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Rita McGrath

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September 12, 2005

iPhone for positioning?

Is Steve Jobs playing the options game? In our book ‘The Entrepreneurial Mindset’ we argued that uncertain ventures could be treated as the real asset equivalent of financial options, building on a lot of great work done in finance. One type of option, which we call a ‘positioning option’ is most appropriate when the primary uncertainties are technical, or outside your control. Examples include when some new breakthrough is needed to develop a market, or when you are waiting for a standard to emerge.

So what do you think of this description of Apple’s move into music phones, printed in this week’s Business Week?”…it looks like Jobs is making a careful gamble. He doesn’t want the music-phone market to soar, at least not right away. That could cut into his iPod franchise, the source of almost all his revenue and profit growth. At the same time, he knows the mobile-phone market could be tremendously important for digital music in the future. So he’s positioning Apple to be readcy for a sales boom without leading the charge himself…Jobs, in other words, seems to be trying to define the music phone to his advantage.”

Well, will it work? Apple has gotten into trouble before with proprietary standards, and if I were Zander of Motorola, this might be of some concern. On the other hand, wouldn’t it be cool to have a mobile phone with the intuitive and straightforward interface of an iPod?

Filed Under: Growth Options / Real Options

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