink
    January 12, 2010

    The other thing is that you get an MBA in order to be a better manager. If you’re already better than MBAs (and judging by Apple’s results, Steve Jobs is a great CEO) who cares about MBA and rules?

  2. January 12, 2010

    Good point.

  3. diksha permalink
    January 12, 2010

    Steve Jobs is an awesome CEO, trouble is, his talent cant be replicated and put into books for people to learn. For Apple to keep surviving with the current strategy of defying strategy, they need to capture the genius of Steve Jobs.

    The core competency of Apple is innovation – by Steve Jobs. Without him, they failed, and will do so again unless they can find an equally talented successor!

  4. January 12, 2010


    It’s a very good point (and similar to one that Jim Collins makes in “Built to Last”). We’ll see how it turns out.

    – Greg

  5. January 12, 2010

    Hi Greg;
    For once I could not tell precisely what message you were getting across here. I read this post thinking that you typed most of it with your tongue firmly wedged in your cheek: Apple’s not “so stupid” strategy appears to be working more successfully them most.
    But then you give Steve Jobs a failed MBA award and all of a sudden I’m wondering if you were seriously questioning their approach?
    I look at it this way. Apple has always been an innovative company who understands the true value of design. It isn’t just the sleek silver cases and sexy shapes – it’s all that hard work they put into the complete User Experience. Right from their great website all the way through to those retail stores you were knocking and every single element of the User Interface. Every aspect is designed carefully upfront to make the user’s experience the best it can be, EVEN AT THE EXPENSE of the cost of building or manufacturing the product. Why? Because Apple also understands that people will pay a premium for good design, even if they do it unconsciously.
    And how does all this apply to their strategy? Jobs was awarded the CEO of the decade prize because he effectively launched 3 business units in the past decade and grew each one to a billion in revs:
    1) iTunes – no entrenched competitor here to unseat – just the status quo of a broken music retail channel.
    2) MP3 players. Yes, there were a bunch of players, but the iPod captured people’s hearts because of it’s ease of use. Not just the controls, but again the whole User Experience of the player and iTunes and the synching and on and on.
    3) iPhone. Sure there were a lot of phones, and even Blackberrys out there, but a phone and an MP3 combined? And, once again, all the rest of what it takes to make a great User Experience?
    And then, as you said, Jobs also turned Macs back into a viable product again with some of the best machines around. The rest of the industry certainly thinks they are a force to be reckoned with: Microsoft changed the name of its latest offering from a Tablet to a Slate just on the rumor of Apple’s soon to be released iSlate.
    So please, please tell me you were joking when you give them a failing grade. As diksha said, it will be difficult to replace Jobs with anyone else and Apple is going to have a hard time transitioning to a successful strategy without him, but while you have such talent at the head, why would you do anything different?”

  6. January 12, 2010


    Sorry for the confusion. Let me be clear: I’m a huge admirer of jobs and Apple.

    I think you hit the nail on the head when about user experience, but I would even go further. It is their passion for user experience that makes them such a great company.

    I actually think that Apple will be okay without Jobs (although, he is irreplaceable). The company’s success doesn’t rest on brilliant strokes or master plans, but continuous incremental improvements. Jobs is the inspiration, but to do it as well they do requires an integrated team effort across the whole company.

    – Greg

  7. January 12, 2010

    Thanks for clearing that up for me – for once I was thinking that we would have to disagree on a topic! I, too, would like to believe that Apple can survive without Jobs and I think you are totally right when you say it’s success mostly relies on incremental improvements. And they do have a great team who can and does do this really well.
    My fear for the company is in terms of “what’s next up?” Jobs appears to be one of those people who has a way of seeing the answer to this question more graphically than most of us, and he has at his disposal, one of the finest research and development teams on the planet so he can capitalize on it all. But when he’s gone, who is going to think of the next big Apple thing? He will leave behind a giant-sized pair of shoes to fill and I’m glad I won’t be trying them on!

  8. January 12, 2010

    I am a devoted Apple customer and have been for years…let’s see I cut my teeth on the Mac SE (oops, I’m dating myself here), I have a 7200 kicking around under a desk somewhere, a Mac mini and a G4 that were passed down to my son, I am writing on a MacBook right now, we have 2 iphones and 2 ipods in our house…my point is that Mac speaks to a certain segment. Either you are a Mac person or you are not. They have a deep understanding of that, as seen in their ongoing Mac vs. PC advertorial sagas. Their business model can’t be replicated because it’s all about innovation, intuitive ease of use and DESIGN. Sure, there were mp3 players out there before the iPod, but the DESIGN of the iPod is what grabbed people (you know all those right brainers;). I am a huge fan of Jobs. He is proof positive that innovation and incredible design can drive a company’s success, rather than focus groups, crowd sourcing and trying to replicate the competition. There was a great documentary on the other night about Apple on CNBC…I’m sure it’ll repeat, but it just captured the passion behind the business, the drive to innovate and the devotion to great design…all key ingredients that are sadly lacking in most business models, and in my opinion at least, the secret ingredients to Jobs’ success.

  9. January 12, 2010


    A couple of points:

    1. If you haven’t read Jim Collins’ book “Built to Last” it’s worth a read. Only one company he examined had a charismatic leader and went on to be a great performer after he was gone (Disney). The odds are against Apple, but I do think the two have a lot in common.

    2. One interesting thing about Jobs is that he gives a lot of credit to a course he took on calligraphy. I guess that doesn’t have a direct bearing on your comment, but I think it shows where his priorities are – making products that please the senses rather than a strategic plan.

    Generally, I think what most MBA programs and strategic consultants miss is the passion that it takes to make a great company. You an’t legislate belief.

    – Greg

  10. January 12, 2010


    I agree with most of what you say, but I do think Apple’s success goes beyond just design. Their products aren’t just beautiful for beauty’s sake, they are extremely usable.

    That takes a lot of trial and error. There’s no “big idea,” but a lot of small improvements that don’t mean much in and of themselves. You just have to keep trying till you get it right. That takes passion.

    – Greg

  11. January 12, 2010

    I have not read, “Built to last,” but will add it to the large pile awaiting some time – thanks for the reference.
    Jobs and calligraphy? Wow, never heard that one before, but yes, it’s all about passion and making products which please the senses and emotions, not just our reason and logic.

  12. Chris Dorr permalink
    January 13, 2010

    It might also bear mentioning that Jobs had another company you might know, called Pixar. It is why he is the largest shareholder in another company called Disney. Pixar, to date, has only created hit movies, it has yet to create a flop. An MBA who has studied the movie business would tell you that this is impossible. I guess not!

  13. January 13, 2010


    And an economist will tell you that it’s not worth picking up a hundred dollar bill off the street because it can’t really be there:-))

  14. January 13, 2010

    Greg, I agree and I’m not saying at all that it’s just about design…it’s about a willingness and desire to innovate, a deep understanding of their consumers, passion for the brand, great engineering, AND uncompromising commitment to fabulous design. Here’s a link to info about that documentary – you should check it out:

  15. January 13, 2010


    Absolutely! (I wasn’t arguing, merely clarifying)

    Thanks for the link:-)

    – Greg

  16. January 13, 2010

    Good post, Greg.

    Thinking in terms of “blue” and “red oceans” I can see an explanation of Apple strategy. You point out they are eager to enter big red oceans with a winning product which contradicts the theory that a company should look for blue oceans with little competition. I think entering a saturated market (a red ocean) Apple actually change the rule of the game presenting a unique product. They are in fact making a blue ocean in the midst of the red one. This is how things look to me, not to defend the theory…

  17. January 13, 2010


    I see your point, but once you have to go to great lengths to interpret a theory, it loses its explanatory power. It would be much better to simply say that you want to try to deliver maximum value to the consumer and leave it at that:-)

    – Greg

  18. diksha permalink
    January 13, 2010

    A question on that thought – if all companies try to deliver “maximum value” why do 99% of them fail? What is the success formula followed by the top 1%?

  19. January 13, 2010


    It’s a very good question, with no easy answers. The problem with strategy is that it’s a means to an end, rather than an end in itself. However, because it’s a boardroom activity, it tends to take on undue significance.

    Focusing on the consumer takes passion, and that’s tough to instill and maintain among hundreds or thousands of people. It can’t be legislated by big shots and there are no rules to follow. It’s just something you have to work towards every day.

    – Greg

  20. Jamie Norman permalink
    January 13, 2010

    Apple made public their strategy years ago in the form of 2 simple words. This is the thread that runs through everything they do and most of what has made them so successful…..
    How to create a blue sea in a red ocean, how to win at retail, how to break out of the matrix.

    “Think Different.”

  21. January 13, 2010

    Greg wrote: “Stan, I see your point, but once you have to go to great lengths to interpret a theory, it loses its explanatory power…”

    Greg, I agree with you, but then do you know a flowless theory at all? In the case of Apple some other theory would be more applicable. Like the Steve Denning’s one saying that a company must seek to delight their customers and not merely “produce things”.

    Apple find ways to delight customers with unique products that sell at higher price than competitors, hence higher profitability but lower market share as not everybody can afford high-end products.

  22. January 13, 2010


    I agree. That’s the limits of theory, it doesn’t always fit the facts, Wittgenstein had a mot to say about this.

    – Greg

  23. January 14, 2010

    An extremely interesting thread. Blue-Red-Blue-Red-Blue Ocean thinking is the way things seem to go. A RASP strategy: Read, Answer, Solution and Product. Read the market and the markets reactions to a Blue Ocean, Answer the Problems found, Create the Better Solution and launch the better Products the market will love. I see Steve Jobs as the ultimate Rule Breaker, Game Changer, Think Different and Delight Your Customer Genius he is. Probably why I switched from PC to Mac and lowered my stress levels.
    Thank you for a good article to stimulate thought and a great thread.

  24. January 14, 2010


    Thanks for the input.

    – Greg

  25. January 14, 2010


    Here’s to the crazy ones…


  26. January 15, 2010

    Yes, I too am a fan of Apple products. My first exposure was with the Apple II. I took a break from their products and returned a year ago for a Mac Book Pro.

    I used the “Blue Ocean Strategy” in the condo conversion market during the nineties. Any person with a construction trade became a real estate developer over night. Even Doctors and Lawyers were asking me to bird dog potential projects. While everyone was participating in multiple offers for project acquisitions in hot communities. I took my developers a neighborhood or two over and got the job done. The projects sold with little marketing and I sold 90-95% pre-construction off of plans. In order to create a condo market in area that previously did not exist I had to price and package accordingly. Offering an above market quality at an under market price. However, the inventory sold with a low profit margin. If the same work was performed in a “Red Ocean” or hot area I would have walked away with a bigger pay day.

    Blue Ocean strategy is great for the path of least resistance on a marketing stand point. Red Ocean is where you want to be for greater profits. The reason? consumers are more receptive to loosen up their coin purse in a hot market. I am currently analyzing a hot market and developing services that will dwarf the competition.

    Apple’s key to success is not marketing but product development. They do an amazing job with look, feel and more importantly functionality! The products are for the most part reliable. As bad as the economy is doing consumers are still motivated to spend on reliable products. Thanks for the topic Greg!

    Have a sunny day!


  27. January 15, 2010


    Thanks for your input.

    – Greg

  28. Ashok permalink
    January 16, 2010

    Been an admirer of Steve Jobs and Apple (under him, of course)
    One other fact missed out, which tells you the kind of creative
    business genius that he is: The Disney connection, with PIXAR.
    It’s not a coincidence that PIXAR and its offerings went on to
    capture public imagination, and PIXAR zoomed in valuation.
    Disney wooed Steve Jobs to sell PIXAR which he did, for billions.
    That, again gives rise to the question, without Steve Jobs’ guiding
    hand, where is PIXAR today? Yes, it has had Ratatouille and Wall-e
    but the buzz is missing.

  29. January 16, 2010


    Pixar is indeed a great company. However, Steve Jobs came with the deal. He sits on Disney’s board as a major shareholder.

    – Greg

  30. Ashok permalink
    January 16, 2010

    Yes, Greg, I stand corrected. But, the buzz that was there
    around the time of ‘Finding Nemo’ seems to be missing.

  31. January 16, 2010


    Indeed it does:-)

    – Greg

  32. January 17, 2010

    Which is exactly the reason why music conference panels along the lines of “Success strategies for musicians to make it in today’s music industry” are such a spectacle. They serve their purpose, but it is a different purpose.

  33. January 17, 2010


    Nice to see you again:-). I think you’ll like the new post about how ideas evolve:

    – Greg

  34. January 17, 2010

    I am sorry, but I couldn’t get the point of this article.

  35. January 17, 2010


    Sorry. I’ll try to do better next time.

    – Greg

  36. January 18, 2010


    If my memory serves me well, “Blue Ocean Strategy” talks about two ways to get to the Blue Ocean.

    One is to create something new or do the same thing in a different way. I guess apple has chosen the latter.

    All said and done, Apple needs Steve Jobs more than they think they do…

  37. January 18, 2010


    That interpretation doesn’t leave much out. You might as well call it the “don’t do everything exactly like everybody else strategy.” And even if you do, change the color.

    – Greg

  38. walter Marcinowski permalink
    January 20, 2010

    Have you noticed that over the past 10 years most major corporate failures were run by Harvard MBA’s?
    When everyone is using the same tactics it waters down the chance of success. The worst thing to do for your business is hire and MBA.

  39. January 26, 2010


    You had me worried for a while, but like the sting. The issue with MBAs and indeed Blue Ocean is the desire for rules to teach you how to do things. This is reflected by a world in which you draw the world on 2 axis for a market and look for the gap. What makes Jobs and Apple interesting is that they seek to change the Axis and redefine the market in their favour. IBM did some very interesting analysis of what makes a successful company in recent times. The key factor wasn’t the extent to which they invested in NPD etc – it was whether they had changed the market or the model for it. Side points. George Bush had an MBA from Harvard. Harvard had Enron as a case study for best practice and 2 years later a case study for worst practice.

  40. January 27, 2010


    Great points. You might like this post about how it’s always the “crazy ones” who change the world.

    – Greg

  41. January 31, 2010

    Hi Greg,

    I think that Apple is changing itself and becoming a distributor of content. The devices are just a piece of their value proposition and they are into selling audio, video and recently book content. Apple having success is in the position to provides value also to content providers.
    This is what their competitors missed to see and to connect the dots. The timing was good for their products, Apple got successful by detecting properly the consumers habits changes.

    Apple is good providing:
    – the UI;
    – the quality of their products;
    – good system specifications;

    Apple is not anymore surviving as the other Red Ocean competitors, there are also complementary sources of revenue.


  42. January 31, 2010

    Hi Greg,

    I think that Apple is changing itself and becoming a distributor of content. The devices are just a piece of their value proposition and they are into selling audio, video and recently book content. Apple having success is in the position to provide value (distribution channel) also to content providers.
    This is what their competitors missed to see and to connect the dots. The timing was good for their products, Apple got successful by detecting properly the consumers habits changes.

    Apple is good providing:
    – The UI;
    – The quality of their products;
    – Good system specifications;

    Apple is not anymore surviving as the other Red Ocean competitors; there are also complementary sources of revenue.


  43. January 31, 2010


    What you say is true, but they are also very good at building competencies (such as the Apple Stores).

    – Greg

  44. February 1, 2010


    This logic of yours in the article really beats me. Since Steve is already so successful why do you want him to conform to the set theory.

    Steve is a creative genius which he has been proving by delivering the results time and again and by questioning his methods by comparing it to what the MBAs are supposed to do.

    I’m sure many would love to emulate a Steve Jobs rather than an MBA.



  45. Peter permalink
    February 4, 2010

    I’m left wondering if you could have written the article upside down: “Having an MBA is (not) enough to run a business”, arguing that you learn about all these simplistic models, apply them duly — and never become as successful as say … Apple.

  46. February 4, 2010


    I suppose I could have, but that would make too much sense:-)

    – Greg

  47. Peter permalink
    February 4, 2010


  48. Nikhila permalink
    February 6, 2010

    Since road of aspiration for all successful MBAs end at Visionary CEOs, it makes better sense to be a Steve Job in the world and land there convincingly 🙂

  49. February 6, 2010


    Nice thought. Thanks.

    – Greg

  50. February 12, 2010

    Apple is an interesting phenomenon for those who study the history of computer business and it will probably be decided in China in the next 10-15 years if the Chinese would care to keep the brand on nostalgic life support or just as a curiosity of sorts (at least) in the their techno museums… The Chinese are pragmatic and they bought Volvo for sipping out its technology (please don’t believe Ford lawyers’ assurances and watered down caveats). Why should the Chinese care about Apple’s technology? It could be emulated in any way or fashion by considerably bigger players… So then, we’ll be left with a melancholic cult about Apple, locally grown in North America. Cause that’s what it is…a cult, and Jobs, let’s face it, is somewhat messianic; didn’t he almost die and came back to…Apple’s business life as emaciated as Jesus? I’ve known bright people who were Mcacintoshed for the rest of their life and wouldn’t touch anything else but Apple products, even if they badly needed to use media applications/software that were not available for Apple products/OS. They kept waiting like Lieutenant Drogo in Buzzati’s THE TARTAR STEPPE to see the fulfillment of their wishes that eventually never happened, as those products were only made for the “stupid Windows”… I’ve seen computer retailers who because they wouldn’t sell enough Appples went bankrupt, but refused to sell Lenovos. You’ve got to admire retailers with strong brand principles…whom I’ve seeing using Vaio books.
    I remember a century ago how Sony stack by its Beta format. Microsoft’s VHS won the battle of video formats and Steve Jobs had to take Beta to another level in the broadcast formats that became the King of Broadcasts formats: Betacam and Betacam SP. But then everything turned digital and so the Hyundai guy from JVC invented HDV, an HD format that has taken over the broadcast formats. OK, let’s not talk about USB flash drives! I call these expressions ‘techno religions’.
    I can understand Mr. Eric’s initial puzzlement after reading Grigoryi ‘s lucubrations about Steve Jobs. And don’t worry Doamna Tchobanenko, just look at Grigoryi’s smile and get the point: he’s using Socratic methods of (not) making a point. So here we are trying to draw any wisdom from this blogoslavnik topic and if this appears as a waste of time just think how wasteful Microsoft is with its own and well paid talent/professionals:

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