Apple is 34 years old, Microsoft is 35. Can elephants dance? Apple today feels like an innovative startup, Microsoft a corporate behemoth. MSNBC says "Apple, Microsoft hit midlife as fresh, frumpy". Steve Jobs is the driving force behind the iPod, iPhone, iTouch, iPad, devices that have changed the world. Bill Gates started disengaging at Microsoft 10 years ago. Apple (AAPL) has a Market Cap of $215 Billion, while Microsoft (MSFT) is at $257B. Apple has nearly $25B in cash, Microsoft has $36B.
Enterprise vs Consumer - For years Apple competed against Microsoft in the desktop / laptop computer market. Windows had over 90% of the market, while Apple had between 5% and 8%. Apple took pride in delivering a seamless end-to-end experience, but in the process controlled the hardware and software themselves. Microsoft focused on software and made it available to any company that wanted to build hardware. Microsoft engaged partners to build applications and do consulting or system integration. The strategy worked great for Microsoft.
Apple shifted focus to consumer electronics with the iPod, iPhone, iPad and other devices. There was no competition from Microsoft in these markets. In fact, Microsoft is struggling to catch up with Apple. Imagine what would happen if Apple decide to focus on games? Hmmm...Xbox could have some serious competition.
Founders Matter? - Founders are the heart and soul of startups, but do founders matter 20 or 30 years later when there are tens of thousands of employees? In a word, yes. Look at what happened at Apple when Steve Jobs left...and when he came back. The transformation was amazing. Look at what happened to Microsoft when Bill Gates starting disengaging and focusing more on philanthropy. Some would argue that the pace of innovation slowed, the killer instinct subsided, and Microsoft lost its soul. I don't agree with that generalization, but certainly comparing Apple and Microsoft over the past 10 years points out some very different approaches.
The comparison can't be complete, or the conclusions verified, until Steve Jobs leaves Apple for a few years. Then we will see if the presence of the founders is what makes Apple different from Microsoft. Perhaps Steve Jobs will be able to influence and effect the culture of Apple long after he leaves. Bill Gates influence and killer instinct is hard to find today at Microsoft. Steve Ballmer is the unquestioned leader at Microsoft. Ballmer is amazing...but very different than Bill Gates.
Transformational Change - The MSNBC article has some very interesting quotes from people in the industry. Here are a few of them;
“The difference between the two companies is that Apple has been fearless about transformational change while Microsoft has been reluctant to leave its past behind,” said Casey Ayers, president of MegatonApps in Jacksonville, Fla. His company soon will release its first iPad app, “Multitaskers” which includes a calculator, ruler, lantern, stopwatch and five more functions.
“Microsoft has always been loath to change and risk alienating some of its customers, but its inability to leave the past behind has left their product line bloated and dysfunctional,” Ayers said. “Yet iPhone completely changed the mobile space forever. Apple doesn't blink at making unpopular decisions if it believes they will result in a better end product. ... It's just a matter of time now before Apple blows past Microsoft's market cap.”
Transformation Continued - Microsoft is a great company. Over $60B in annual revenue, with $36B in cash, and Steve Ballmer driving the company forward. Yes, they lost a little when Bill Gates disengaged, but the real question is what will happen when Steve Ballmer rides off into the sunset?
The next leader of Microsoft will make or break the company. IBM faced a similar crisis about 20 years ago. They brought in Lou Gerstner from RJR Nabisco. Gerstner totally changed IBM and put them on an entirely new path. Mr. Gerstner wrote a very interesting book "Who Says Elephants Can't Dance?" about the transformation of IBM. That was nearly 20 years ago, but some history lessons are timeless.
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