"Microsoft certainly held a lot of things back by sticking to a status-quo for as long as possible. But how can you blame them? It was a profitable status-quo."

"Microsoft certainly held a lot of things back by sticking to a status-quo for as long as possible. But how can you blame them? It was a profitable status-quo." That is exactly the Innovator's Dilemma. That is why, IBM, for example didn't pursue the home PC market with more vigor. The status quo is enormously profitable. The emerging market is quite a bit less profitable. However, by the time you recognize that the emerging market has greater growth potential than the status quo, all of the first mover advantages are taken by companies who had no choice but to go into the emerging market. Going back to the IBM PC analogy, Microsoft and Compaq had no choice but to go into personal computers, because the mini-computer and mainframe markets were dominated by companies like Unisys, IBM, DEC, and Digital. In the same way, Apple saw that the personal computer market was dominated by Microsoft. When Steve Jobs returned to Apple, the company's marketshare had declined precipitously and it had ceded all but a few specialized niches to Microsoft. A lesser CEO would have waged a costly and futile battle to take back the personal computer market from Microsoft. But Steve Jobs saw that the battle was already lost. Instead, he focused on consolidating Apple's hold on the niches that it did retain (high-end, well designed, hardware sold at a premium price) while expanding out into emerging markets like MP3 players, phones, and tablets; markets that Microsoft did not take seriously precisely because its dominance of the desktop/laptop market was so complete. And now Microsoft finds itself in the same position that IBM found itself in when Microsoft dominated personal computers.