"The way we always view cannibalization is that we'd prefer to do it than have someone else do it."
Apple CEO Tim Cook held a fireside chat earlier today at Goldman Sachs and most of the headlines took note of his comments about working conditions at Apple's overseas factories. But the above observation, which Cook made almost in passing, goes to the core--no pun intended--of Apple's ongoing success.
The context here was that Apple is perfectly sanguine about the cannibalization of the Mac--so long as Apple is the one doing the cannibalizing. If ever some academic sought an example of creative destruction in action, here was the perfect photo opp.
We all know that Apple makes great products that customers love. But here's the other reason to explain why Apple is the most valuable company in the world in terms of market cap: Unlike the competition, Apple was willing to swallow hard and ultimately doom one of its traditional cash cows.
Apple saw a tremendous opportunity in tablets and worked on turning the iPad into a global phenomenon, even at the Mac's expense. The gamble is paying off. A new report suggests that based on orders placed for displays, iPad sales may be on track for more than a 60 percent jump over 2011. Cook now expects the unit size of the tablet computer industry to outstrip that of the PC industry.
Echoing a philosophy first laid down by Steve Jobs, Cook has often mentioned Apple's willingness to eat its young. (See here and here.) Given that Apple shares just busted past the $500 level, however, his most recent affirmation seems even more prescient.
With the benefit of 20-20 hindsight, Apple's willingness to sacrifice the Mac at the iPad's altar qualifies as a no-brainer. But it's precisely because Microsoft wasn't able to do something so radical that some investors now bay for Steve Ballmer's head.
It was the challenge posed by Harvard's Clayton Christensen years ago in his idea of the innovator's dilemma. Unlike Apple, Microsoft has always resisted jeopardizing a profitable, decades-old business model, one that generated the funds to help build a multibillion-dollar dollar software empire. Even though Microsoft had its opportunities, the internal debate always came out on the side of protecting Windows licensing. We know how the rest of the story turned out.