Apple Plays "Cat and Mouse" with Competitors

I was in Istanbul working with a group of technology executives from around the Middle-East/ Africa region and we were talking about the habits of breakthrough strategic thinkers. To get the conversation going, I decided to show a video of the (then recently released) Amazon Kindle 2.

I’ve used the Amazon Kindle case and the eBook story in general in my leadership development programs for years. It nicely exemplifies a strategic pattern that has for millennia distinguished strategists from tacticians and laid the groundwork from some of history’s biggest successes and flops.

Today, I believe we see this pattern maturing as evidenced by a January 3, 2010 New York Times article by David Carr, which delves into the future of eBooks and readers. After reading Carr’s piece, I immediately thought about an ancient Chinese principle that suggests, "to catch something, first let it go."

This strategy teaches that we must not confuse being first with winning. Just as the lead rider in a bicycle race bears the brunt of the wind while followers coast in his wake, the first to market, enjoying his place on the "most innovative" list, may be unknowingly clearing the paths for followers.

People have been speculating for months that Apple is going get into the eBook business. In October, for example, a New York Times executive, Bill Keller, supposedly inadvertently leaked that Apple was planning an eBook reader.

But Carr’s article offers the most straightforward hint yet that Apple is planning to launch a competitor to the Amazon Kindle, Sony Reader, and the Barnes & Noble Nook. If you know this pattern, and tracked the eBook market’s growth, you would have recognized this two years ago.

Here is how the play works:
1.    Someone tests out a new innovation
2.    This innovation should be attractive, but customers do not understand what it means and various social and systemic ties prevent immediate adoption (e.g., few publishers offer electronic books)
3.    So the innovator invests in changing the system, building the technology, the laws, the new norms that will enable the innovation to succeed
4.    The system loosens and people start adopting
5.    Then someone else, who owns critical strategic assets, steps in and tries to take the innovation for himself

This pattern helps explain why VHS beat out BetaMax, why Gatorade has an 80% market share while UnderArmour (which was born under nearly identical circumstances) commands only about 15%, and why most people say they "TiVo" things, but they have never actually owned "TiVo" because they get free DVRs from their cable providers.

Just as every person adopts certain habits of behavior, every company tends to settle on and repeat a few strategies that work. A few months ago, while my colleague and I analyzed Apple’s growth and success, we identified Apple’s playbook – the patterns and strategies that have been used to gain market share and profitable growth. And one of Apple’s key plays is this pattern – to catch something, you must first let it go. That approach has become part of the company’s DNA.

I spoke with an Apple executive who disagreed with my analysis, but I believe the pattern holds true. Apple is not innovative in the way most people define the term. Their brilliance comes not from introducing new cutting-edge technologies or in building new markets. Rather they let others do that work. Then Apple steps in, expands existing technology, jumps into a market space that is already growing, and then uses its marketing and business-building talent to command a large share of what others have already started creating.

They did this with MP3s (stepping in for Sony) and smart phones. They are attempting to apply this same pattern to the Flip, a small video recorder, by advertising the video function of the iPod Nano. And, predictably, they seem to be poised to do the same thing to the Amazon Kindle.

Experts believe Apple will not point its new device directly at eBooks, but instead Apple will offer a tablet that can contrast the Kindle’s black and white display with full color and video. That is another strategy that Apple has had success with, but I will have to delve into that in another blog post.

But for now I invite you consider this - are you, today, being the wise cat or the naïve mouse? Ask yourself the following questions to see how you might use this ancient strategy to your advantage today.
1.    What would happen if you let your competitors innovate ahead of you?
2.    How close behind do you need to follow to ensure they cannot get completely away?
3.    What strategic asset can you use to position yourself to take the market when it is ripe? (Usually, the required asset is either customer captivity, scale, or preferential access to resources.)

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  • Adrian Exposito

    Interesting article Apple is the king at using patience and then marketing the right technology to wipe out its competition. A very well runned company that can't be stopped right now. It's innovation on creating the MAC back when it's PC market was dying back in the 90's was being very innovative, because it was being beaten by Dell,HP for a while. Apple is a great company!!!

  • robin albin

    Too many companies "beat themselves up" for not being first to market. Apple - the perceived gold standard of innovation - proves smart is often better than first. Enjoyed this tremendously. Robin