Free Essay

New Technology Disrupts Old Model

In:

Submitted By mkolokoff
Words 1496
Pages 6
2.0 New technology disrupts the old model – Modern Day Challenges

2.1 Preamble

With the increase in technological innovation we can observe how these forces are disrupting the conventional business models and marketing strategies of industries. These innovations have shaken core of the business world where several venerable facets of the media industry such as newspapers, radio and television are clamoring for their breadth under the impact of innovative giants such as Google and TIVO with large chunk of ad revenue shifting from conventional channels to more topical channels (refer graph 2.1). Why? Primarily, conventional media industries were not poised for changes, as we observed the break neck speed at which we have proceeded from web 1.0 to 3.0 within the last decade. Could the companies have avoided the wreckage if they had prepared for this pace of change? That is questionable.

Graph 2.1

We can observe several strategic inflection points which have diminished the prominence of media industries; primarily, the ability of internet based technologies to deliver richer content in a cost effective manner in comparison to the high legacy cost of running a newspaper (i.e. office buildings, printing press, editors, photographers etc.). Second is the failure of the media companies to keep pace with the evolving changes around them, and the final elements of this downward spiral is the industries disregard for the customer base or the target market, i.e. producing content for inventory than market. We will further analyze these through industry examples.

2.2 The cause and effect and its impact on the industry

2.2.1 The rise of internet based news service and ads

The first such example we can observe is the newspaper industry and how its subscriber base got eroded due to evolution of information dissemination via the internet. From traditional internet news providers such as CNN, Reuters and AFP to citizen led news distribution through blogs, twitter feed and facebook newsfeeds, the erosion of the traditional news channels can be attributed to the cost effective manner in which information is shared via the internet and the boom of complementary technologies supplementing the growth such as hand held devices (touch-pads and mobile phones) and wireless technology (wifi, HSDPA, 3G, 4G etc.). Not only have technologies gained a firmer foothold compared to its traditional rival but also have helped seep through national barriers and censors to create a more transparent society (e.g. wikileaks). Another factor is that the technology does not only act as the conventional news provider, but also empowers the user to engage with the news source and create their own content which has aided several creative and social disruption to-date (i.e. Arab Spring and the toppling of the Mubarak regime instigated by a Wael Ghonim through a Facebook page, which called for change in Egypt).

In similar vein we can observe how internet can erode the ad business of conventional newspaper industry, as extracted from www.zdnet.com:

One of the best examples of how the Internet can devalue business models is Craigslist and its effect on the classified ads business.

The Pew Center reports that in 2000 this was a $19.6 billion a year business. In 2008 it had fallen to $9.9 billion because of online classified ads — mostly Craigslist.

And Craigslist doesn’t charge for the vast majority of its classified ads. Craigslist has managed to pull the majority of nearly $10 billion out the classified ads industry in a single year using an operation staffed by just 30 people. There are estimates that Craigslist could take in $100 million this year.

Again, we see the power of the Internet and how it devalues everything it touches. In this case, Craigslist’s use of Internet technologies has managed to transmute $10 billion in value into $100 million. It’s the opposite of the dreams of alchemists - Craigslist has managed to transmute gold into lead. [ (Foremski, 2009) ]

2.2.2 DVR decimates the old TV model of advertising

With the invention of Digital Video Recorders (DVR) which allows the user to record the shows and thereby allowing to time-shift programming and ads has posed a serious threat to companies advertising in traditional networks as well impacted the ad revenue source for the TV networks.

For example, 25 percent of our U.S. consumer respondents and 20 percent of our U.K. respondents already have a DVR. Given high customer satisfaction rates, forecasters project
DVR penetration to reach close to 40 percent in the United States within the next five years, which poses a significant threat to the traditional TV advertising model.

In our consumer survey, 53 percent of DVR owners in the United States report watching at least 50 percent of television content on replay, supplying them with the fast-forward capabilities that allow ad-skipping. As DVRs gain traction across demographic groups and consumer segments, traditional television advertising may be the first major casualty of changing media consumption habits. And though new commercial rating tools can now track viewership via DVR, industry debate continues about the true value of an ad if it is viewed after the initial, targeted broadcast period. (IBM Global Business Services, 2007, p. 9)

The recent results of an ongoing study by TiVo Inc. concluded that relevancy outweighs creativity in TV commercials. (14) The ads least likely to be skipped were well tailored to their audience – they were often those ads that aired during the daytime on cable (where shows have smaller, niche audiences and it’s easier to determine viewers’ interests) or during prime time on directly relevant programs.(15) (IBM Global Business Services, 2007, p. 12)

This development has led ad agencies and companies to shift their advertisement model from one of creative based to impact based by targeting customers based on their viewing behavior.

TiVo’s interactive advertising technology enables pop-up messages while consumers are watching programs, as well as while they are fast-forwarding through programming. (IBM Global Business Services, 2007, p. 26)

2.2.3 Internet and satellite radio damage value of radio advertising

The dynamic changes in the internet and telecommunications sphere has enabled companies to venture into satellite and internet based radio technology. We can observe a rise in migration from terrestrial radio listeners to satellite radios listeners due to multiple factors, ranging from the mobility of this technology to the clarity it adds to the programming. Based on poll run by the Motley fool website, 49% of the 821 respondents identified satellite radio as reason for the diminishing role of conventional radio (refer graph 2.2).

Graph 2.2

[ (Munarriz, 2009) ]

Unlike FM radios frequencies which have limited range, satellite radios use orbital probes (in the case of Sirius XM three satellites are used to broadcast programming) which have broader ranger and therefore enable better access or reach for customers. A product originally targeted for automobiles market, the clarity and accessibility has enabled them to penetrate the home market. Other factors which helped gain traction among this target segment was the level of content which allowed users to tailor their listening preferences aided by the ad free programming which ensured uninterrupted consumption of music, news and weather report. The satellite radio companies such as SiriusXM in US can sustain this model through user’s monthly and annual subscription, and therefore will highly customer driven to ensure that quality of the programming is kept very high. This has and will pose a threat to the ad revenue model of terrestrial radios as shown in news extract below:

According to BIA Advisory Services today, the terrestrial radio industry will see a negative 7% revenue growth rate in 2008 with sector revenues falling to their lowest level in five years ($16.7 billion). Worse still is that the group expects the decline to continue through 2009, where it will bottom out at $15 billion before turning around. Thus, revenues for terrestrial radio are on the decline.

In contrast satellite radio is seeing revenues increase each year. While costs are high, the balance between losses and profits is beginning to shift. In Q3 the proforma EBITDA loss was $9 million for Sirius XM (excluding onetime costs). The losses are expected to become profits in 2009, and revenue continues to grow quarter after quarter. [ (Tyler, 2008) ]

Bibliography
Foremski, T. (2009, June 27). Disruptive technologies disrupt - goodbye newspaper companies. Retrieved November 25, 2011, from http://www.zdnet.com: http://www.zdnet.com/blog/foremski/disruptive-technologies-disrupt-goodbye-newspaper-companies/573
IBM Global Business Services. (2007). The end of advertising as we know it. New York: IBM Corporation.
Munarriz, R. A. (2009, November 20). Who killed terrestrial radio. Retrieved December 1, 2011, from http://www.fool.com: http://www.fool.com/investing/general/2009/11/20/who-killed-terrestrial-radio.aspx
Tyler. (2008, December 2nd). Terrestrial Radio Revenue vs. Satellite Radio Revenue. Retrieved December 1st, 2011, from www.siriusbuzz.com: http://siriusbuzz.com/terrestrial-revenue-vs-satellite-revenue.php

Similar Documents

Free Essay

Shireesha Individual Assignment

...CLOUD COMPUTING DISRUPTIVE INNOVATION Managing Technology and Innovations Date: 30 March, 2016 Shireesha Sudhakar Manchal 152093 MIB 39 A 1 Disruptive Innovation – Cloud Computing “A disruptive innovation is an innovation which creates a new market as well as a new value network that will eventually disrupt an existing market and its value network, displacing established market leaders and alliances”. The term was coined and analyzed by Mr. Clayton M. Christensen beginning in 1995. It is the term that is used to describe a new technology that has a vivid effect towards the competitive existing incumbent firms. This kind of innovation is a hybrid of both technological and market innovations which make old technologies obsolete. It is a technology based on new- value structure which provide value experience for new low-end customers in a highly competitive market which later spreads to the incumbent market as well. By utilizing this kind of innovation, the already existing markets will be forced to modify their strategies to suit the new innovation and hence will result in those companies having to undergo a lot more changes to both try and crush the old technology with a more advanced one as well as to try and adapt this technology in their business successfully. Let us take the example of Cloud Computing which uses a network of remote servers hosted on the Internet to store, manage, and process data, and which does not...

Words: 979 - Pages: 4

Premium Essay

Disruptive Innovation

...DARE TO DISRUPT!! DARE TO DISRUPT!! Theme: Means to tackle disruptive innovation Name: Prasun Kumar Das PGPM Participant, Batch 1114 Information Management S. P. Jain Institute of Management & Research Mobile - +91 7506793925 DISRUPTION – The New Age Competitive Strategy Everything is fair in love and war; and competition in a business environment is like a cold war. Innovation has always been the major strategy used by businesses around the world to stay competitive. The traditional paradigm of innovation was to improve the performance of the existing technology, thereby steeping up the performance trajectory. However, value creation for customers may be much simpler than high performing technology. There is always a threshold level till which customers can absorb and appreciate which the traditional paradigm fails to address. This has lead to a gradual shift in paradigm, over the last five decades, from a continuous performance improvement to that of something called ‘Disruption’. Clayton Christensen coined this term and today it has become a big buzzword. He identified ‘Disruptive Innovation’ as a product or service, so compelling in nature that everyone rapidly abandons their current way of doing things to this new approach. IT has been the big enabler of this disruption. The fundamental aspect of disruption is to use the right benchmark, which becomes additive with time. When that happens, we find entire product lines – even the whole market...

Words: 2134 - Pages: 9

Premium Essay

Disruption

...Disruptive Business Model The word Disruptive is used when referring to surprising new entrants into an industry, new competitors with new technology and sudden competition coming from unlikely sources. It means in business and technology, that sudden changes occur to improve the product or service in different ways that the market does not expect. There are many companies which used to follow the old stream method for their business strategy, but if we have a look in recent years we can see that the companies those who comes along with new innovation and technology with a new ‘disruptive’ business plan, was able to make a disruption in the industry and was able to capture the market share from its competitors. There is also a correlation between disruptive business and disruptive innovation .It is often said that ‘innovation has something to do about being positively different from competitors’. It is about being different in a way customers love. Especially it works better in either ways when the economy is static or mild, or the market share is already captured –companies should find a different business model to disrupt the market in order to sustain or gain market share. For example –Southwest Airlines introduced LCC (low cost carrier) model which includes: * Flying one model of plane rather than several * A point to point route structure rather than having several stop over * One class of service rather than many * No meals, no assigned seating. Their...

Words: 1618 - Pages: 7

Premium Essay

General Motors

...that the taxpayers of America are asking. General Motors was once the industry leader in America. General Motors was a fortune 500 Company for decades. They dominated the automobile industry .Stocks top out at the highest being sold at 83.00 dollars on the market. General Motors made the middle class in America. General boasted the characteristic in the corporate world as being powerful, stubborn, monolithic, and authoritarian and it main concerns was the assembly lines, called the seeds of success. General Motors was established in 1892 by an R. Olds who created the Oldsmobile his vision was to create horseless carriages. He started the automobile factory in Detroit was soon followed by others in the industry, and he and several others decided to create amalgamation of over different companies. The new automobile entities became known as General Motors. Each new partner brought in his brand as they began consolidating. Mr. Olds had a management style of controlling he knew what needed to be done and he did it. He knew when to start merger and acquiring early in the game he established General Motors. His vision and management style gave him the outcome that he was seeking Ford was General Motors major competitor General Motors legendary CEO Alfred Sloan took GM to another giant step “a car for every purse and purpose” became the trade mark. His strategy was to sell cars at the top of each price range, competing in quality against less expensive car. His theory of planned...

Words: 1997 - Pages: 8

Premium Essay

Case Study of Diageo Company

...Subject name –strategic business management Topic name - The adidas company analysis Submitted by- Sohail yousaf Registration number-(MAF 051-23-074) Submitted to – Sir ahmad shahzad The MS Model The MS model is a method through which we identify human and material resources and how they are applied in particular industry or sector. Following is the detail provided of the adidas company how they applied MS model. Machinery As a part to initiate and implement better technology, such as computer stitching and high cutting frequency and automated production line across factories and to provide technical training to the staff across the factory. Make up Being a large organization the company has also made the policies to maintain its cutler, by keeping high value to its employees, and management. As we know that being a large organization the company has also protected its good will and patents therefore the company has also developed anti-counterfeiting programs. Management & Information To become a leading organization management is the the back bone of the organization. The company has hired most skilled and computable management in order to get the best and unique product. In this process a lot of work Is done at R&D department. Markets Being a large organization it is necessary to maintain...

Words: 2747 - Pages: 11

Premium Essay

Sxdcfvgbhnjm

...Management Information Systems, 13E Laudon & Laudon Lecture Files by Barbara J. Ellestad Chapter 3 Information Systems, Organizations, and Strategy Chapter 3 describes how organizations and information systems work together, or sometimes against each other. The idea, of course, is to keep them in sync, but that’s not always possible. We’ll look at the nature of organizations and how they relate to information systems. 3.1 Organizations and Information Systems You could say that this chapter relies on the chicken-and-egg theory to develop a relationship between organizations and information systems. You need to design information systems that serve the existing organization. At the same time you must be ready and willing to restructure the organization to take advantage of the improvements an information system can offer. So which one takes precedent—the organization or the information system? Actually neither one. The goal is to adapt one to the other. What Is An Organization? An organization is very similar to the information system described in Chapter 1. Remember Figure 1-4 from Chapter 1? Compare it to Figure 3-2 in this chapter. [pic] [pic] Figure 3-2 The Technical Microeconomic Definition of the Organization These two figures have many things in common. Both information systems and organizations require inputs and some sort of processing, both have outputs, and both depend on feedback for successful completion...

Words: 7470 - Pages: 30

Premium Essay

Change

...not only on the change but the whole process of change – starting from the introduction to the consolidation of change. Definitions of change: o As a society, we have been moving from old to the new. And we are still in motion. Caught between eras, we experience turbulence.' - JOHN NAISBETT Change is inevitable in the life of an organization. o According to Stephen P. Robbins- change is concerned with making things different. Things must be different because they change constantly. o Change can be defined as – when an organizational system is disturbed by some internal or external force, change frequently occurs. Change as a process, is simply modification of the structure or process of a system. It may be good or bad, the concept is descriptive only." Outside environment of the organization is ever changing, even socially and politically we are always on the move, looking for newer and better ways of doing things. The industrial revolution & shareholders and other stakeholders demand in an organization today also presses the organizations to move. Added to this, the globalization and inter-cultural exchange had made us even more susceptible to change than ever before. We are becoming increasingly expected to adopt new techniques, due to the fast additions & changes in technology and even in management theories and...

Words: 2274 - Pages: 10

Premium Essay

Activision

...Ian Rose M. Cunanan MBA-TEP Batch 2 Student No. 2012-62432 Case Analysis Acting on a Vision of Change Viewpoint : Business Consultant Time Context : Present I. Statement of the Problem * How to create a new interactive blockbuster game that will gain high market acceptance in midst of the company’s various organizational changes II. Stat ement of the Objective * To improve the information system for a period of 6 months. * To strengthen and expand both our local and global money transfer networks by increasing our presence through multiple channels III. Areas of Consideration STRENGHTS * The company is haven for video game developers * Employee are the most creative and passionate experts in the industry * Encouraged autonomy * Market research are not use to pressure the company’s creative team * Savings on development cost because of partnership with Vivendi * R.Koticks charisma and pitch to investors * possess a litany of popular titles * products span the full spectrum of gaming genres * cult like devotion of consumers/subscribers * establishing revenue streams via subscription models | WEAKNESSES * Denial of credits for individual contributions * No channel for independence * Company’s history and financial reputation * Too much autonomy given * Decentralization of funds management * Competition between studios * | THREATS * Market competition due to a faster technological advancement * Suing of disgruntled ex-employees...

Words: 660 - Pages: 3

Premium Essay

Disruptive Technologies

...McKinsey Global Institute May 2013 Disruptive technologies: Advances that will transform life, business, and the global economy The McKinsey Global Institute The McKinsey Global Institute (MGI), the business and economics research arm of McKinsey & Company, was established in 1990 to develop a deeper understanding of the evolving global economy. Our goal is to provide leaders in the commercial, public, and social sectors with the facts and insights on which to base management and policy decisions. MGI research combines the disciplines of economics and management, employing the analytical tools of economics with the insights of business leaders. Our “micro-to-macro” methodology examines microeconomic industry trends to better understand the broad macroeconomic forces affecting business strategy and public policy. MGI’s in-depth reports have covered more than 20 countries and 30 industries. Current research focuses on four themes: productivity and growth, the evolution of global financial markets, the economic impact of technology and innovation, and urbanization. Recent reports have assessed job creation, resource productivity, cities of the future, and the impact of the Internet. MGI is led by McKinsey & Company directors Richard Dobbs and James Manyika. Yougang Chen, Michael Chui, Susan Lund, and Jaana Remes serve as MGI principals. Project teams are led by a group of senior fellows and include consultants from McKinsey’s offices around the world...

Words: 10687 - Pages: 43

Premium Essay

Mkt1 Marketing Plan

...Company G 3-Year Marketing Plan Assessment Code: MKT1 Student Name: Student ID: Date: Mentor Name: Table of Contents Introduction 3 Mission Statement 3 Market Objectives 3 Target Market 3 Product Objective 3 Price Objective 3 Place Objective 4 Promotion Objective 4 Competitive Situation Analysis 4 Consumer Product Classification 4 Analysis of Competition using Porter’s 5 Forces Model 4 SWOT Analysis 5 Strengths 5 Weaknesses 6 Opportunities 6 Threats 6 Marketing Strategies 6 Product Strategies 7 Price Strategies 7 Place Strategies 7 Promotion Strategies 7 Tactics and Action Plan 7 Product Action Plan 7 Price Action Plan 8 Place Action Plan 8 Promotion Action Plan 8 Monitoring Procedures 8 Introduction Companies G is wholesale appliance business focusing elite urban singles and couples; affluent retires in sunbelt cities; sophisticated townhouse couples; upscale urban singles and couples who are looking to upgrade their traditional top-end washer and dryer to the newer front-end washer and dryer appliances by Frigidaire. Mission Statement Company G will provide the highest quality Frigidaire brand products, superior customer service and cost-effective solutions to our customers, resulting in sales, profit and a mutually long-term relationship with our suppliers and customers. Market Objectives Target Market Our ideal customer are elite urban...

Words: 2650 - Pages: 11

Premium Essay

Mkt1

...Company G 3-Year Marketing Plan Assessment Code: MKT1 Student Name: Student ID: Date: 03/05/2011 Mentor Name: Table of Contents Introduction 3 Mission Statement 3 Market Objectives 3 Target Market 3 Product Objective 3 Price Objective 3 Place Objective 4 Promotion Objective 4 Competitive Situation Analysis 4 Consumer Product Classification 4 Analysis of Competition using Porter’s 5 Forces Model 4 SWOT Analysis 5 Strengths 5 Weaknesses 6 Opportunities 6 Threats 6 Marketing Strategies 6 Product Strategies 7 Price Strategies 7 Place Strategies 7 Promotion Strategies 7 Tactics and Action Plan 7 Product Action Plan 7 Price Action Plan 8 Place Action Plan 8 Promotion Action Plan 8 Monitoring Procedures 8 Introduction Companies G is wholesale appliance business focusing elite urban singles and couples; affluent retires in sunbelt cities; sophisticated townhouse couples; upscale urban singles and couples who are looking to upgrade their traditional top-end washer and dryer to the newer front-end washer and dryer appliances by Frigidaire. Mission Statement Company G will provide the highest quality Frigidaire brand products, superior customer service and cost-effective solutions to our customers, resulting in sales, profit and a mutually long-term relationship with our suppliers and customers. Market Objectives Target Market Our ideal customer are elite urban singles and couples, affluent retires in South and Southeast cities,...

Words: 2652 - Pages: 11

Premium Essay

Intel Project

...was founded in 1968 by Robert Noyce and Gordon Moore with a business plan centered on developing semiconductor memory products. Alongside the founders, Andy Grove has also played a crucial role in the company’s success, as a scientist when the firm was set up and then as its President and COO in 1979, its CEO in 1987 and later as its Chairman. In 1971, Intel sustained its first significant change when the company entered the microprocessor market. Nowadays, Intel is dominating the microprocessor industry and is one of the most recognized brand names in the world. Based on an article from the online version of the Business Week magazine, I will study the organizational change that has taken place at Intel. Organizations in the technology industry like Intel must adapt to the changing market conditions and to the ever-rising customer expectations to maintain a preferred provider position. The key to successful adaptation is dependent on a manager's ability to direct change programs without worsening employee-felt stress. In Intel’s case, the external environment provides conditions for change, but an organization can change only when internal...

Words: 1324 - Pages: 6

Premium Essay

Osi Model Presentation

...Economic Summary of Project Feasibility  Measurement of how proposed system solves the problem  Management Commitment  Dependent on Human Resources Operational Feasibility Analysis  A large part of determining resources that has to do with assessing technical feasibility  Contact with Vendors  Internal Technical Capability Technical Feasibility Analysis  Cost and benefits analysis  Frequently used method  Used to determine the benefits and savings Economic Feasibility Analysis  Project Description  Goals and Objectives  Project Performance  Project Assumptions  Project Constraints  Major Project Milestones Business Process Summary Business Process Summary (Cont.) Process Objective Model • Negotiations • Proper and Conducive Project Plan • Assigning Tasks to Team Members • Proper Estimation of Project Quantitatively/Qualitatively • Reviewing and doing rework when needed Descriptive  Types ◦ Emergent Approach and Prescriptive Approach  Downfalls ◦ Does not consider that unexpected changes may occur  Details ◦ The...

Words: 939 - Pages: 4

Free Essay

Nokia Strategy

...SURVEY: NEW MEDIA Among the audience The era of mass media is giving way to one of personal and participatory media, says Andreas Kluth. That will profoundly change both the media industry and society as a whole [pic] Apr 20th 2006 | From The Economist print edition THE next big thing in 1448 was a technology called “movable type”, invented for commercial use by Johannes Gutenberg, a goldsmith from Mainz (although the Chinese had thought of it first). The clever idea was to cast individual letters (type) and then compose (move) these to make up printable pages. This promised to disrupt the mainstream media of the day—the work of monks who were manually transcribing texts or carving entire pages into wood blocks for printing. By 1455 Mr Gutenberg, having lined up venture capital from a rich compatriot, Johannes Fust, was churning out bibles and soon also papal indulgences (slips of paper that rich people bought to reduce their time in purgatory). The start-up had momentum, but its costs ran out of control and Mr Gutenberg defaulted. Mr Fust foreclosed, and a little bubble popped. Even so, within decades movable type spread across Europe, turbo-charging an information age called the Renaissance. Martin Luther, irked by those indulgences, used printing presses to produce bibles and other texts in German. Others followed suit, and vernaculars rose as Latin declined, preparing Europe for nation-states. Religious and aristocratic elites first tried to stop, then control...

Words: 1847 - Pages: 8

Premium Essay

It Innovation

...three of these rules as the most critical to Sea Ray’s success. Sea Ray must operate in fundamentally different ways when forming an innovation experiment to avoid organizational memory. The success of the experiments will hinge more on experimentation than the initial strategy used. Sea Ray then must not base success on financial performance, but on the ability to learn and adapt. Formal pathways which are currently being used for innovation will be assessed and characterized. Using this pathway data, new modern opportunities will be discussed in order to make Sea Ray more innovation friendly. Sea Ray will also use human resource data instead of research and development data to track and measure their success. Finally, an innovation committee will be formed to manage innovation across Sea Ray. INTRODUCTION Sea Ray Marine is recognized as one of the top premier boat manufacturers in the world over the last half century. They lead the marine industry with innovative new products and...

Words: 2767 - Pages: 12