“Closed” strategies like Apple’s will win over open ones until the point when technology passes the needs of consumers

With respect to the strategic issue of tightly integrating the iPhone/iPad software and hardware, a strong case can be made that Apple’s “closed” strategy is smart. Clay Christensen has given us the only serious theory I know of to predict when it’s optimal for a company to adopt an open versus closed strategy for (among other things) operating systems. The basic idea is that every new tech product starts out undershooting customer needs and then – because technology gets better faster than customers needs go up – eventually “overshoots” them. (PC’s have overshot today – most people don’t care if the processors get faster or Windows adds new features). Once a product overshoots, the basis of competition shifts from things like features and performance to things like price.

The key difference today between desktop computers and mobile devices is that mobile devices still have a long way to go before customers don’t want more speed, more features, better battery life, smaller size, etc. Just look at all the complaints yesterday about the iPad – that it lacks multitasking, a camera, is too heavy, has poor battery life, etc. This despite the fact that Apple is now even building their own semiconductors (!) to squeeze every last bit of performance out of the iPad. Until mobile devices compete mainly on price (probably a decade from now), tight vertical integration will produce the best device and is likely the best strategy.

I can definitely see how a closed strategy is critical when a new technology is emerging. Cell phones were horrendous before the iPhone, and something like the iPad will only be successful if carefully designed.

But I think closed can be good in the long run as well. Even when technology has passed what most consumers need, there’s some added value for the greater experience.

That’s why Macs are doing well again, and BMWs always sell over cheaper alternatives. They might not be 95% of the market, but those “closed” systems are definitely worth the extra cost to some people.

3 comments

  1. Sachin,I totally agree. The problem with open systems is that after a while they can collapse under their own weight–which is what I think happened with Windows Vista–also why concurrently OS X gained market share. As Windows became ever more bloated to support their huge, open (impossible to QA) ecosystem, OS X became relatively more attractive to consumers who grew tired of open and began to value "just works."That said, I think we will see a day in the not too distant future where Apple makes moves to open up its App Store even if the hardware and OS stay tightly integrated. There is room for gray–just like Apple may be tightly integrated in most aspects they still obviously allow third party software and peripherals on computers and mobile devices. I actually just wrote about this very topic on my blog yesterday at http://bit.ly/ak0cuE

  2. "Closed" strategies will only lose when the overall experience fails to deliver and people begin to blame it on the restriction of alternatives. See Eastern Europe, the PSP, and Italian Serie A soccer. But give the people what they want and they’ll continue drinking the tasty kool aid.

  3. <html><body style="word-wrap: break-word; -webkit-nbsp-mode: space; -webkit-line-break: after-white-space; ">Very interesting about windows 7. i haven’t read much about it yet. good post<br><div><div></div></div></body></html>

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