How did Apple take on the Windows monopoly and win? Steve Jobs formerly would quote the following tech strategy from Alan Kay who was one of Jobs mentors: "People who are really serious about software should make their own hardware."
Clearly Microsoft was not a student of this strategy and in fact disagreed completely with the implementation. The famous military strategist Sun Tsu would write: "The ultimate art of war is to subdue your enemy without fighting."
While Microsoft is an amazing company and visionary in its own right, they focused their strategy on owning the desktop software environment. This strategy won as long as they owned the desktop which they did with a near monopoly of the desktop computer and the associated scale and penetration. Steve Ballmer once said, "Jobs is nuts to think he can charge $600 for a phone with software." The problem was that the phone Jobs invented did more than the $1200 computer which Microsoft owned and it was much smaller and easier to carry around.
As Jobs was able to own the device, he could also control the OS. So far, this strategy has displaced Microsofts leading software position. The next generation in technology however is coming with augmented reality and virtual reality and the company who owns this hardware and software combination will become the next leader in the industry.
The other force that took Microsoft by surprise was the "web application". Or an application that did not depend on a particular operating system. The "stateless" application as we think in software.