Apple’s plight: will disruptive innovation make it a winner?

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Earlier this week, Apple (once again) became the world’s most valuable company. For those of us who have been fans over the past 10 or 15 years, this may come as no surprise, especially given their loyal customer base and their ability to enter, and often define, entire new markets.

But the rise of Apple has, at many points over the past few years, led me to ask whether their leadership will remain intact for the long term. By long-term, I mean the next 20 or 30 years (I’m pretty confident about the next year or two). Then I came across this article from the Wall Street Journal blogs which asks at least part of the question I’ve been asking, and I thought it was worth explaining.

One of my favorite professors taught me an introduction to business strategy. He opened the course by making the point that business always changes – dramatically – and as the time horizon lengthens, the rate of change increases exponentially. So, to use his method of making the point I looked at the Fortune 500 lists from 1955, 1985 and 2005 (keeping the decades even), and found:

– 210: The number of companies on the list in 1955 which were still there in 1985
– 139: The number of companies on the list in 1985 which were still there in 2005

I think it’s a safe bet to say that in 2015 (just three years from now) the number of companies that were on the list in 2005 that are still there will be smaller still. And yes, I assume the rate of change in business, most importantly the rate of market disruption, will continue to accelerate.

Which leads me to ask: What can keep a company on the list decade after decade?

General Motors was on top of the list in the 1970s, and we know what has happened there. I won’t go into all the factors, but the saturation of the American car market, global competition and consumers holding on to cars longer were certainly factors in GM’s decline.

Exxon Mobil, which has topped the list a number of times over the years, doesn’t face these challenges. The demand for oil is still increasing and prices are (generally) still rising. One wonders what will happen when other unexpected energy alternatives become dominant.

Back to Apple.

One thing Apple has shown over the years that few other companies have shown (at least to the same degree of success) is the ability to create disruptive innovation (for an interesting discussion of Apple’s innovation strategy, take a look at Curt Carlson’s book, Innovation).

Apple has continued to re-invent itself (from computer company, to music company, to mobile device company and so forth) as the needs and desires of technology consumers have changed. And whether through it’s visionary founder or it’s innovation process – most likely a combination – it has often been the company that defined what was possible and showed us how to turn our technology aspirations into reality.

If Apple is to stay at the top of the list, it will – among other things – need to continue and accelerate this innovation capability. There will be challengers. Not just the kind of competition that comes out with “the better alternative to _______ device” but the companies that will define the future needs and aspirations of technology consumers. Apple will have to continue to disrupt our world in order to stay on top.

And if in 2025 we look back on today, and we are amazed at how Apple has been so successful for so long, then we will be able to point to the disruptions they defined. If we are wondering how such a mighty company fell down the list so quickly, we will likely collectively conclude that the passing of Steve Jobs must have been the cause. But in reality it will have been the loss of the ability to continue to define the market disruptions that will happen increasingly frequently.

And no, this is not exclusive to Apple. Any company that makes it to the top of its market faces the same issue. In part, it’s Christensen’s famous innovators dilemma and in part another idea Mr. Christensen introduced. If the job that people are hiring your product to do for them is no longer necessary, then your product is no longer necessary.

And the jobs we need products to do are evolving quickly.

Are you taking the steps you need to in your company to make sure your products will do the job your customers will need done in the future? Tell me how.