One of the big questions a Technology Strategist needs to ask and answer is if they want their product or service for that matter, to be part of a "closed" or "open" system.
An article in FORTUNE by Devin Leonard entitled "The Player" talks about the decisions that APPLE has made related to this topic.
APPLE is famous for its closed system decisions. The article states (March 20, 2006) that iPod now has 73% of the market. A number estimated by Fulcrum Global Partners.
The iTunes and iPod system has been a tremendous success.
What do you think about "closed" systems?
Gene A. Wright
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9 comments:
Apple did an awesome job with locking in the record companies by providing the copy right protection software, prior to the mp3 boom took place.
The closed system in the mp3 player market was a great idea. It has not payed off for Apple yet in the Mac market.
I believe it depends on your guarantee for market dominance. In Apples case, their products exploded on to the market, and they were guaranteed the dominant technology position. A closed system can give you a “force field” effect that will make it very difficult for your competitors to get through. They will eventually, but I think you can ride technology for a longer period.
However, I don’t believe closed systems are necessarily good for the consumer. It limits the products that they have available to them, and of course, they may end up paying more. Take it from a person that has a iRiver player, when the rest of the family has iPods.
I think a close system best suits Apple with itunes and ipod because it helps gain an upper hand in the market. Especially with their innovative technology and revolutionary designs, it would take other competitor more time and effort to come up with a similar product. To withstand in a competitive market, this approach I think is good.
I think the article articulates the pros and cons of a closed system quite well.
As long as there is a strong demand for the product part of a closed system, the payoff for the company will be excellent. Right now, iPods are a hot item on the market. In order to make use of these players, the customer has to go back to Apple to purchase the content. When thinking about it, video gaming consoles are the same way. If you would go out an buy a Nintendo GameCube, you have to purchase the video game content from Nintendo or other content providers licensed by Nintendo.
Anyways, in the case of the desktop computer outlined in the article, the closed system burned Apple in that outside software couldn't be run on Apples, causing them to lose market share and to serve only a niche market. Who's to say that this couldn't again happen to Apple? Maybe the next big craze will be something that is only copy protected by Microsoft, making the iPod useless in trying to run this new content. Who knows?
In summary, providing a closed system market offering can be profitable, however, it makes the market offering a riskier venture. It takes a sound business strategy and technology strategy plan to pull it off, and the organization better be confident that its offering will be successful.
Does it really matter when your product is hot? Video games have always been a closed system so don't know if you can really compare the two products.
The bigger fish I think is copyright protection for the music being transfered. Apples software is the reason why iTunes has such a large selection and backing from the music industry.
Its certainly a much risker venture to have a closed loop system. I think to counter strike MS's new device coming out, Apple should open the closed loop system and leave them with the barn door open.
A.Popchock
A closed system can definitely work for you or against you. Apple is a great example of this. The Mac never got a significant portion of the market competing against established PC compatible market. In the music player market Apple was at least first to mindshare. Getting consumers to know iPod as “the” audio player. The other big names such as Sony and Microsoft were late to the market and the other smaller companies didn’t get the strategic pieces in place.
I don’t think that the iPod would be as successful using only the FairPlay if the music companies and consumers had accepted another protected format before the iPod came along.
I agree with Adam that closed systems are not as good for the consumer because the competition is not there.
From my understanding what a closed system is having some kind of dominance over the market which account major percentage in the market. I think understanding from that perspective Apple indeed did a fantastic job of coming out with the product and launching it. A very strategic decision in authorizing itunes and made it "the closed system" It killed or disrupt a lot of competitor.
Sheetal
While the "closed" iTunes/iPod system works in the early stages of many industry revolutions, it just might finally succumb to the open, more-modular systems.
You also see it in aircrafts and software, and medical devices, and over and over. 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.
-Sameer Mustafa
I am impressed with how well thought out Apple’s plan seems to be. I recently learned that their control of content goes beyond the iPod into cell phones that are able to offer music services. These cell phones have a closed blue tooth system that will only allow a wireless earpiece to be connected. Leaving the communication protocol open would allow the transport of copyrighted material.
Personally, I am a late adopter in the digital music market. This year might be the year that I get my first iPod.
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