Sunday, September 16, 2007

Apple Macintosh versus iPod

An article in NY Times today that discusses how Apple missed a window of opportunity during the introduction of Vista. The market share for the Macs is stuck at around 3% (down from a high of 14% in 1984). Randall Stross does a good analysis of Apple's retail strategy (including the relationship with Best Buy). But, winning market share in the personal computer arena (against Windows) is more than just fixing the retail and distribution strategy. Windows succeeded because of the strength of its network of complementors. Apple made a strategic decision long back to keep Macintosh closed (and not open to third-party developers). Apple's production-constrained for sure.
In contrast, Apple made iPod compatible with Windows: that decision (more than anything else) has made Apple enjoy a commanding market share. If Apple had required that we buy Apple Macintosh to use iPod, it would have had a market share in single digit. Stross concludes with this sentence about the strength of Windows.
Mr. Kay, of Endpoint, described a Microsoft operating system and its thousands of certified supporting hardware vendors and the two million device drivers as forming an enormous flywheel.
What Apple has going for it is a similar flywheel with iPod and iTunes (and potentially iPhone).
Succeeding in network-era competition is more than crafting an effective retail strategy--which is necessary but not sufficient. For early clues about network-era leaders, look at the pattern of complementors linked to it. That's what defines Microsoft with Windows (but not Zune) and Apple with iPod (but not Macintosh). At the same time, these network-based advantages are not sustained for longtime unless the leader nurtures and evolves the ecosystem.

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