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Friday, March 26, 2010

Amazon - Make Kindle Open Source to Beat Apple iPad

by Yann Cramer

Amazon - Make Kindle Open Source to Beat Apple iPadIndependent research boutique ChangeWave surveyed 3,171 consumers and found that, amongst respondents planning to buy an e-book reader in the next 90 days, a towering 40% favor Apple's iPad, with Amazon's Kindle attracting only 28%. While the marked preference for the iPad may be temporarily over-inflated by the hype surrounding its launch, there is no doubt that Apple's entry in this market is a threat to Amazon. What should Amazon's next move be?

Acknowledge. The first step is to recognise a few hard truths:
  1. That the main threat is not the iPad selling better than the Kindle, but the iBook business model seriously denting Amazon's e-book retailing market share (currently estimated at 90%).

  2. That in spite of its heavy investment and outstanding achievement in developing and launching the Kindle, Amazon is not an electronic goods company, let alone a technology leader.

  3. And therefore that having the Kindle as one of the very few devices that can read e-books sold on Amazon will become a serious handicap to Amazon's mainstream business which is to sell books. There is no way back: the e-book market is rapidly growing and consumers will not settle for second best e-readers. If the Kindle becomes technically unable to compete with the iPad (or any other future new entrant), the barrier that Amazon has created by restricting the number of devices that can read e-books sold on its website will not hold for long.

Unlock the innovation potential of the Kindle. In a head-to-head confrontation on technological innovation, Amazon stands little chance to come on top of Apple. To unlock the innovation potential of the Kindle Amazon needs to take a path that Apple is reluctant to walk: open innovation, or, more radically, open source.

Open innovation would see Amazon orchestrate a network of lead-user enthusiasts, electronic good suppliers keen to win new business, and geeks with outside-the-box ideas. It would still require Amazon to retain a core capability to sieve, internalise, connect and integrate the input from this network, but it would tap into an enormous innovation work force that even Apple could not match.

Open source would be a more radical step. By letting other manufacturers adopt its e-book standard, Amazon would create immediately an intense competition for its Kindle but such competition would have two major advantages:
  1. Growing dramatically the offer of Amazon-compatible e-book readers would push the prices down, win over new customers to the e-book technology and overall grow the e-book 'cake'. Amazon's Kindle would enjoy only a share of that cake, but it would be a share of a much bigger cake.

  2. It is likely that Amazon would be able to tap into Kindle's competitors for technology improvements to be applied to the Kindle itself, therefore keep up with the pack instead of inexorably falling behind.

Even in the worst case scenario that would see this newly created e-book reader competition completely outclass the Kindle, Amazon's e-book retailing business would not be threaten but rather boosted.

The question is whether Jeff Bezos, who is reported to have invested a lot of passion and personal energy in the Kindle, can take the bold step of unleashing competition on it for the sake of reaping larger benefits in Amazon's mainstream

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Yann Cramer is an innovation learner, practitioner, sharer, teacher. He's lived in France, Belgium and the UK, he's travelled six continents to create development opportunities with customers or suppliers, and run workshops on R&D and Marketing. He writes on www.innovToday.com and on twitter @innovToday.

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Anonymous Greg said...

Keep in mind that AMZ is currently losing in their current model, taking a loss on all of the frontlist. With the agency model, they'll actually have an opportunity for profit.

1:44 PM  
Blogger Shivesh Vishwanathan said...

Yann, I completely agree. The truth is, companies need to let go somewhat in order for variety to emerge.. which breeds innovation! Just like mass production was a result of widespread automation in the last century, mass “varietization” will emerge from widespread innovation. Standards are now increasingly made for “supporting” (read variety), and not just “adhering to” (read conformance), a key difference if you think about it! I argue these points at http://blog.harbinger-systems.com/2010/04/automation-to-innovation-brief-history.html

1:30 AM  

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