Disruptive Technologies and Competitive Forces
A disruptive product, service or technology is an innovation which creates a new marketplace and a new value web. It eventually goes on to “disrupt” an existing market environment and value web. Portable tablet computers from Apple have come and gone before, such as Apple’s “Newton” in the 1990s which was eventually discontinued in 1998 following poor sales. The iPad, launched in 2010, looks like it will be different. It is a beautifully designed product with a high-resolution 10-inch color display, a WiFi Internet connection and access highspeed mobile-data networks. Also, by mid-2012 over half a million applications were available on Apple's App Store which include video, music, text, social networking applications, and video games. Just like the original launch of the iPod and iPhone Apple must convince potential users that they need a new, expensive gadget (around €450) with the functionality that the iPad provides. The iPhone was a massive success which demolished sales of traditional cell phones throughout the world. Of more interest is the iPhone’s impact on the smart phone industry. In five years the iPhone has overturned the status quo as represented by Microsoft’s Windows Phone, RIM’s BlackBerry, and anything Nokia. When the iPhone debuted in 2007, all three were smartphone industry leaders. iPhone’s disruption of the traditional marketplace caused a shift in revenue and profits with huge implications for traditional mobile phone manufacturers. Within a few years, in spite of only a minority share of the smart phone market, Apple had gained a disproportionate share of both revenue and profits. Similarly, within a few years after launch the iPod, coupled with Apple’s iTunes Store, had decimated the portable media player industry creating an entirely new business ecosystem. Will the iPad do likewise as a disruptive technology for the media and content industries? The same thing as what happened with the iPod and iPhone seems to be happening in computer tablets. Apple’s iPad may be simply an iPod Touch with a larger screen, but sales have been phenomenal, disrupting both the netbook and notebook markets. Together with the built-in apps ecosystem, Apple have created a huge barrier to entry for competitors who must resort to low prices, low or no margins, and lower quality to compete. The iPad has some appeal to mobile business users, but experts believe it will probably not replace laptops or netbooks in this market. Instead, it is in the publishing and media industries where its disruptive impact will probably be felt most. The iPad can provide people TV on the go, rather than television at home. Users can also read ebooks, newspapers, and magazines online rather than in print form. Consequently, the iPad and other similar devices (like Amazon’s Kindle Fire and the Kindle eReader) requires existing media companies to change their business models in major ways. Content firms must stop investing in their traditional content delivery platforms (like newsprint) and increase investments in new digital platforms. Publishers also believe that e-books may be a way to give new life to stagnating sales and also to attract new readers. The huge success of the Kindle has generated new growth in online book sales. It is hoped that e-books could account for 25 to 50 percent of all sales. Amazon provides the technology platform and is also the largest distributor of books in the world. It exercised its new power by forcing publishers to sell e-books at $9.95, a price too low for publishers to profit. Publishers are now refusing to supply any new books to Amazon unless prices are raised and Amazon is beginning to comply with their wishes. With the iPad Apple entered this market with the intention of competing with Amazon on both price and distribution. Amazon has committed itself to offering the lowest possible prices, but Apple, recognizing the position of publishers in the...
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