Summary
IT sounds like Nook is launching with a lot of additional bells and whistles that Kindle does not currently have. The question is what is the strategy that each is really employing to gain a sustainable competitive advantage?
Analysis
There is no question that Kindle has room for improvement. However, Amazon has a significant advantage today. Why? They now have years of information from and experience with their customers learning what's important to them. These early adopters will help them in the coming months as rivals enter the market. But will Amazon respond in order to evolve their strategy?
The fact that Barnes & Noble has entered that market on the heals of Sony and Amazon gives credence to the market. And most experts believe there will be more. Amazon immediately announced that they were dropping the price of their latest Kindle to match the price of the Nook. This is all good for the consumer.
If we look at Apple and itunes, It really wasn't the number of songs that drove interest or even the device. There were other cool devices that worked and were even stylish on the market. Diamond Multimedia introduced the Rio in 1998 and Best Data introduced the Cabo 64 in 2000. Both worked well and were stylish. But Apple was smarter. They had a great business model. Their innovation was the ability to download inexpensive music in an easy and convenient way. The company built a groundbreaking new business model that combined hardware, software and service. HBS likens the approach to that of Gillette's razor and blades model but in reverse. Apple essentially gave away the blades (low margin) to lock in the purchase of the razor (the high margin iPod). And it worked in a big way. What worked so well for Apple was price and convenient access of music in the itunes store. When you logged on with your ipod, you were signed on to the itunes store and ready to buy lots of music at low prices. Apple was so successful and so far ahead making songs easy to access at affordable price that this drove the sales of their devices. Had they not linked the music to their devices, they would not have been nearly so successful.
Today when people think of buying books online, they think of Amazon. This is likely to help Amazon down the road. Price points will become very important. The key will be what strategy each competitor employs to gain competitive advantage. Amazon has significant advantages that given them an edge over Barnes and Noble. A great device is not the defining factor.
