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Tuesday, January 10, 2006

iPod As Toast : Nope – iTunes Is The Standard Of Digital Music

Clayton Christensen fears that iPod's success is built on a strategy that won't stand the test of time. He says that like in any other industry - not just computers and MP3 players - be it in aircrafts and software, and medical devices, and over and over – one can see that during the early stages of an industry, when the functionality and reliability of a product isn't yet adequate to meet customer's needs, a proprietary solution is almost always the right solution - because it allows you to knit all the pieces together in an optimized way. But once the technology matures and becomes good enough, industry standards emerge. That leads to the standardization of interfaces, which lets companies specialize on pieces of the overall system, and the product becomes modular. At that point, the competitive advantage of the early leader dissipates, and the ability to make money migrates to whoever controls the performance-defining subsystem. In the modular PC world, that meant Microsoft and Intel , and the same thing will happen in the iPod world as well. Apple may think the proprietary iPod is their competitive advantage, but it's temporary. Three years from now, the proprietary architecture may not be as dominant as it is now.
I had always been a little concerned about Apple’s closed standard approach. However, Apple with its dominant marketshare and nearly complete mindshare is in a very formidable position – several of its imitators had to bite the dust . Apple’s digital music leadership can’t be compared with the miniscule marketshare Mac had years back when Wintel gained dominant marketshare. For all that Apple could announce partnerships for video transfer and support wider range of standards – if push comes to the shove. Apple is demonstrating that it can accomodate, to grow like adding features like FM to iPod. History may not be the right indicator for future happenings – atleast in this case –iPod competitors may have to try harder to dislodge it – but, Apple iPod would shape the future of the digital music and not otherwise. Afterall the iPod is the standard of digital music.

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