John told me that an smart analyst looks at stocks excluding apple. It is hard to imagine a company better executing on a drag race than apple. A remarkable achievement but illustrates a very traditional approach to losing.
Apple started out as just another PC company in the sense that there were dozens. It was distinctive in that it like the other systems back then ran in a drag race with its own hardware, processor, software and peripherals.
In the end apple lost to the weight of industry horizontal integration and scale. Intel could invest far more in processors then Motorola and then IBM. Tcp/ip networking had far more volume than AppleTalk. Same for FireWire vs USB. Mac OS vs all those Windows apps
The miracle was Steve took the company from a losing drag race to running a stealth add-on play. He ended up getting the economies of industry standard hardware and software by adopting pci bus, unix, USB, tcp/ip, etc. and most of all in allowing migration (eg rosetta to run old apps) but not being a slave to (eg discontinuing support in 3-5 years).
That let him win in important niches so converting to a stealth segment play. Notably education and graphics design.
But the real innovation at that point was the conversion back to a full drag race with the introduction of the iPod, MacBook, and iPhone. Each of these were best of breed products at rock bottom prices that won on innovation and vertical integration. From the retail stores to AppleCare to the iTunes store, the products were simply easier to use
And because they had manufacturing economies they were low cost leaders. So even at rock bottom prices, they generated enormous cash.
The amazing thing has been to see the companies with the money not invest their dollars but in a horiZontally integrated world, it is very hard to beat a vertically integrated company if it is nimble. There r simply too many organizational boundaries to be crossed. And most importantly the richest companies are hurt last so while they should be responding first, first their ecosystem dies and then they fight when they lose their most important allies, their partners.
So here we are with apple worth more than Microsoft, intel, Sony and Nokia combined. Wow.
What’s next? Well they have converted their drag race into a platform war. Now apple has development resources focused on iOS (underneath that is Unix) and they are converging OS X with iOS so they will have a single platform an software store as well as hundreds of millions of Apple store customers they touch directly.
And with their push into the home most likely following the iPhone model of close integration with wireline broadband providers and content, it looks like the horizontally integrated consumer electronics providers are next.
It is the ultimate model of one platform for phones, tablets, computers and soon televisions. Wow.