Doesn't this type of vertical integration lead to user lock-in after they've displaced the incumbents? And as the companies rise and fall, the broad range of things they had to get good at ends up being reinvented and stove-piped by other companies.
I can't think of any examples of vertically-integrated anything achieving a monopoly in our industry, at least not without going back to IBM in the '50s and '60s.
It seems like vertically-integrated products have the capacity to become strong competitors, since the reason for making such a thing is to deliver a very specific experience. However, by definition such products aren't going to cater to everyone, and thus are unable to take over the market completely, at least not for any length of time.
The iPod is a good counterexample, but it's a not a general-purpose type of product and had a short-lived reign as being the way most people listened to digital audio.
Vertical is a great way to realize a very specific vision for something, but it's a huge impediment to getting majority market share. Done properly though, you can do things your more horizontal competitors simply can't. It can be quite profitable but it won't be for everyone (Mac). The danger is that there's a higher bar that needs to be reached in order to pull it off. You can't assume that third party hardware or software vendors are going to jump on board to add value to your platform.
Horizontal is a great way to insert yourself into a preexisting market, help create a new market, and maybe even get a monopoly on your layer of the stack (Windows). This can also be very profitable. You still can't be everything to everyone, but you can get much closer to that goal. The downside is that being everything to everyone is not always a desirable goal, but now you're stuck with it, because otherwise what's the point of going horizontal? You need your layer to be as general-purpose as possible in order to maximize third-party involvement in the layers above and below you.
Comments
Doesn't this type of vertical integration lead to user lock-in after they've displaced the incumbents? And as the companies rise and fall, the broad range of things they had to get good at ends up being reinvented and stove-piped by other companies.
Is this an issue for the industry at large?
I can't think of any examples of vertically-integrated anything achieving a monopoly in our industry, at least not without going back to IBM in the '50s and '60s.
It seems like vertically-integrated products have the capacity to become strong competitors, since the reason for making such a thing is to deliver a very specific experience. However, by definition such products aren't going to cater to everyone, and thus are unable to take over the market completely, at least not for any length of time.
The iPod is a good counterexample, but it's a not a general-purpose type of product and had a short-lived reign as being the way most people listened to digital audio.
Put another way:
Vertical is a great way to realize a very specific vision for something, but it's a huge impediment to getting majority market share. Done properly though, you can do things your more horizontal competitors simply can't. It can be quite profitable but it won't be for everyone (Mac). The danger is that there's a higher bar that needs to be reached in order to pull it off. You can't assume that third party hardware or software vendors are going to jump on board to add value to your platform.
Horizontal is a great way to insert yourself into a preexisting market, help create a new market, and maybe even get a monopoly on your layer of the stack (Windows). This can also be very profitable. You still can't be everything to everyone, but you can get much closer to that goal. The downside is that being everything to everyone is not always a desirable goal, but now you're stuck with it, because otherwise what's the point of going horizontal? You need your layer to be as general-purpose as possible in order to maximize third-party involvement in the layers above and below you.