Why Apple Vs. Exxon?

America’s largest corporations always pay close attention to their industry rivals. For instance, who can forget the riveting moment when Bill Gates and Steve Jobs clashed on stage over Apple’s Mac vs. PC ad campaign? Or the time when Exxon and Mobil, the two largest firms in the energy industry, decided to merge?

It’s less common, of course, when firms in different industries compete with each other. Nevertheless, Apple and Exxon are now doing so for the mantle of America’s most valuable company. A year ago, Apple astonished the capital markets by surging past Exxon to become #1 in terms of market capitalization. But just last week, Exxon returned the favor and passed a slumping Apple to regain the top spot.

On the one hand, the track records of these two companies can be attributed to the internal capabilities of the firms themselves. But on the other hand, these recent swings in market valuations also reveal something meaningful about the computer and energy industries.

A Pillar of Stability

Exxon Mobil is a venerable firm; it can trace its roots all the way back to 1870. That year, only a decade after Colonel Edwin Drake of the Seneca Oil Company launched the contemporary energy industry with the discovery of oil in Titusville, Pennsylvania, John D. Rockefeller incorporated the Standard Oil Company.

By 1890, just two decades after its incorporation, Standard Oil controlled almost 90% of all of the refined oil in the United States. When the Supreme Court declared the firm to be an “unreasonable” illegal monopoly in 1911, the firm was split into 33 distinct organizations. The two largest successor firms were Standard Oil of New Jersey and Standard Oil of New York; they respectively later evolved into Exxon and Mobil.

In other words, the firm now known as Exxon Mobil has existed (together or apart) as one of the largest firms in the world for well over a century. But what of Apple, the firm that it is now battling for the title of America’s most valuable corporation?

Continuous Reinvention

Apple Inc. did not even exist until Steve Jobs and his two partners formed the firm in the 1970s. Its first great burst of growth occurred in the 1980s, when its primary rival was IBM. In fact, its “1984” Super Bowl television commercial about its Big Blue adversary has become one of the most widely admired marketing events in contemporary business history.

Apple then experienced a period of decline during the 1990s; it came perilously close to filing for bankruptcy during the decade. Its most widely remembered event during this era was the announcement of a noteworthy $150 million investment in the weakened Apple by a dominant Microsoft, featuring a gigantic on-screen image of Bill Gates towering over an on-stage Steve Jobs.

Of course, Apple’s market valuation eventually surpassed Microsoft’s during the rise of today’s internet era. Apple has introduced one radically successful product innovation after another, while Microsoft continues to strive to design products and services that can compete in the evolving market.

Seismic Shifts

It may be inappropriate, however, to attribute changes in the recent fortunes of Apple and Microsoft to differences in the abilities of the organizations. After all, the computer industry is inherently prone to seismic shifts every twenty years or so.

For example, IBM’s decade of dominance in the 1960s coincided with the development of mainframe computers. But demand for computing power shifted dramatically towards desktop devices during the 1980s, enabling the emergence of Microsoft Corporation. Likewise, the growth of the internet during the 2000s then empowered the rejuvenation of Apple.

When an industry experiences an era of continuous transformation, its market leaders inevitably struggle to remain dominant against younger and nimbler competitors. In other words, their competitive strengths become weaknesses, and stability itself becomes a handicap.

The “New” Electric Car

The energy industry, on the other hand, has experienced stability for over a century. Most automobiles, for instance, have been powered by internal combustion engines throughout this entire period. And oil burner technology has not fundamentally evolved since M.A. Fessler and others developed the technology during the early 1900s.

Indeed, Standard Oil and its descendants have been the beneficiaries of a remarkable era of stability in the energy industry. Even our newest technologies, such as the electric automobile motors of the current century, can trace their ancestries to vehicles like the Davenport car of 1837, the Morrison automobile of the late 1800s, and the Columbia Mark Runabout of the early 1900s.

So if you feel inclined to marvel at the sustained track records of companies like Exxon Mobil or the volatile histories of firms like Apple and Microsoft, you might wish to avoid attributing all the credit (or blame) to the firms themselves. After all, they might merely be serving as the beneficiaries (or as the bearers of the burdens) of their respective industries.