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Business Innova,on and Transforma,on: Opportuni,es and Challenges in the
Media Sector
Professor N. Venkat Venkatraman David J. McGrath Jr. Professor of Management
Boston University School of Management
Canal + France Master Class June 23, 2010
Overview
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Emergence of Network Era
Illustra,ve Cases and Concepts
Implica,ons for the Media Sector
2
Imagine life without……
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Towards Network Era: A Brief History
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1,900,000,000
4,400,000,000
*March 31, 2010
A brief history… (con,nued): YouTube and Hulu generate 2X traffic than the en,re Internet in 2000
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Source: Cisco
And there’s Facebook….
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400 million active users 70% outside USA 100 Million access using mobile devices 50% log on in any given day 500 billion minutes per month
But……Facebook in Media and Entertainment?
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And.. there are tweets…
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*June15, 2010
Tweets seem to be purpose-‐driven
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Link
From 1995 ,ll today..
• Developments in informa,on technology have been drama,c and significant
• Shics in management prac,ces have been incremental and slow
• A new business infrastructure is emerging – Global – Digital – Connected – Converged
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Towards Global Digital Network Era….
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Informa,on technology is impac,ng products..
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Products linked on all-‐IP infrastructure
Products on IP-‐
network
Towards 40-‐50 billion
devices
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Impac,ng next genera,on business processes..
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video
Processes designed for the global All-‐IP infrastructure
Healthcare
Logis,cs
Energy
Media & entertainment
Financial Services
Next-‐genera,on processes
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….and service delivery…
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Services delivered on the All-‐IP infrastructure
Service Delivery
Next-‐genera,on services
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The new business infrastructure….
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Live
Work Play
Learn
Connect
Innovate
Consume
Transact
Let us introduce three technology laws
Bandwidth Law
Metcalfe’s Law
Moore’s Law (c) N. Venkatraman [2010] 19
And look at them together..
Moore’s Law
Metcalfe’s Law
Bandwidth Law
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“Computer”
“Connec8vity” “Cloud”
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A Working Framework on Business Innova,on
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Technology Domain
Business Domain
Process Product Service
Moore’s Law
Metcalfe’s Law
Bandwidth Law
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The Alignment Challenge: Balancing Innova,on and Implementa,on
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Business Strategy
I/T Strategy
Implementa,on
Innova,on
Overview
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Emergence of Network Era
Illustra,ve Cases and Concepts
Implica,ons
23
Seing 1: Computer Industry’s Evolu,on and Imapcts
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Computer industry [circa 1980]
Source: Bill Gates Testimony Source: Bill Gates Testimony 25 (c) N. Venkatraman [2010]
Computer industry [circa 2002]
Source: Bill Gates Testimony 26 (c) N. Venkatraman [2010]
Two Key Ideas…
Ver,cal integra,on giving way to horizontal layers of specialized capabili,es
When and how do new layers emerge?
When do layers disappear or morph? Can you disrupt by introducing a new layer where you hold an advantage?
Can new entrants succeed by introducing a new layer?
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1
Two Key Ideas…
Winning requires domina,ng a layer and connec,ng across layers
What’s your panern of connec,ons across the layers?
How do your compe,tors connect across the layers?
Do you have an advantage in network connec,ons across layers?
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Wealth Crea,on and Destruc,on Across Technology Cycles
Mainframe Compu,ng
Mini Compu,ng
Personal Compu,ng
Desktop Internet
Compu,ng
Mobile Internet
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1960s 2010s
Source: Morgan Stanley (2009)
Each cycle required the leaders to ar,culate and architect different business ecosystems
The Computer (I/T) Industry Today..
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The Computer (I/T) Industry Today..
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Products
Plaporms
Services
Solu,ons
Evolu,on of the Computer Sector…
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The Computer (I/T) Industry Impacts Media and Entertainment…….
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The Poten,al Future Impact of the Computer Sector…
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Seing 2: Apple’s Innova,on and Transforma,on
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Music in the analog era….
Hardware Turntables, cassene players, tape decks, Sony Walkman etc.
Content (music)
Albums offered by record labels in standard formats (33-‐45-‐78 rpm; & cassene tapes)
Channel Sold in Physical outlets (general and specialty) & Mail-‐order Catalogs
Customer Network
Albums and tapes borrowed within friends communi,es.
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Music in the digital era…..
Hardware Digital audio players
Content (music)
Major lables plus rise of independent labels pos,ng music online
Digital Rights Management
Apple Fairplay; Windows Play For Sure
Channel Sold in stores (CDs); Rise of Online downloads
Customer Network
P2P file sharing; personal CD burning and sharing with friends
Socware MP3; itunes; Windows Media; Quick,me; Realone etc.
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Precursor to today’s social
network?
iTunes in the music ecosystem: Closed? Open?
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iTunes History (relevant for architectural control point)
• Versions 1 to 4.0.1 – Supported only Macintosh (,ll October 2003)
• Version 4.1 – Windows 2000 Support (October 16, 2003); 1 million downloads
• Subsequent versions support latest versions of both Mac and Windows OS
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Apple’s orchestra,on of the music ecosystem
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Content Availability
iPod Adop,on
Complementor Networks
Customer Networks
Direct
Indirect
Music in the network era……
Hardware Mul,ple network-‐enabled devices
Content (music)
CDS offered by major labels; rise of independent labels;
Digital Rights Management
Apple Fairplay; Windows Play For Sure: Open Mobile Alliance (OMA)
Channel Sold in stores (CDs); Online downloads; downloaded to phones; Networked streaming
Customer Network
P2P file sharing; personal CD burning; social and automated recommenda,ons
Socware MP3; Apple itunes; Windows Media; Quick,me; Realone etc.
Mobile Operators
Mobile network for accessing music
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Network of Linkages in Music
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Hardware
Opera,ng System
Applica,ons
Content
Channel
Mobile Operators
Customer Network
Apple’s App Store: Extension of iTunes Store
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From iPod to iPhone: Role of iTunes and App Store
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From iPhone to iPad: Role of iTunes and App Store
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iPad and Media Consump,on
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iTunes and Apple TV.. S,ll not fully leveraged..
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iTunes + iPhone have been cri,cal for Apple’s Innova,on and Transforma,on
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And there’s the Google TV Ecosystem
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Google TV Ecosystem
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While Microsoc had an early lead…
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Media 1.0 Media 2.0
What content to broadcast when? how?
How to ‘orchestrate’ the consump,on of media for different consumers?
What does this shic mean?
Ac8vi8es Media 1.0 Media 2.0
1. Search Printed guide or Electronic Program Guide (EPG)
Search engines, social networks. Links, tags etc.
2. Access Television sets Computers, Mobile Phones, Tablets, Televisions
3. Consume Watch and Record Watch, Pause, Rewind, Record, Comment etc.
4. Store Local or Networked DVRs
Cloud Services
5. Share Copied on Tapes and DVDs
Emailed, Embedded, Linked, Tagged
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Two Key Ques,ons…
Who’s architec,ng the emerging media business architecture? Content creators? Channels?
Aggregators? New entrants (Apple, Google and others?)
Where’s the value created in the new architecture?
Who’s likely to capture it?
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1
Two Key Ques,ons…
Winning requires domina,ng a layer and connec,ng across layers in the new business landscape
What’s your panern of connec,ons across the layers?
How do your compe,tors connect across the layers?
Do you have an advantage in network connec,ons across layers?
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2
Overview
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Emergence of Network Era
Illustra,ve Cases and Concepts
Implica,ons
56
Winning in Networks
• Recogni,on of shics in locus of value crea,on and capture (‘cash register’)
• Role of layers of capabili,es and connec,ons across layers (‘reconfigura,ons’)
• Poten,al of cross-‐network disruptors @ scale (e.g., Apple, Google, Amazon, Microsoc and Facebook)
• Winning in dynamic ecosystems through a porpolio of alliances
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Five requirements to win
1. Construct your strategy network 2. Examine likely shics in your strategy network
3. Evaluate possible connec,ons (and their governance)
4. Assess your organiza,onal capability to compete in dynamic strategy networks
5. Calibrate and monitor posi,ons on your network scorecard
In closing……
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“The difficulty lies not so much in developing new ideas as in escaping from old ones.”�
John M. Keynes