Wednesday, November 13, 2013

Today's world and Disruptive Technology

According to Christensen’s framework, disruptive innovation serves as a source of improving market in unexpected ways. But this market may seriously impact industries that have not yet leveraged that level of technology. This framework helps one better understand how the movie industry today is in a dilemma as to how their business models will look five years down the line. The revenue trend has seriously changed in the past few years after the Spotify equivalents of the world - Netflix, iTunes, Amazon Instant Videos and their like have gained ground. Starting from production, which was earlier, solely in the hands of the big studios, power has recently been transferred downstream. A good example of this is House of Cards being produced by Netflix. Big data here has the upper hand. Since these downstream channels now own user data, they can leverage the power to even produce movies that will draw the attention of most of their customers, and more so have a higher probability of guaranteed success. Distribution, that earlier followed the standard windowing pattern- from theatre to home video to pay-per-view to pay TV and then finally network and cable television, is now changing dramatically. Consumption, too, has seen a technological impact. Since user-viewing patterns have changed, the big question is to analyze, based on customer segmentation, how much percentage of the population will still drive down to a rental store and purchase physical disks. I could clearly relate this to the music industry which once worked by having the artist contact a record label and then a distributor which would go down to retailers. Good networking and brand name were but the most important factors needed for success of the artist. However, today Spotify, which rules the music industry with its tier-based subscription service works on the basis of commercial music streaming using secure Digital Rights Management rather than the traditional music-download approach and has only seen an upward graph in its revenues. The famous Encyclopedia Britannica case proves how a major player can be completely washed out due to lack of change in their operational processes which leads to cannibalization of their revenue streams. An excellent example of this is how Facebook overtook Orkut in a shorter time than Orkut took to build its vast customer base. Customers want innovation, they need changes in interface and Facebook, keeping in mind customer satisfaction, kept adding new applications and integrating software into their website (Spotify for music, Google maps for maps and so on) to better engage their people in this customer driven market. Digital transformation serves as a platform to adapt in this fast paced industry. The big question now is how should business decisions be made keeping in mind various technological factors that will help drive more efficient managerial decisions ??



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