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The conditions for survival and prosperity

Yesterday’s post described the history of personal computing platforms over the past 37 years. It showed a distinct shifting of “eras” between traditional personal computing and the emergent mobile computing represented by device-based platforms.

Underlying these lives (and deaths) of platforms were the growth (and decline) of fortunes of companies and people. I hoped that by observing these patterns insight could be gained into the conditions for success or failure.

The following graph shows the companies which were predominant (in the top five ranking by shipments[1]) during each year of the industry’s history and the volumes they were able to obtain during that period. I also added Nokia and RIM as examples of the challengers coming from mobile devices.

It’s a difficult graph to interpret. The pattern I observed was that most companies were not able to sustain presence in the top five ranking for long. Indeed, regardless of having one’s own platform or being a licensee, companies seemed to fade reliably. Some were acquired, some sold their operations but there is a distinct impermanence to their prosperity.

To sharpen this perspective of longevity I indexed each company to the point when they entered the “prosperity zone” and measured their staying power within it. The following graph shows these indexed lives.

 

Apart from Apple, IBM remained in the business the longest (24 years). Compaq was second with 20 years before being bought by HP. HP and Dell are still operating after 15 years, having tied Atari and Commodore. After these ancients, the upstarts Nokia and RIM are struggling to remain relevant after 10 to 12 years.

Then there are the transients like Packard-Bell/NEC, Toshiba, Radio Shack and Fujitsu which lasted less than 10 years. The newest PC companies are all from China or Taiwan: Acer, Asus and Lenovo. Their longevity cannot be called yet though Acer seems to be in decline. Lenovo, which took over IBM’s brands continues to grow. However, as yesterday’s post showed, without diversification into devices, pure PC makers are likely to fade.

But besides this interesting history lesson, there is a deeper, unsettling observation. The scale of these periods of prosperity is far shorter than the average person’s career. Indeed, the entire time span of the study is 35 years, about the time an average person will be employed. All the companies failed to maintain prosperity over this time frame.

These are a small sample, flawed by showing only hardware units, but I consider it a proxy for the overall technology market. Software-only or services companies have had no better records.

The implications for company managers and workers is profound. Chances are that the business you work for will not prosper for more than a decade and will reward you for an even shorter period. Similarly, as witnessed by the P/E ratios, investors have  given up on this industry as one with any quality of earnings.

There is no “rule” that this has to be so. The high mortality rate and short longevity of technology companies is a consequence of a failure to manage innovation and disruption. Apple may be an exception–one I think worth studying. Though not always prosperous, it has managed to survive, being the only company from the early era of personal computing to still be operating in the industry. Indeed, it’s now the most prosperous. Maybe it’s a fluke, but I rather think it’s due to an ability to re-define itself as the market shifts. Its essential quality being an ability to disrupt itself.

And if we think about it this way, ultimately, longevity is more important than prosperity. Without patience there is nothing but chance determining prosperity. The fate of more than company finances rests in the balance.

Notes:

  1. Apple did not maintain a position in the top 5 throughout this period but is shown as a benchmark as it remained in the same business throughout this period.
  • http://twitter.com/WaltFrench Walt French

    Many interesting points here, but first a quibble that I can’t make out the RIM history on the Top5 chart.

    • http://www.asymco.com Horace Dediu

      Thanks, it’s fixed now.

  • http://twitter.com/WaltFrench Walt French

    Given that IBM *was* computing for many decades prior to the introduction of PCs (and is still strong in computing), it’s not terribly surprising that they were able to understand and manage through the ups and downs of the PC industry. And the chart shows what a thin plurality they had in PCs for so few years. That they left on a high note of volumes and profitability is testament to the quality of their management.

    And while this level of granularity makes sense, I’m intrigued by a post I saw at Ars Technica (not recommended for non-gearheads) about the lack of multi-tasking on the iPhone, meaning, in that writer’s cramped view, that the iPad is not a PC.

    Of course, many of the early and very successful computers — including Apple — couldn’t multi-task for the majority of their company lives, yet customers made good use of the products. But the PCs really solidified their role when users could easily keep multiple projects running. My work desktop features an Excel spreadsheet tracking selected real-time investment updates, for example, flashing when something that I deem significant happens.

    So I wonder what you and other posters think were the underlying technologies that powered the engine of the disruptive innovation. Multi-tasking, limited or otherwise, letting a user use one device to be constantly in touch with multiple jobs? Price or difficulty-of-use crossing a tipping point against the benefit from some key functionalities? Some social features that turn users into marketers, or the Google-inspired business model that turn apps into mechanisms for delivering eyeballs to advertisers? Critical mass of wi-fi, backed by 3G?

    I think this deeper dive might give us clues about what the Next Big Thing could be in tech innovation, whether it’s an iOS v7.0 with full “object oriented” integration of applets, always-on devices that track our interests ALL the time and are smart enough to interrupt us in the right context, etc.

    • Leon Hurst

      Quoting:
      “surprising that they were able to understand and manage through the ups and downs of the PC industry”
      Walt, do you assume a level of corporate memory and ingrained meta-behaviours that survive through each new generation of IBM leaders? This has certainly not been the case for some companies including Motorola and Nokia.

    • Leon Hurst

      Quoting:
      “surprising that they were able to understand and manage through the ups and downs of the PC industry”
      Walt, do you assume a level of corporate memory and ingrained meta-behaviours that survive through each new generation of IBM leaders? This has certainly not been the case for some companies including Motorola and Nokia.

      • http://twitter.com/WaltFrench Walt French

        I’m not able to say anything useful about Nokia, but I’ll note that Motorola always defined itself in terms of engineering (not business).

        And here’s a quote from Sam Palmisano from a speech about IBM’s longevity: 
        “I firmly believe that any organization, in order to survive and achieve success, must have a sound set of beliefs on which it premises all its policies and actions. Next, I believe that the most important single factor in corporate success is faithful adherence to those beliefs. And finally, I believe that if an organization is to meet the challenges of a changing world, it must be prepared to change everything about itself… except those beliefs… as it moves through corporate life.”

        So yes, IBM had a strong sense of itself as an entity, not a capability for making certain types of products.

  • http://ximagin.co/ The CW

    Perhaps this wins the “obvious award” but I’d bet there’s a simple correlation between profitability and longevity. As product lines face competition their companies start cutting prices to stay competitive. Profitability lost, the company either terminates the product line, the company liquidates, or the company innovates.

    Apple has survived by innovating it’s way out of each tough period.

  • Luis Masanti

    quote:
    “Maybe it’s a fluke, but I rather think it’s due to an ability to re-define itself as the market shifts. Its essential quality being an ability to disrupt itself.”

    Particularly, Apple “also” has the “ability” to re-define the markets in which it entered.
    The Apple I redefined “hobby computer,” the Apple II “fully functional”, the Macintosh’s “GUI,” the iPod, iPhone, iPad… etc., etc….

    On the other hand, IBM more than hundred years shows, at least to me, a similar capacity to redefine itself, although in a bigger-than-only-personal-computing (as a matter of facts, entering the pc world was one of those redefinitions… that began with the census counting machines!)

    (Another point that just sparkled to me while writing this is that both, Apple and IBM “owned” the hardware and software –IBM in big irons–. Other companies “also” have this characteristics –Sun/SGI/Commodore– so I do not know if this is relevant. It seems to me that this is “necessary” but “not sufficient.”)

  • Garry Booker

    Fascinating.  If you ignore all but the top one or two vendors every year, a best-fit trend is very close to a straight line.  Since this is a log chart, the straight line means the industry leadership has maintained consistently exponential growth over a very long period of time, despite the fact that tech bubbles and deep recessions occurred numerous times.

  • Garry Booker

    Fascinating.  If you ignore all but the top one or two vendors every year, a best-fit trend is very close to a straight line.  Since this is a log chart, the straight line means the industry leadership has maintained consistently exponential growth over a very long period of time, despite the fact that tech bubbles and deep recessions occurred numerous times.

  • T C

    Very interesting analysis.

    A case could be made that The Apple line actually shows Apple and Apple-NeXT.
    It would be Interesting to compare Apple/Apple-NeXT with IBM/Lenovo, HP/Compaq, Gateway/Acer, etc.

  • T C

    Very interesting analysis.

    A case could be made that The Apple line actually shows Apple and Apple-NeXT.
    It would be Interesting to compare Apple/Apple-NeXT with IBM/Lenovo, HP/Compaq, Gateway/Acer, etc.

  • MM

    This is ultimately not knowable I’m sure, but, given the job mobility in silicon valley, I wonder how consistent the employees between successful companies are. Put another way, are the same people hopping job to job from the most successful to the most successful companies.

  • MM

    This is ultimately not knowable I’m sure, but, given the job mobility in silicon valley, I wonder how consistent the employees between successful companies are. Put another way, are the same people hopping job to job from the most successful to the most successful companies.

  • http://twitter.com/bennomatic bennomatic

    I think that there’s one thing that Apple seems to do better than all the other companies–at least in the last decade–and that is, more than just innovating, being able to let go of their legacies.  When you look at a lot of these companies, they keep their focus on monuments to their historical success.  Commodore tried to prop up their flagging C64 sales by introducing the C128, which was an almost worthless upgrade.  The Amiga was amazing for its time, but it was not enough to take any market share from the Mac or Wintel PC worlds.  Similarly, PCs in general have only been able to make evolutionary change; the processor wars of the 90’s were exciting, but there are certainly diminishing returns on incremental growth in processing speed.

    Contrast that with Apple’s leap from MC68XXX architecture to PPC to Intel, and now with their mobile devices, custom ARM architecture.  And their leap from a legacy OS which could still run OS 1 applications to a modern, Unix-based one, keeping backwards-compatibility around only as long as absolutely necessary.  Consider their approach on the iPod mini, which they killed at the peak of its popularity, replacing with the nano.  Consider their jump into the phone and tablet markets, understanding that those jumps would potentially eat into sales of their laptop/iPod devices.  Why did they do that?  Because they knew that if they weren’t brave enough, someone else would do it.  My bet is that the move to Final Cut Pro X will eventually be heralded as the same sort of brave, successful move.

    When a company builds monuments to their own success, those monuments become anchors keeping them from moving into the future.  As innovative as some of these companies are, a lot of them are dragged down because while it’s incredibly important to be able to look forward, it’s equally important to know when not to look back.

    • http://www.facebook.com/people/Carlos-Carbajal/620312515 Carlos Carbajal

      Agree. Apple seems to be the best at not having “sacred cows” or “sacred cow features” in their product line-up.  

      Maybe this is summed up as Apple having the most tolerance for risk?

  • Tatil

    Here is what quickly popped into my mind after looking at the plots and your commentary: 

    It is quite impressive that RIM unit sales are still on a fairly strong growth trajectory despite all its missteps in the past five years. Isn’t it a little early to call Acer in decline? 

    • Canucker

      RIM’s data obscure a significant decline in ARPUs.  As their marketshare in the US stagnated, they’ve shifted to emerging markets where sales are distorted to their lower end devices. The sales numbers do not correlate with their profit numbers (cash in the bank might be more revealing of the predicament). Hence, this is not the best visualization of their current financial situation. RIM is bartering for its own survival.

    • Anonymous

      Acer is toast.

    • http://www.asymco.com Horace Dediu

      The market reacts very violently to slowdowns in growth. The time scale of one year does not offer sufficient resolution to conclude much on the timing of sentiment toward companies.

  • Matthew Gunson

    Interesting that the most adaptable player here, and the current market leader started the smallest. Excepting IBM, None of the other competitors were disruptors. They all had to start out with production of at least 80K to justify entering the market.

  • http://twitter.com/sampenrose Sam Penrose

    It feels like neither this way of looking at the market nor the previous one quite gets it. What if you graphed roughly this:
        Apple I->Apple II->Apple III
        (other pre-DOS PCs)
        DOS/Intel PC
        Mac (through System 9)
        NeXT
        OS/2
        Windows 1 -> 3.1 -> 95 -> ME
        Windows NT
        Windows 2000 -> Windows 7 (child of previous 2, obviously)
        Mac OS X
        Palm
        RIM
        Symbian (was it every really a platform?)
        iOS
    You could call them “mass-market platforms targeted by independent software vendors” or something.` Arguably RIM and Symbian don’t belong.
       

  • http://twitter.com/WaltFrench Walt French

    “It’s a difficult graph to interpret.”
    There is enough valuable info here to support many ideas, but here’s my take: there are three clusters of firms shown here. Group together the lines into the early hobby/experimenter companies; the business/upscale-home era; and the mass market ultra-mobile era.

    Apple is the only firm (at least, the only firm shown) to have participated in all three of these waves but  despite its many innovative advances, it stands out in the chart shows ias a nimble follower in all three phases when you count units.

    This grouping identifies technologies that made different uses feasible/cost-effective, too. I think the early advances in each phase were quickly embedded in others’ products, to build a network of value.

  • Tatil

    It is hard to believe Apple was in Top-5 during mid to late nineties, as it looked like it was in terminal decline, comparable to how RIM looks right now. However, I can only see IBM and Compaq with more sales than Apple until 1997. There must have been a lot of sales fragmentation at the time, because I cannot think of many large PC manufacturers that you missed. (Olivetti, Unisys… Who else?) I remember there were a lot of small local manufacturers in many countries during that time. What changed in 1997 that made a very small number of manufacturers to dominate sales? I remember many families starting to buy “IBM compatible” PCs for personal use during that time and it is not surprising that the exponential growth in PC sales presented opportunities for new entrants, but it is still hard to believe that economies of scale was not as important before then. How could the market sustain so many companies at the time, but not now? 

    The situation now is quite different. Smartphone and tablet sales come from a handful of companies already. It looks like winnowing down of the field has taken place, before the new era of personal computing. Is that a mirage? Should we expect a proliferation of competitors to emerge in the next few years before the ultimate winners of this era are determined? 

  • Glimmerman

    Just a modest observation – look at only the periods when Steve Jobs was at Apple and you can yet again appreciate what an amazing CEO he was.

    • Canucker

      Minor quibble, he wasn’t CEO during the first era but you can bet he acted like he was.

  • Anonymous

    Interesting stuff. But why not just normalize Lenovo’s number to include the past result from IBM and remove IBM all together?

    Outside of mainframes IBM is so removed from its past.

    • http://www.asymco.com Horace Dediu

      There would be no “PC” without the IBM PC. It was the top vendor for a decade.

  • poke

    Given that most of these companies simply assemble components into end products, and given that many of them have managed to survive other transitions (mainframe to PC in the case of IBM at least, and desktop to laptop in the case of the modern PC manufacturers), you have to wonder why they’ve found it so difficult to innovate. I think the problem might be that they’ve too narrowly defined their businesses. It’d be interesting to compare them to the consumer electronics companies, where product diversification is the norm. Sony, for example, is ancient compared to these companies. What’s the difference that separates them? Apple owes its longevity to diversifying along the lines of a consumer electronics company. Why haven’t other PC companies managed to do this successfully? How is the related to an enterprise-focus vs. a consumer-focus? Could it be that getting in too deep with the enterprise, with its notoriously conservative values, is the cause of this inflexibility?

    • Canucker

      Although the lifetime window for prosperity for a company in this sector is relatively short compared to employee working life, the spans for CEOs is even shorter. Since the CEO green lights new innovations and projects, perhaps this is more closely related to unsustainability (or inability to disrupt) than the company size. Apple’s longevity was in spite of a hiatus in leadership but they’d built a sufficient buffer (just) to allow survival for a while and, more importantly, were in a niche that didn’t appeal to their competitors/potential suitors. If Apple had been sold like Compaq, their fate would likely have been similarly dismal.

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  • mysterio

    Would be great to see:

    – Market share area graph
    – Rank line graph

    Also, what are the probabilities associated with next-year’s rank given this year’s rank?  If I’m #1 this year, how likely is it that I’m #1 next year?  That helps describe how strong economies of scale, brand effects, and other “leader” benefits are…

    This is rich data, though hard to parse.

  • Tim F.

    Excellent work. A suggestion: in the chart where you pin a company’s start to y-axis to show platform lifespans — is it possible to add end points to those platforms that died? “Longevity” and “Audience” pop in this graph, but you lose the sense of platform “Death.”

  • Anurag

    The story for me is:

    If you put in a similar graph for value-add  (gross margin) on these products then you will have the story which we are all familiar with i.e. the companies with maximum value-add survive the longest which in turns come from IP that is valued. Apple definitely had that in its first version which kept it going during its winter to enjoy its current success.

    For the rest the value-add is by elephant in the room (or graph) so to speak i.e. Win-tel and that is why they can survive and come up (might not but at least have a chance) in this new multi-device era (as oppose to mono device of PC/notebook earlier from UI and form factor perspective.)

    Same hold for mobile makers like Nokia/RIM where they at least have a chance to survive due to being the top value-add vendor but will require a quantum jump. You never know Apple has shown it could be done!
     

  • http://www.facebook.com/people/Carlos-Carbajal/620312515 Carlos Carbajal

    What is a fluke I think is that Apple survived as a going concern through the Spindler / Amelio era.  Had Be not demanded as much money for their OS, had MSFT decided not to invest in Apple or support it with their browser and office suite, or had Apple have run out of cash just a quarter or too sooner the world would probably be a very different place right now and the dotted line on the graph above ending somewhere in 1997 or shortly thereafter.

    Thank goodness that isn’t how things turned out but I do believe a healthy amount of blind luck got Apple through those dark days in the 1990’s.

  • Anonymous

    20 years of just surviving, connecting two periods of unprecedented growth from ’77 to ’85 and 2005 to present.

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  • http://pulse.yahoo.com/_K5I7BASR2ACVSGV3U4CJUNSWZA Ricardo

    Whew! Too much data for fanboism or macbashing. I keep on saying that every company eventually fails, but maybe not Apple. At least not for a long time. 

    • http://www.asymco.com Horace Dediu

      The trick is to plan your own failure.

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  • Anonymous

    Arguably, IBM has also managed to disrupt itself away from the abyss, even if it no longer belongs in the graphic.

    I have the feeling Apple will exist as long as there’s such thing as a consumer-oriented tech industry.

  • Murliman

    Dell has been selling PCs since at least 1987. That means, they’ve been in the PC business for 25 years, not 15. HP’s been in the game about as long too. Please correct your graph.

    • http://www.asymco.com Horace Dediu

      The third paragraph explains which data is included and which isn’t. The discussion is about prosperity not existence.

      • Murliman

        Ah, ok. Thanks.