Apple has passed arch-rival Microsoft to become one of the most highly valued companies in the world, but retaining its position among the most valued of all companies will require considerable skill as well as perhaps a good dose of good luck, because maintaining a phenomenal growth rate when your sales total $19 billion is a lot easier to do than your sales have grown to $65 billion. So what are Apple’s best strategic options? That’s what I’ll like to explore in this article.

With its enormous success has come an enormous pile of cash: over the last few years Apple has accumulated a monumental cash hoard of more than $58 billion.  The company has been making modest acquisitions over the last few years, but sooner or later it will have to either spend the money in the form of some blockbuster acquisitions, or return it the cash to its shareholders in the form of dividends.  So how should Apple spend its money?

The first order of business is to identify what we call a “strategic framework,” a way to think about Apple and the markets in which it competes that may offer some insight into the company’s future.

Apple’s market ecosystem has four major components:

  1. Devices; hardware and locally distributed – These are the end user devices, computers, iPods, phones and pads.  Apple makes these, and the company has evolved from a device maker narrowly defined as a computer company with a handful of products, to one with a much broader portfolio across the iFamily of devices.  To reflect this shift it removed the word “computer” from its official corporate name – now it’s just “Apple,” not “Apple Computer.”What new devices could Apple create that offer significant growth potential?  Are there more computers, pods, pads, phones and other yet-unimagined devices waiting to be revealed, more multi-million selling device rabbits in the hat?  Or perhaps Apple’s near the end of the line?  What do we see in devices?
  2. Distribution networks; hardware and centralized – These are the wireless phone networks that connect the devices created and run by Apple’s partners, such as AT&T, Verizon, etc.  But there are two categories of networks, the wireless carriers, and the wired or cabled carriers such as Comcast.  Are these markets attractive for Apple?
  3. Content creators; software and locally distributed – These are the individuals and organizations that record the songs and create the TV shows and movies that you buy on iTunes, and write the apps you use on your phones.  Does Apple want to own content creators?  This is a business that Steve Jobs knows intimately, having developed Pixar into a global animation paragon, and then sold it for a fabulous sum to Disney, one of the world’s great proprietors of branded content, becoming Disney’s largest shareholder in the process.  But is content right for Apple?
  4. Distribution platforms and channels; software and centralized – Apple has proven itself as a skilled distributor as a retailer, the proprietor of the world’s most successful chain of 300 stores, now numbering more than 300, and as an e-tailer, proprietor of iTunes and Apps.  Will Apple expand its distribution efforts?  Almost certainly this business holds great promise for Apple’s future, but are there are acquisition targets in the future, or will this business grow organically without the need for vast sums of capital?

The company depends for its success on the integration of all of these elements into a functional device + network + content creation + content delivery system to create an effective market system for its brand.  Some of these are markets that it has influence on, some that it controls, and some for which relies on partners.  Each has unique characteristics, and factors and attributes that could make it highly appealing or less attractive.

There’s also another vantage point we can also use to explore Apple’s options, not by looking at the ecosystem of providers, but at customer groups.

Having defined the global smart phone standard, Apple’s brand identity is now closely tied to its mobile users, who are generally individuals and families.  Its brand is also linked with the e-distribution model of iTunes and Apps, and in the home market, the emerging competition with Netflix and the other streaming video services.

But Apple is weaker in the business market, where Microsoft built its wealth-building global franchise as the operating system and software suite of choice for corporate IT departments, which locked the company in for the past 2 decades.  What would it take for Apple to make strong progress in the business market?

If you’re interested in innovation strategy, you know that it’s not wise to bet on a single strategy, and you know that the diversification of the company from its core computer market into entertainment devices and communications devices, and the markets that support them, has been a key element of its growth and success.

So what would I do if I were the CEO? In this article we’ll look at each of the four markets, and at the various customer grouping, and venture some speculation about which may hold the greatest interest for the company, and why.

By Langdon Morris

About the author

Langdon Morris is a co-founder of InnovationLabs LLC, one of the world’s leading innovation consultancies.

Langdon is also a Contributing Editor and Writer of Innovation Management, Associate Editor of the International Journal of Innovation Science, a member of the Scientific Committee of Business Digest, Paris, and Editor of the Aerospace Technology Working Group Innovation Series.

He is author, co-author, or editor of eight books on innovation and strategy, and a frequent speaker at innovation conferences worldwide.  He has lectured at universities on 4 continents.