In other words, blue oceans offer the real potential for future profitable growth. By contrast, the remaining 14 percent of launches-those that created markets or recreated existing ones-generated 38 percent of revenues and a whopping 61 percent of profits. This 86% of market-competing moves, however, generated only 62 percent of combined launch revenues and 39 percent of profits. That is, incremental improvements in existing market space, like a pasta company introducing a new line of gluten-free pasta. In studying more than 100 new business launches we found that 86 percent of what companies classified as new business launches were effectively market-competing moves. The truth is too many companies are paying a similarly steep price. While the products might bring in steady revenues, the lack of any compelling market-creating offering has left Microsoft with a red-ocean heavy product portfolio-for which the company has paid a steep price. Two old businesses-Windows and Office-account for close to 80% of the company’s profits. Over the same period, Microsoft’s market cap crept up a mere 3 percent while its revenue went from being nearly five times larger than Apple’s to nearly half its size. From the 2001 launch of the iPod to the fiscal year end of 2014, Apple’s market cap surged more than 75-fold as its sales and profits exploded. Over the last fifteen years Apple has made a series of successful market-creating-or blue ocean-moves (think the iMac, iPod, iTunes, the iPhone, the App Store, and the iPad). How has Apple managed to maintain its stock price and convince investors of its growth potential?Ĭonsider the recent history of Apple and Microsoft, two tech companies no longer run by their visionary founders, and how each has competed in red or blue oceans. This despite Wall Street’s uncertainty since the death of the company’s founder and visionary, Steve Jobs. This past quarter Apple once again crushed its earnings report.
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