The Problem with Protectionism

When I was a teenager…

The gadget to be seen with was a Walkman.

  • Modelled by tall blondes on roller-skates cruising along sun-kissed Californian beaches
  • Desired — in my case — by a spotty youth sitting in a bush shelter in rain-swept North Yorkshire

The Walkman was so popular it even lead to social scientists coining the phrase “The Walkman Effect”:

Personal experience management which allows for greater confidence and control in space and time but promotes narcissism, detachment, and rude behaviour.  — Apparently

But I didn’t give a stuff about that.  I just wanted one.

And it wasn’t just me.  The Walkman sold more than 200 million units.

But technology moved on

Only a masochist would listen to their music on tapes now.  Technology changes were bread and butter to Sony.  They pushed through wave after wave of advances:

  • The Walkman
  • The Discman
  • The Minidisc Walkman
  • The Video Walkman
  • The Network Walkman
  • The Walkman MP3
  • The Walkman Core

Sony love technology.  They have released more than 300 different models across all the different formats.

Then the iPod arrived

And whooped Sony’s ass…  Because Sony got greedy.

As well as making gadgets Sony also record music.  They own a host of record labels: RCA, Epic, Colombia, Arista, to name a few.

When the it became easy to download tracks onto an MP3 player directly Sony saw a way to sell more music.  They only allowed Walkman customers to download music from Sony’s own catalogue.  A less than brilliant cross selling strategy.

Apple however launched iTunes from which you can download (just about) anything.

The message in this little history lesson?

Protectionism is never a great policy.

Sony learnt from their mistake, today you can download the Sony Music catalogue via iTunes.  After all, there is little point in biting your nose off to spite your face — is there?

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Comments

  1. A good post. However, I am not sure it’s that black and white. Should you open your platform (or product) to competition unless you are 100% confident your product has a definite technological advantage?

    If you find ways to protect a product which is technologically inferior to the competition, you may be increasing its chances of success.

    On the other hand, if your product is far superior to the competition from the technology perspective, you can afford to compete head to head without any kind of protection.

    • James Lawther says:

      Thanks for your comment Hugo.

      I guess as with all things the answer is very nuanced. Maybe it depends on how long can you protect your position for.

      James

  2. James,
    Your post highlights a question that corporate boards probably need to regularly ask themselves: ‘If technology or your competitive landscape changes, would you be willing to cannabalise your own business?’

    Adrian

  3. Hello James,

    Closed ecosystems, those that find themselves immune to the bigger world, are always at risk from ‘intruders’. The right intruder can devastate the population and transform the ecosystem. Just take a look at South America. Why did a small number of Spaniards have such an impact? Because they carried diseases to which the South American indians had no immunity. Why? Because they had no exposure to the diseases.

    And it occurs to me that the natural instinct of the ‘fat and wealthy’ is to protect what they have. To do all they can to maintain the status quo. Remember the Ottoman Empire? It occurs to me that this is universal pattern: the hungry take the chances as they have nothing to lose’; the fat and wealth utilise all their power to protect their power and privileges; mostly the fat and wealthy win; occasionally, the hungry win.

    All the best
    maz

  4. James Lawther says:

    Interesting perspective Maz, instinctively we protect what we have.

    I do wonder (and don’t know) how long Sony stuck with their “Sony Only” music policy. Self delusion is an interesting phenomenon

    James

  5. I would question if “whooped Sony’s ass… Because Sony got greedy” is right. My guess is Steve Jobs would have seen to it that Apple whooped Sony’s ass no matter what. The only way Sony could have prevented that was beat Apple to a better product (along with good marketing).

    I do agree trying to protect your position via protectionism is unwise (except maybe if you do so with the backing of politicians you buy – that is bad for society but may work for you).

    Those looking at these issues should read Clayton Christensen.

    • An Interesting point perspective John maybe you are right, though I think we can agree ass got whooped and Sony’s approach certainly didn’t help

      Thanks for the comment

      James

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