Professor N. Venkat VenkatramanDavid J. McGrath Jr. Professor of ManagementBoston University School of ManagementIS829: January 2010

Cross-Industry Digital Disruption:Lessons and Insights from Apple

2(c) N. Venkatraman [2010]; Boston University IS714 Course

Apple: Evolution of the Vision

3(c) N. Venkatraman [2010]; Boston University IS714 Course

Apple’s role in the computer industry in 2002…

4(c) N. Venkatraman [2010]; Boston University IS714 Course

Apple’s Launch of iPod in 2001

5(c) N. Venkatraman [2010]; Boston University IS714 Course

Apple is in Steve Ballmer’s Top 25 IT Companies (2005)

6(c) N. Venkatraman [2010]; Boston University IS714 Course

Apple’s Innovation Anchor

Sept 2007

“the cost-savings [of outsourcing design] aren’t worth what you give up in terms of teamwork, communication, and the ability to get groups of people working together to bring a new idea to life…” ---Steve Jobs

7(c) N. Venkatraman [2010]; Boston University IS714 Course

Apple’s Core Capability: “Design”

• Macintosh desktops• Macintosh laptopsComputers

• iPod & iTunes

• Apple TV

Media & Entertainme

nt

• iPhoneMobileTelephone

8(c) N. Venkatraman [2010]; Boston University IS714 Course

Apple’s Transformation Trajectories

(c) N. Venkatraman [2010]; Boston University IS714 Course 9

Apple’s Role in the Music Sector

(c) N. Venkatraman [2010]; Boston University IS714 Course 10

Music in the analog era….

Hardware Turntables, cassette players, tape decks, Sony Walkman etc.

Content(music)

Albums offered by record labelsin standard formats (33-45-78 rpm; & cassette tapes)

ChannelSold in Physical outlets (general and specialty) & Mail-order Catalogs

CustomerNetwork

Albums and tapes borrowed withinfriends communities.

(c) N. Venkatraman [2010]; Boston University IS714 Course 11

Music in the digital era…..

Hardware Digital audio players

Content(music)

Major lables plus rise of independent labels posting music online

Digital Rights Management

Apple Fairplay; Windows Play For Sure

ChannelSold in stores (CDs); Rise of Onlinedownloads

CustomerNetwork

P2P file sharing; personal CD burning and sharing with friends

SoftwareMP3; itunes; Windows Media; Quicktime; Realone etc.

Precursor to

today’s social

network?

(c) N. Venkatraman [2010]; Boston University IS714 Course 12

Apple’s Role in the Transformation of Music Network….

13(c) N. Venkatraman [2010]; Boston University IS714 Course

Versions 1 to 4.0.1 – Supported only Macintosh (September 1, 2009 to October 2003)

Version 4.1 – Windows 2000 Support (October 16, 2003); 1 million downloads

Subsequent versions support latest versions of both Mac and Windows OS

iTunes History (Relevant for Interoperability in Networks)

(c) N. Venkatraman [2010]; Boston University IS714 Course 14

This Day in History: April 3, 2008

January 1, 2009: 6 billion songs (70% of global digital sales); nearly 9 billion now.

15(c) N. Venkatraman [2010]; Boston University IS714 Course

Design Evolution: iPod as a case example

Source

16

(c) N. Venkatraman [2010]; Boston University IS714 Course

Apple: Role of PatentsPatent #:7,479,949

Analyzing patents to examine new product trajectories

17(c) N. Venkatraman [2010]; Boston University IS714 Course

iTunes in the US Digital Music Sector

Date: August 20, 2009

18(c) N. Venkatraman [2010]; Boston University IS714 Course

Apple’s success in music: Interplay between direct and indirect network effects

ContentAvailability

iPodAdoption

ComplementorNetworks

CustomerNetworks

Direct

Indirect

19(c) N. Venkatraman [2010]; Boston University IS714 Course

Music in the network era……

Hardware Multiple network-enabled devices

Content(music)

CDS offered by major labels; rise of independent labels;

Digital Rights Management

Apple Fairplay; Windows Play For Sure:Open Mobile Alliance (OMA)

Channel Sold in stores (CDs); Online downloads;downloaded to phones; Networked streaming

CustomerNetwork

P2P file sharing; personal CD burning; social and automated recommendations

Software MP3; Apple itunes; Windows Media; Quicktime; Realone etc.

MobileOperators

Mobile network for accessing music

20(c) N. Venkatraman [2010]; Boston University IS714 Course

Network of Linkages in Music

Hardware

Operating System

Applications

Content

Channel

Mobile Operators

Customer Network

(c) N. Venkatraman [2010]; Boston University IS714 Course

APPStore

O.S

Devices

21

From Music to Mobile Phones

iPhoneiTouch

~ 140,000 AccessoriesNew Monetization Logics

Cross-NetworkDisruptor

22(c) N. Venkatraman [2010]; Boston University IS714 Course

Apple iPhone App Store: Extension of iTunes Store

23(c) N. Venkatraman [2010]; Boston University IS714 Course

Apple’s App Store as Complementary Network

24(c) N. Venkatraman [2010]; Boston University IS714 Course

Apple’s success extends the interplay between direct and indirect network effects

ContentAvailability

DeviceAdoption

ComplementorNetworks

CustomerNetworks

iPod

Media

‘Apps’

iPhone

25(c) N. Venkatraman [2010]; Boston University IS714 Course

Apple iPod and iTouch: Fastest Growth..

26(c) N. Venkatraman [2010]; Boston University IS714 Course

Apple iPod + iTouch: The Fastest Ecosystem Ramp in History!

27(c) N. Venkatraman [2010]; Boston University IS714 Course

iPod + iPhone leverage the same complementor network

July 22, 2009

28(c) N. Venkatraman [2010]; Boston University IS714 Course

iPod + iPhone: Important anchors for Apple

June 22, 2009

29(c) N. Venkatraman [2010]; Boston University IS714 Course

Microsoft versus Apple: 2005 to 2009

30(c) N. Venkatraman [2010]; Boston University IS714 Course

Apple: Market-share? Mind-Share? Profit Share?

Source:

31(c) N. Venkatraman [2010]; Boston University IS714 Course

What insights do we get by using this framework to understand Apple?

TechnologyDomain

BusinessDomain

ProcessProduct Service

Moore’sLaw

Metcalfe’sLaw

BandwidthLaw

19802010