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How much vertical integration does a consumer product require to make it a great consumer product? Like the Palm Pilot before it, the iPod is the ultimate consumer hit of the 21st century, but it is characterized by a highly integrated experience from design to in-store experience and brand experience. Organizations, by and large, have been notoriously bad at creating experiences when they’ve been successful at the enterprise level.

Compare and contrast products like Burberry, Hermes, BMW, Apple, Ikea, Sony and others. While these are great consumer products, they are not enterprise products and do not aim to create an enterprise experience. For example, BMW has successfully created a brand around success and driveability. (This does not apply to Ford Mondeo or Chevy Impala, both of which are fleet vehicles.) The brand experience permeates the advertising through to the buying experience. Those lucky enough to shop at a BMW dealership will understand that it’s very different than buying from a Chevy dealership. Both BMW and Lexus understand this and make it a requirement for selling a BMW vehicle. And yes, they offer free lattes and muffins and some of them look like Starbucks stores. (BMW dealers prefer the white and stainless steel look like Shelley BMW in Wellington and BMW Sydney in Potts Points, as well as BMW Toronto where LandRover/Jaguar like the wood trim.)

Going back to the Sony Walkman, like I said, the Walkman needs to have the music pre-packaged and available. The Phillips Compact Cassette made this possible in large numbers at the time. In fact, it would be reasonable to say that both Sony and the music industry have benefited enormously from the Walkman and created a new level of economics with the music industry. It is a fact today that this level of integration, the cassette and the portable player, were a necessary condition for the existence of the market. Because while it was indeed possible to copy music onto the cassette deck, which many of us did, we also bought pre-recorded music in bulk too quickly and easily.

By June 1989, 10 years after the first model was released, the total number of Walkman units manufactured had exceeded 50 million, and in 1992 it reached 100 million. In 1995, total production of Walkman units reached 150 million. Including a special 15th anniversary model, over 300 different Walkman models have been produced to date and Sony has remained the market leader. [Source Sony Corporation.]In contrast, the Apple iPOD has sold 67.9 million iPods in its various flavors in its first 4.25 years and seems to reach 100 million iPods in about 6 years, beating Sony by about 7 years

Sony also spent a lot of time on the brand experience. The Walkman name was both clever and multilingual. They were able to clearly shape the brand around the Walkman, which expresses youth and freedom. The ability to hear your music when and where you need it became the rigor of the day and is a fact we now take for granted.

Walkman as a verb or generic noun

As much as Google dismisses the term “Google” as a verb to “search,” it’s not up to them, it’s up to the consumer to decide which brands are verbs. You should be flattered because it is a valued position in the market that means a market position that is second to none. Walkman along with the iPod, the Hoover and the Xerox are all brands that have achieved this position. Walkman became the de facto name for a portable music player until Apple replaced it with the iPod. Although it is still difficult for the elderly to replace the Walkman, for younger people the Walkman is just another music player.

However, Sony was able to create the Walkman brand as a class of devices that made it almost impossible for others to compete for consumer opinion. I challenge everyone to come up with an alternative portable CD or cassette player. I’d argue that Apple has achieved that so far, and we’ll see if the term “Zune” is on the street or just another Wanabee brand.

Vertical integration must include the brand experience

So the second element is that the brand experience is an integral part of the vertical integration strategy, which brings us closer to arguing that a platform doesn’t work in the consumer space and that’s because they value the experience beyond the device and maybe They buy the device to subscribe to all the values ​​that the brand offers.

What if Microsoft called it MSN Player instead of Zune?

Our natural reaction is that this wouldn’t work, buy why?. I hazard a guess that this is because consumers would already be applying preconceived brand experiences to the music player and you don’t want to transfer those brand values ​​as they are not the experience you want to convey. The MSN network is what we call the ghetto portal. Unlike Google and Yahoo, which have great search and media partners, MSN is a hodgepodge of content with a few apps around it. If it went away tomorrow no one would care because it’s a duplication from Yahoo making it 10x better. That’s not to say Windows Live won’t enhance that experience (the fact that they have to do Windows Live shows MSN is being taken back and beaten to death), but Windows Live is trying to stretch its brand into the portal space.

Does the vertical OS integration argument extend to music players?

Again, the ability to seamlessly experience digital music from purchase to listening has been an important part of iTunes/iPod’s success. The main flaw with the Sony Digital Walkman is that it doesn’t integrate neatly with music downloads. The Sonic Stage software is unwieldy and difficult to use. It requires a level of skill in transferring music to the player that surpasses most consumers, and its playback limitations were frankly counterproductive. This is due to the limitations Sony imposed on itself when launching the digital product, it was actually its own worst enemy.

Since Microsoft dropped the Playsforsure partners, they too have admitted that the iTunes/iPod combo is a necessary condition for competition. They didn’t say that a few years ago when they were courting partners for this system they thought a platform approach where they would license the software and DRM to vendors would work.

In short, what was the Sony Walkman’s strength, pre-recorded and pre-recorded music and a strong brand experience, was actually its downfall. Because Sony didn’t make it as easy and convenient to use their product as possible, they failed to catch the iPod trend and left the market to Apple and the iTunes/iPod combo. Sony believed because of their success in the CD/cassette player market that they could control the consumer’s experience and the way they could use their music. They also had the limitation of owning a major record company (Sony Columbia) which lobbied heavily at the corporate level to cripple the Digital Walkman, ultimately leaving the way open to Apple to take the lead.

Before we get to the question of whether Windows will transform the Zune ecosystem, we need to understand why the Playsforsure ecosystem failed and whether Microsoft learned any lessons from it.

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