This is the key point of The Innovator's Dilemma. On the one hand, disrupting yourself means cannibalization and strategies that almost certainly seem unprofitable on paper. On the other hand, if you don't disrupt yourself someone will do it for you.
Considering Apple's success I'm inclined to say that disrupting yourself before anyone else has the chance to is the right long-term move, but I haven't studied the topic in enough detail to be sure.
The iPhone attacking the iPod before Android did so is IMO a great example of The Innovator's Dilemma. Many companies would have tried to charge more for iPod capability's on the first generation iPhone. Instead Apple realized cellphones would never be great MP3 players so even if they cannibalized some sales early on trying to maintain an artificial distinction would not be useful in the long run.
In some ways I think they even helped keep the iPod concept alive longer by giving the impression that using a phone for an MP3 player was a compromise not a replacement. Yea, your phone can do this, but why waste the battery life?
And we are watching Apple’s iPad dancing around the outskirts of the MacBook Air market. A more old-school market would be working very hard to force the markets to be completely segmented, strongly differentiating OS X from iOS and so on.
Instead, Apple is making OS X behave more like iOS, reducing the differentiation and creating opportunities for the iPad to steal MB Air sales.
> Instead Apple realized cellphones would never be great MP3 players so even if they cannibalized some sales early on trying to maintain an artificial distinction would not be useful in the long run.
I believe they came at it from another way: if someone is going to eat at your sales (iPod), it might as well be you (iPhone). That's been Apple's mantra for a while.
And although anecdotal, most people I know with an iPhone (or Android smartphone) don't buy new iPods. And if they do, it's a lesser model (i.e. for excercise); not to the same value as before.
Considering Apple's success I'm inclined to say that disrupting yourself before anyone else has the chance to is the right long-term move, but I haven't studied the topic in enough detail to be sure.