Channel conflict is an almost-inevitable occurrence in any industry where sales, manufacturing and intellectual property are distinct segments of the value chain.
In the Internet value chain, it frequently happens that app, device and service segments of the ecosystem are in some state of tension. That happens most often when leaders in one portion of the value chain conclude they can profit by entering other parts of the value chain. So far, Google is the foremost example, operating in the operating system, application, device and access services portions of the value chain.
But Google might be aiming to take a bigger role in mobile devices, a step some have suggested would be required if Google was to integrate end user experience on the Apple model, amidst what every observer would say it a tendency to fragmentation of the Android market.
If Google does enter the market for branded smartphones, the move will be risky, not just because of execution issues, but because it causes channel conflict with partners using the Android operating system to power their own brands of smartphones.
Never has the phrase "coopetition" been more apt. Up to this point, Google has run the Nexus program largely on the basis that it showcases what Android can do, on a handset built to showcase operating system features.
Now Google might be thinking of producing and marketing its own branded smartphones, on the Apple model, essentially. So Google might gamble that the damage to its operating system efforts will be offset by the upside from a device and apps ecosystem that actually showcases and optimizes Android operation on compatible hardware.
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