The Myth of Market Share by Richard Minitar is one of those little books, published in 2002 by Crown Business, that you probably never read – or even heard of (available on Amazon though).  And that's too bad, because without spending too many words the author does a great job of describing the non-correlation between market share and returns.  There are as many, or possibly more, companies with high profitability that don't lead in market share as ones that do.  Even though the famous BCG Growth/Share matrix led many leaders to believe share was the key to business success.  Another something that worked once (maybe) – but now doesn't.

"Moto Looks to Sell Set-Top Box Unit" is the Crain's Chicago Business headline.  Motorola's television connection box business is #1 in market share.  But even though Motorola paid $11B for it in 1999, they are hoping to get $4.5B today.  That's a $6.5B loss (or 60%) in a decade.  For a business that is the market share leader.  Only, it's profitability + growth doesn't justify a higher price.  Regardless of market share.

Kind of like Motorola's effort to be #1 in mobile handset market share by cutting RAZR prices.  That didn't work out too well either.  It almost bankrupted the company, and is causing Motorola to sell the set top box business to raise cash in its effort to spin out the unprofitable handset business.

On the other hand, there's Apple. Apple isn't #1 in PCs – by a long shot.  It has about a 14% share I think.  Nor is it #1 in mobile handhelds, where it has about a 2.5% market share.  But Apple is more profitable than the market leaders in both markets.  Today, Apple's value is almost as high as Microsoft – historically considered the undisputed king of technology companies.

Chart source Silicon Alley Insider 11/12/09

While Microsoft has been trying to Defend & Extend it's Windows franchise, its value has declined this decade.  Quite the contrary for Apple.

Additionally, Apple has piled up a remarkable cash hoard with it's meager market shares in 2 of 3 businesses (Apple is #1 in digital music downloads – although not #1 in portable MP3 players). 

Chart Source Silicon Alley Insider 11/11/09

"While Rivals Jockey for Market Share Apple Bathes in Profits" is the SeekingAlpha.com headline. Nokia has 35% share of the mobil handheld market.  It earned $1.1B in the third quarter.  With its 2.5% share Apple made $1.6B profit on the iPhone.  While everyone in the PC business is busy cutting costs, Apple has innovated the Mac and its other products – proving that if you make products that customers want they will buy them and allow you to make money.  While competitors behave like they can cost cut themselves to success, Apple proves the opposite is true.  Innovation linked to meeting customer needs is worth a lot more money.

Bob Sutton, Stanford management professor, blogs on Work Matters "Leading Innovation: 21 Things that Great Bosses Say and Do."  All are about looking to the future, listening to the market, using disruptions to keep your organization open, and giving people permission and resources to open and manage White Space projects.

If your solution to this recession is to cut costs and wait for the market to return – good luck.  If you are trying to figure out how you can Defend & Extend your core – good luck.  If you think size and/or market share is going to protect you – check out how well that worked for GM, Chrysler, Lehman Brothers and Circuit City.  If you want to improve your business follow Apple's lead by developing thorough scenario plans you can use to understand competitors inside out, then Disrupt your old notions and use White Space to launch new products and services that meet emerging needs.