Do you remember when AOL dominated the internet?  In the early 1990s most people who used the internet actually were AOL clients.  They bought their internet access, via dial-up modems, from AOL.  Their interface (browser) was from AOL.  And most of the sites – and navigation – was driven by AOL.  AOL was the "monster" of the web.  And it created enormous value for investors from this leadership position.  It's value stormed to over $160billion!

Chart from Silicon Alley Insider

But as we can see, once acquired by Time Warner AOL tried to Defend & Extend its position. These actions pushed AOL into the Swamp, an undefendable position in the rapidly growing internet world. Defending its position proved impossible, as people found better and lower cost solutions for accessing and using the web.  Now AOL is in the Whirlpool, fast disappearing – an historical anecdote about early internet days.

Apple has only about 2% market share in mobile phones.  On the one hand, this could appear nearly immaterial.  But if we look at usage, we see a very different story

Chart courtesy Silicon Alley Insider

iPhone application growth, which is clearly becoming logarithmic, demonstrates a change in the marketplace.  People are clearly using these devices for more than making calls.  Unlike AOL, which tried to hold people into their environment – or even Motorola's RAZR which tried to dominate sales of phones with pricing – Apple isn't trying to Defend & Extend a market position.  Apple is creating a market disruption by changing how mobile devices are used.  Promulgating applications increases demand for the iPhone (and iTouch) as not just phones but as replacements for laptops and other internet devices.  Possibly ereaders like Kindle.  This pulls people toward Apple's devices, which will generate strong future growth.  By constantly bringing out new uses, Apple disrupts the market for phones, computers and internet access devices.  Positioning its own products to be big winners as demand continues growing, and keeping Apple in the Rapids.

PostScript –

I was pleased to see a recent Wall Street Journal article "What Kills Great Companies:  Inertia."  The message of Lock-in as a source of business problems keeps spreading.  This time Gary Hamel talks about some of the sources of Lock-in he sees.  Reads like he bought a copy of "Create Marketplace Disruption"!