Apple Bests Microsoft: Is It Built to Last?Posted: 05/27/2010
Yesterday, David beat Goliath. Well, not quite; Apple passed Microsoft to become the world’s most valuable technology company. As of yesterday’s market close, Apple was valued at $222.12B versus $219.18B for Microsoft. This is a monumental achievement for a company that in the mid-1990s was believed to be in its last days. Back then, Microsoft was ascendant, and Apple maintained only niche markets for their products, like education.
In fact, I was a typical customer. In 1994, when I was heading off to college at USC, I purchased a Macintosh Performa for my dorm room. Compared to the Gateway that my parents had at home, the computer was simple, elegant, and user-friendly. Still, in retrospect I can see why these bad boys never took off in the business world.
In 1996, Apple brought back Steve Jobs as CEO, and the company began innovating again. However, not everyone was sold; for my graduation gift, I received a clunky Dell desktop. This machine was awful; I faced the blue screen of death at least once a week, and required a replacement of the motherboard within two years of purchase. By the time I returned to school in 2003 at Penn State, I returned to my computing roots. Apple, with Jobs back at the helm, was producing incredible notebooks, as well as new music players, the iPods. I am not an early-adopter by any means; by 2003 iPods were already ubiquitous. However, I still remember the first time I went jogging with my iPod, and the sheer joy I found in the shuffle function.
Steve Jobs changed the landscape of technology, twice. First of all, in 1984, Apple released the Macintosh with this famous Super bowl ad. He made the personal computer personal, unlike the grey MS-DOS machines produced by IBM. Then, when the company he founded was on the ropes, he transformed technology from a business setting to a personal setting. The outstanding Mac Books were certainly part of that. However, the iPod, the iPhone, and the iPad brought technology out of the office, and into the streets, onto the subway, into the car. First, our music collection was untethered from walls of plastic. Then, TV was portable; while living in Japan I loved watching Jon Stewart on my Subway commute. Finally, with the iPad, maybe we will eventually become untethered from our physical books, magazines, and newspapers. Instead of just business, technology now largely revolves around consumer desires.
However, there is a lesson of caution for Apple. Microsoft, in the late 1990s, faced off with the Justice Department over its dominance of the browser market. While Microsoft remains profitable, it has not been the same company since. Now, Apple is in the sights of regulators. The Justice Department is investigating whether Apple’s dominance of the online music market, with its iTunes store, is above board:
“People briefed on the inquiries also said investigators had asked in particular about recent allegations that Apple used its dominant market position to persuade music labels to refuse to give the online retailer Amazon.com exclusive access to music about to be released.”
Now, who today remembers the browser that had Microsoft all hot and bothered, the Netscape Navigator? However, Internet Explorer is no longer the dominant browser; Firefox, Chrome, and Safari, along with Explorer, share the market. In the same way, I doubt that Amazon.com will be a dominant music retailer ten years from now; however, Apple will certainly not be the only large provider of the coming cloud-based music market.
However, don’t be too alarmed for Apple. Some people fear that the company will falter when Steve Jobs is no longer in charge. In their book Built to Last, Jim Collins and Jerry Porras identify visionary companies as those that do not rely on one great leader, but rather develop a culture of innovation and success that emanate throughout the company and beyond the founder. If Steve Jobs is really smart, and I think he is, Apple is poised to continue its history of innovation long after he leaves the company.
UPDATE: Speaking of Built to Last, a company that was celebrated by Collins and Porras was Johnson & Johnson. In 1982, J&J ordered a nationwide recall of Tylenol after seven people died from poisoned Tylenol in the Chicago area. That recall, which some at the time felt was unnecessary and expensive, earned J&J many plaudits. However, now J&J is suffering from criticism that in 2008 the compant concealed a recall of Motrin, a popular pain releiver. Apparently, the tablets weren’t dissolving, and J&J sent a contractor to surreptitiously buy up the product from stores, but not to mention the word ‘recall.’ There are hearings on Capitol Hill, and the FDA referred the matter to its criminal investigation unit for review. The troubles that J&J is facing today are striking, compared to the way it earned people’s trust in 1982.