Zune

This is the story of a company with a cute logo and an insanely great (in some ways - not so much in others) CEO. The CEO unveils a killer product that captures the hearts and minds of the entire nation. But then along comes another company with a CEO who is so cunning it's scary. According to legend, he somehow convinces the first CEO to give him a couple prototypes of the product, and his company proceeds to reverse engineer it (albeit slowly) and build a competing one. The company understands the power of creating an open system and foresees the commoditization of hardware. With this insight, its product proceeds to conquer and rule the industry, despite its technical inferiority, leaving the first company to slowly wither away. It does just this, until it is saved by yet another killer product in a completely different field...

Side note: I write this blog for the Valley-savy, but I realize most of you are probably college kids who didn't grow up with stories like the one above, so I'll explain. The two companies are Apple Computer and Microsoft, respectively, and the tale refers to the OS wars, which Microsoft won by eschewing Apple's proprietary philosophy and allowing others to build the hardware and develop software, among other things.

Funny how history repeats itself. Just a few days ago (sorry, this post is late because the draft I was working on got deleted), Microsoft announced Zune (click for details), a hardware and software package aimed at the heart of Apple's iPod. Reactions have been mixed, but the majority opinion amongst pundits is that Zune will have a hard time catching up to the iPod.

I disagree, and history is on my side. The parallels with the OS wars are eerie. As long as Microsoft thoroughly analyzes the industry conditions, they should be able to build a product to knock off the iPod. They must recognize and capitalize on their inherent advantage: Windows (and Vista soon). Their product should offer an integrated solution (not unlike Apple's iPod/iTunes) and interface that ties in with the OS. Cool features are a must, but following through on this advantage will set them apart. Apple should be scared.

A caveat, though. Microsoft should realize that hardware isn't the path to victory in the industry. The iPod is nice and very much in vogue today, but its days are numbered even without Zune because commoditization will set in. The principles that governed the OS wars will also come into play here (software over hardware, open system, etc.). Apple has already made the mistake of creating a closed system around the iPod (they make the iPod and every related product, much like they tried to do with the Mac), Microsoft should not follow suit. The greed to capture every penny of profit in the marketplace has sunk many companies. Microsoft should be wary of delving into the hardware world, one that has not treated them kindly in previous forays.

All in all, this should be fun to watch.