Communications Industry Report Card:
A Value Chain Dynamics Perspective
Professor Charles Fine
Emmanuel Blain
Value Chain Dynamics Working Group
Communications Futures Program
Massachusetts Institute of Technology
May 2009
Telecom Italia Future Centre, Venice
charley@mit.edu
eblain@MIT.EDU
A Simple Value Chain:
Sales/Marketing
/Distribution
Consumers/
Users
Product
Concept
Production
Subsystem
Suppliers
Core
Technology
Suppliers
Innovation along the Value Chain:
How (& why) do Autos & Electronics Differ?
Sales/Marketing
/Distribution
Consumers/
Users
AUTOS
Add-ons
Internet
Production
Subsystem
Suppliers
Product
Concept
Minivan,
SUV,
Crossover
Lean
Production
iPod, X-Box,
Palm,
Contract
Office, Manufacturing
Napster, Amazon,
ELECDell Digital Photog.
TRONICS Apple I
Mobile Phone
Core
Technology
Suppliers
Hybrid
Aluminum
Engine,
Bonding,
Active
Carbon Fiber,
Suspension CAD tools
Java, Microprocessor,
Html, Hard disk drive,
C++ Photolithography
Innovation Dynamics can be
Performance
RADICAL (disruptive) or INCREMENTAL (sustaining);
Technological perspective vs Industry perspective
How to measure
performance?
How to know
where you are
on the “S”?
Where in the
value chain?
Worse before
better?
Time
Performance
Disruptive Process Innovation in Autos vs.
Disruptive Product Innovation in Electronics
Lean Production
Mass Production
Craft Production
Time
What makes an innovation disruptive?
Performance Push
an overwhelmingly superior technology/process
(mass production, penicillin)
Customer Pull
new customers care about different measures of
performance
(wireless phones, personal computers)
Organizational Competencies
incumbents cannot do what the innovators can
(Dell supply chain, Southwest Air)
Drivers of Value Chain Dynamics :
“Gear Model” for Roadmapping the VC
Corporate
Strategy
Dynamics
Customer
Preference
Dynamics
Regulatory
Policy
Technology Dynamics
& Innovation
Dynamics
Gears differ by size/speed
Each has an engine & clutch
Capital
Market
Dynamics
Industry
Structure
Dynamics
Business
Cycle
Dynamics
ALL COMPETITIVE ADVANTAGE
IS TEMPORARY
Autos:
Ford in 1920, GM in 1955, Toyota in 1990
Computing:
IBM in 1970, DEC in 1980, Wintel in 1990
World Dominion:
Greece in 500 BC, Rome in 100AD, G.B. in 1800
Sports:
Bruins in 1972, Celtics in 1986, Yankees not lately :-)
The faster the clockspeed, the shorter the reign
A Review of the oIP’s
1. VoIP:
Voice communication is alive and well.
VoIP is part of the landscape.
VoIP, so far, is a sustaining innovation;
eBay overpaid for Skype.
A Brief Review of the oIP’s
1. VoIP:
2. MoIP:
Voice communication is alive and well.
VoIP is part of the landscape.
VoIP, so far, is a sustaining innovation;
eBay overpaid for Skype.
Music consumers seem pretty happy.
Traditional music companies mildly(?) disrupted,
or, perhaps disrupted in slow motion.
Big opportunity for Apple.
Creative
Artists
THE CASE OF APPLE iPod/iPhone
Music
Publishers
Applications
Networks
Closed then
open to nonApple apps,
VOIP over
WiFi, IM, etc.
Closed to
non-AT&T
Music
Marketing
Open
networks
iTunes
homepage
Music
Sales
Listening
accessories
(& partner)
iTunes
Content
Closed to
non-MP3,
non-Apple
formats
Music
Player
Retailing
Music
iTunes
Distribution
Music
Consumption
iPod/
iPhone
Creative
Artists
THE CASE OF APPLE iPod/iPhone
Music
Publishers
Applications
Networks
Closed then
open to nonApple apps,
VOIP over
WiFi, IM, etc.
Closed to
non-AT&T
Music
Marketing
Open
networks
iTunes
homepage
Music
Sales
Listening
accessories
(& partner)
iTunes
Content
Closed to
non-MP3,
non-Apple
formats
Music
Player
Retailing
APP STORE!
Music
Distribution
iTunes
Music
Consumption
iPod/
iPhone
A Brief Review of the oIP’s
1. VoIP:
2. MoIP:
3. TVoIP:
Voice communication is alive and well.
VoIP is part of the landscape.
VoIP, so far, is a sustaining innovation;
eBay overpaid for Skype.
Music consumers seem pretty happy.
Traditional music companies mildly(?) disrupted,
or, perhaps disrupted in slow motion.
Big opportunity for Apple.
Looks to follow music?
A Brief Review of the oIP’s
1. VoIP:
2. MoIP:
3. TVoIP:
4. NoIP:
Voice communication is alive and well.
VoIP is part of the landscape.
VoIP, so far, is a sustaining innovation;
eBay overpaid for Skype.
Music consumers seem pretty happy.
Traditional music companies mildly(?) disrupted,
or, perhaps disrupted in slow motion.
Big opportunity for Apple.
Looks to follow music?
In USA, newspapers declining rapidly;
Can bloggers and an army of “volunteers” fill
the gap?
A Brief Review of the oIP’s
1. VoIP:
2. MoIP:
3. TVoIP:
4. NoIP:
5. FoIP
Voice communication is alive and well.
VoIP is part of the landscape.
VoIP, so far, is a sustaining innovation;
eBay overpaid for Skype.
Music consumers seem pretty happy.
Traditional music companies mildly(?) disrupted,
or, perhaps disrupted in slow motion.
Big opportunity for Apple.
Looks to follow music?
In USA, newspapers declining rapidly;
Can bloggers and an army of “volunteers” fill
the gap?
On-line banking: a sustaining innovation?
A Brief Review of the oIP’s
1. VoIP:
2. MoIP:
3. TVoIP:
4. NoIP:
5. FoIP
6. AoIP:
Voice communication is alive and well.
VoIP is part of the landscape.
VoIP, so far, is a sustaining innovation;
eBay overpaid for Skype.
Music consumers seem pretty happy.
Traditional music companies mildly(?) disrupted,
or, perhaps disrupted in slow motion.
Big opportunity for Apple.
Looks to follow music?
In USA, newspapers declining rapidly;
Can bloggers and an army of “volunteers” fill
the gap?
On-line banking: a sustaining innovation?
Is “consumption” of the arts different?
Important distinctions among the arts?
Classical, Contemporary, Performing, . . . ?
A Brief Review of the oIP’s
1. VoIP:
2. MoIP:
3. TVoIP:
4. NoIP:
5. FoIP
6. AoIP:
7. SPoiP:
Voice communication is alive and well.
VoIP is part of the landscape.
VoIP, so far, is a sustaining innovation;
eBay overpaid for Skype.
Music consumers seem pretty happy.
Traditional music companies mildly(?) disrupted,
or, perhaps disrupted in slow motion.
Big opportunity for Apple.
Looks to follow music?
In USA, newspapers declining rapidly;
Can bloggers and an army of “volunteers” fill
the gap?
On-line banking: a sustaining innovation?
Is “consumption” of the arts different?
Important distinctions among the arts?
Classical, Contempary, Performing, . . . ?
Sports as a fast-clockspeed performing art;
Time shifting reduces value . . .
Sports over IP: A Dynamic Modeling Perspective
Potential
Fans
Casual
Fans
(Video)
Rabid
Fans
(Live)
Potential
Fans
+
+
Fan
Creation
Rate
Team
Popularity
+
Success
Ratio
+
Number
Of Stars
+
Casual
Fans
(Video)
Rabid Fan
Creation
Rate
+
+
Rabid
Fans
(Live)
+
Potential
Fans
+
+
Fan
Creation
Rate
+
Casual
Fans
(Video)
Team
Popularity
+
+
+
Demand
For Video
Content
Rabid Fan
Creation
Rate
+
Number
Of Stars
+
Over
The
Air
+
Cable
TV
+
+
Success
Ratio
Rabid
Fans
(Live)
Demand
For Live
Performances
+
+
Licensed
Internet
Un-Licensed
Internet
+
Potential
Fans
+
+
Fan
Creation
Rate
+
Casual
Fans
(Video)
Team
Popularity
+
+
+
Demand
For Video
Content
Rabid Fan
Creation
Rate
+
+
Number
Of Stars
+
Team +
+
Revenue
+
+
Over
The
Air
+
Cable
TV
+
+
Success
Ratio
Rabid
Fans
(Live)
Demand
For Live
Performances
+
+
Licensed
Internet
Un-Licensed
Internet
+
Stadium
Prices and
Attendance
+
Potential
Fans
+ +
+
+
+
+
Fan
Creation
Rate
+
Casual
Fans
(Video)
Team
Popularity
+
+
+
Demand
For Video
Content
Rabid Fan
Creation
Rate
+
+
+
Team +
Revenue
+
Number
Of Stars
+
Over
The
Air
+
Cable
TV
+
+
Success
Ratio
Rabid
Fans
(Live)
Demand
For Live
Performances
+
+
Licensed
Internet
Un-Licensed
Internet
+
+
Stadium
Prices and
Attendance
+
Potential
Fans
+ +
+
+
+
+
Fan
Creation
Rate
+
Casual
Fans
(Video)
Team
Popularity
+
+
+
Demand
For Video
Content
Rabid Fan
Creation
Rate
+
Success
Ratio
+
+
+
Team +
Revenue
+
Number
Of Stars
+
Over
The
Air
+
Cable
TV
Rabid
Fans
(Live)
-
(Local
Sports
Blackouts)
+
Demand
For Live
Performances
- -
-
+
+
Licensed
Internet
Un-Licensed
Internet
+
+
Stadium
Prices and
Attendance
+
Potential
Fans
+ +
+
+
+
+
Fan
Creation
Rate
+
Casual
Fans
(Video)
Team
Popularity
+
+
+
Demand
For Video
Content
Rabid Fan
Creation
Rate
+
-
+
+
Team +
Revenue
+
Number
Of Stars
+
Over
The
Air
-
+
Cable
TV
-
+
Demand
For Live
Performances
- -
Success
Ratio
+
Rabid
Fans
(Live)
-
+
+
Licensed
Internet
Un-Licensed
Internet
-
+
+
Stadium
Prices and
Attendance
+
Potential
Fans
+ +
+
+
+
+
Fan
Creation
Rate
+
Casual
Fans
(Video)
Team
Popularity
+
+
+
Demand
For Video
Content
Rabid Fan
Creation
Rate
+
-
+
Number
Of Stars
+
Over
The
Air
-
+
+
Cable
TV
-
+
Licensed
Internet
+
Internet
Innovation
+
Demand
For Live
Performances
- -
Success
Ratio
+
Rabid
Fans
(Live)
+
-
Internet
Users
+
Un-Licensed
Internet
+
-
+
+Broadband
Demand
+
Team +
Revenue
+
+
+
+
Stadium
Prices and
Attendance
Conclusions/Observations/Questions
1. Research:
Modeling value dynamics is feasible for the
performing arts (more to come)
2. Observations:
Internet viewing can potentially grow the overall
market for the arts, but may also reduce revenue
opportunities for art distributors.
All the oIP’s grow the pie for Broadband providers.
3. Questions:
Can Broadband providers get their “fair share”
(e.g, versus Apple, Google)?
What is fair?
Innovative business model design is big opportunity.