Session 17 (Apple in the Music Industry)

Question 1

Describe the Pre-Digital Music Industry

Answer 1

Dominated by record labels; physical distribution (CDs, tapes).
Low supplier power, disciplined rivalry, high barriers to entry.
Industry was attractive to dominant firms.
Then disruption by Napster triggered collapse of this of industry structure

Question 2

Why did Napster have elements of disruptive innovations?

Answer 2

Low-end entry (download time)
Ignored by incumbents
Incumbents failed to respond due to reliance on old profit models, fear of cannibalization, and difficulty of working together

Question 3

What was the Apple iTunes model?

Answer 3

Flipped the razor/razor blade model
- They sold music cheap which was not very profitable
- Profited from iPods

Question 4

What is “Crossing the Chasm Framework”?

Answer 4

Apple successfully transitioned from early adopters to early majority
Needs momentum (e.g. network effects) and demonstrated value to innovation

Question 5

Threats and Future Opportunities of the Music Industry

Answer 5

Streaming services, declining downloads, changing consumer habits

Question 6

What are the Tech Adoption Stages?

Answer 6

Technology Enthusiasts
Early Adopters
Early Majority
Late Majority
Laggards

Question 7

Technology Enthusiasts

Answer 7

2.5% of firms
Love new tech for its own sake
Tolerate bugs, seek novelty

Question 8

Early Adopters

Answer 8

13.5% of firms
Buy into potential, not perfection
Critical for gaining traction and credibility

Question 9

Early Majority

Answer 9

34% of firms
Pragmatic buyers who seek proven value
Rely on references

Question 10

Late Majority

Answer 10

34% of firms
Want fully standardized, easy to use products
Prefer buying from established brands

Question 11

Laggards

Answer 11

16% of firms
Only adopt when forced to