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E x p l o i t a t i o n o f “ t h e T i p p i n g P o i n t ”

By Mark Albala, InfoSight Partners

ABSTRACT

“The Tipping Point”, written in 2000 prior to the digital economy, described a means for forging

disruptions through the exploitation of information. Having a keen understanding of the information

you have at your disposal and a keen awareness of the attempted disruptions through viral social

media and other means is critical for survival in the digital economy. This writing will go over what

the tipping point is, how information aligns to the tipping point in the digital economy and what

organizations must do now to survive disruptive attempts to dethrone their products and services in

the digital economy.

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Introduction

In 2000, The Tipping Point was written by Malcolm Gladwell. It provided a framework for how and why

small changes can result in great impacts in the marketplace. It further defined the magic formula for

instituting a tipping point to influence the market in one’s favor. However, The Tipping Point was

written prior to the existence of a thriving digital economy, where Facebook, Youtube, Snapchat,

Google, Yelp, TripAdvisor and other sites provide a venue for launching content capable of serving up

conditions ripe for a tipping point. They can equally serve up market turbulence to the benefit of no one.

It is no longer feasible for organizations to put their head in the sand and presume that they are

protected from any attempts through video, customer reviews because of the solid relationship they

have with their customer base. It is also no surprise that video is the fastest growing form of media

intended to influence consumers, with an increase of ad spend from 2.4% of total spend dedicated to

video in 2013 to 4.4% of total spend in 2015 (eMarketer study, 2015).

By understanding how the tipping point works and how clues to tipping points can be recognized from

within the platforms participating in your digital events and those outside your digital ecosphere within

social media (Facebook, Youtube, Snapchat, Yelp, Tripadvisor, etc.) and other digital sites, you can thrive

in the digital economy.

Disrupted Broadcasting

The music, photographic and video broadcasting video broadcasting industries have been disrupted

through the wide availability of digital services. This example focuses on the video broadcasting

industries, but a similar case could be made for the music and photography industries (Columbia house

could serve as a good example of the disruption of the music industry, and Kodak could serve as a good

example of the disruption in the photographic industry).

It is also no surprise that the video media has been disrupted, from core broadcasters (NBC, ABC, CBS) to

Cable (HBO, Showtime, Disney, CNN, etc.) and now to internet supplied broadcasters (Sling TV, Netflix,

Hulu, YouTube, Amazon, etc.), where the consumer has been thrust through a series of disruptions

which provided greater control of media outlets, the cost of subscriptions and the portability of their

subscriptions across the myriad of devices in their digital ecosphere. The advent of cable and the

accessibility of everywhere available internet connectivity have provided the necessary ingredients to

disrupt broadcasting. This series of disruptions have impacted most the revenue model of media

carriers because of the ever-increased number of channels which can be used to carry an advertisement.

Because the choices have increased, the ad revenue per minute has come under downward pressure. In

2013, internet based advertising ($42.8 Billion) surpassed broadcast revenue ($40.1 Billion) for the first

time, with digital video advertising growing at 19% annually (IAB, 2013).

It is exactly because information is the thing that is wielded in the music, photography and video

broadcasting industries that makes the ability to wield tipping points through information in the digital

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economy such a powerful concept. But we first must understand exactly what a disruption is and how it

manifests itself to be able to wield information to through tipping points to exploit it.

What is a disruption?

A disruption is something which provides a sufficiently greater benefit than the cost associated that

makes it worthwhile for a consumer to consciously take action to shift their consumption of certain

goods or services in favor of another. An example of a disruptive service is the Vonage phone service,

which uses the internet in virtually all homes to displace the more traditional phone services available

from the more traditional phone companies. In the case of Vonage, their inclusion of international

service and bundling of mobile access to Vonage services outweighs the tried and true phone service

from phone companies. Many have eliminated a home phone number all together and only utilize

mobile phone service, this too is a disruption to the phone companies.

Such actions require a change to the business models for participants in the marketplace. For those who

have adopted Vonage or who have decided to eliminate their home phone service all together, a

discounted service from the traditional carriers would likely be unsuccessful. Therefore, it is the

business models and the value propositions and processes and assumptions supporting those value

propositions that require retrofitting to a new marketplace, which in the case of our example, includes

Vonage and no home phone service competing with legacy landline carriers.

Other noted disruptions are those, like the iPod as a device used for utilizing digitally stored music,

forever changing the music market and the core of assumptions used in the business models of

participants selling music. Columbia House, a club devised to sell music media, was displaced in the

market by digital music and the displacement of much of the need for owning music media.

In the case of the iPod, music was easily acquired digitally and stored digitally on a small easy to use

device with much larger capacities than their analog brethren (CDs, Walkman devices, etc.) and both

displaced the need to acquire whole albums of music rather than only acquiring desired songs.

What is a “tipping point”?

According to Malcolm Gladwell (The Tipping Point, 2000), a tipping point is a moment where a trend,

idea or social event tips into the limelight and spreads like wildfire. A tipping point can impact the

behavior of consumers if the message positively or negatively impact their impression of the digital

identity of the supplier. In the digital economy, a successful tipping point infects the potential digital

consumers with a change of attitude beneficial to the outcome of digital commerce opportunities of the

supplier. However, an unsuccessful tipping point or conflicting attempts to influence a customer can

result in nothing more than turbulence, which generally muddies the waters of the digital commerce

opportunities of all digital market participants.

The tipping point agents are:

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• The law of the few is a description of how a handful of influencers through their actions make a

big difference. An influencer is an independent voice that influences the actions of others.

Early adopters are normally influencers. Crossing the Chasm (Geoffrey Moore, 1979) describes

the process of the early majority being influenced by early adopters. The tipping point describes

the point where the effort that influence is eased.

• The stickiness factor. Stickiness in the digital economy is the ability for a message to be so

memorable or influential that it compels action by a consumer. An extremely sticky message in

the digital economy is one that goes viral.

• The power of context. Context provides the potential consumer in the digital economy the

necessary information to understand the conditions and circumstances of how they could

benefit from the tipping point so that they could decide whether the benefits of adoption

outweigh the costs of conversion.

Social media changes the game because it is easier to launch tipping points through the likes of Youtube,

Facebook and other environments that did not exist when The Tipping Point was written.

Social media is an environment where the ingredients for launching a tipping point are put within reach

of anyone if executed properly, making it much easier to engage influencers for the purpose of creating

and navigating a tipping point. According a 2009 Yankelovich study, 76% of people believe that

advertisers lie. They will represent their version beneficial to the advertiser whether or not there was

fact backing up the advertisement. However, according to an April 2009 global Neilsen Online Global

consumer study, influencers, who are independent from the advertiser, do not suffer from the same

expected position of non-truth that advertisers portray. It is through social media that the word of

influencers can reach potential consumers independently from suppliers or advertisers.

However, if the independence is not believed in the social media post, the impact could be viewed as

another source of advertising, potentially eroding customer value rather than the intended impact.

Turbulence is a situation where multiple tipping points bombard the consumer thereby confusing the

consumer, resulting in neither having the intended impact but both impacting the marketplace in a

rather haphazard way.

Using Antview concepts (Antview.com, 1999), through social media, if a tipping point is going to be

successful, it is the job of the supplier:

• Engage influencers (creators, critics and editors, connectors and collectors) with the necessary

context to independently influence the marketplace

• and monitor and measure the impact influencers have in influencing the remainder of the

potential consumers in the marketplace (spectators and inactives).

• It is the responsibility of the supplier to continually monitor the impact of influencers and adjust

the content provided to them to create the intended tipping point and not create turbulence

instead of a tipping point.

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• The overall activity and impact of the influencers should be monitored throughout the social

media campaign.

Figure 1 Antview concepts, 1999

What is a disruption cycle?

A disruption cycle is the cycle that a disruption either through the introduction of an innovation or other

means will have on the marketplace. Disruptions will follow four phases before resulting in a new

market equilibrium, these being:

• The period where a disruption is identified and market participants each individually determine

their reaction to the disruption and executed their reaction plans in the marketplace.

• The big bang, which is when the individual reaction plans are thwarted on the marketplace each

having an impact. Collectively, the market will react to both the disruption and the actions of

the market participants. There is a window of opportunity available to market participants,

actions either of insufficient magnitude or out of phase with the frequency of the disruption will

have no impact on the marketplace. The big bang is a period of an instable but rapidly

expanding market as market participants quickly try to benefit from the disruption.

• The big crunch, which is the period where the market has taken some action and the trajectory

of the market begins to be visible. The disruptor begins to enter a mature steady state and

others who have taken action during the big bang phase of the disruption either react to the

new but smaller marketplace or get consolidated out of the market.

• Finally, the disruption dissipates into a new market equilibrium.

A tipping point is akin to a stone thrown into the disruption wave, causing ripples in the disruption wave.

A small tipping point in a massive disruption wave is quickly dissipated because of the magnitude of the

disruption wave, however if timed properly, could benefit the originator of the tipping point by

impacting the disruption wave in their favor.

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• An example of a successful tipping point is a disruptor launching a social media campaign to

accelerate the frequency of a disruption wave.

Figure 2 The disruption cycle, InfoSight Partners, 2017

How “tipping points” impact disruption cycles?

Tipping points are ripples in a disruption cycle. They slightly alter the frequency, magnitude and

direction of a disruption wave. The timing of tipping points is critical. They can move edge dwellers of a

disruption cycle in and out of the cycle. An understanding the current positioning of a disruption cycle is

critical information for successful execution and survival of tipping points.

Your perception of where you reside in a disruption cycle is critical. That means if you are an edge

dweller and execute a tipping point you stand an equal chance of navigating yourself into the disruption

wave or outside of the disruption cycle, the outcome is totally dependent on the accuracy of your

perception. A sea of turbulence caused by the disruption cycle is all that is visible from the edge of the

disruption cycle prior to the tipping point.

How does information factor into disruption cycles and tipping points?

If one finds themselves outside of the disruption cycle or desires to push some market participants

outside of the disruption cycle, then the proper use of tipping points can ultimately yield the desired

benefit. However, in order to orchestrate, those enlisting the use of tipping points must have the

necessary information to monitor the impact of their tipping point attempts to ascertain if the outcome

is one that is desired. Should it not be, turbulence can be expected, which blurs the boundaries of the

tipping point and further complicates the successful navigation through a disruption cycle.

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The information required has many components which must be executed in tandem to be effective.

These components are:

• A keen understanding of the business models, including the assumptions, key processes and

information supporting the business model, all of which will be used as key components of

navigating both a disruption cycle and the tipping point.

• A keen understanding of the disruption cycle and the impact on the assumptions and processes

devised to achieve a value proposition within a business model. There will most probably be an

equal distribution of organizations wo perceive the impact of a disruption because they are

perceiving he disruption without being armed with a full complement of available information.

In the digital economy, information will be made available from your internal systems, the logs

created through your internal systems and your digital and mobile channels, the logs created by

the platforms handling components of your digital ecosystem and the social media which

influences participants in your digital content or commerce. Using information to fine tune

perception about the disruption cycle is critical for navigating a tipping point correctly.

• The current phase of the disruption cycle, namely whether the cycle is discovery waiting for

market correction reactions, the big bang, the big crunch or dissipating into a new equilibrium.

• The anticipated impact of a tipping point, analyzed in preparation of launching a tipping point

through models of the marketplace. The greater the self-learning autonomous capabilities a

model has, the more precise adjustment criteria can be in steering a tipping point and any

turbulence strategies to the benefit of the organization.

• Metrics to measure the success of the overall navigation process as a means of improving the

execution of the models and the reaction time of the organization.

Example 1 | Apple

Apple has been one of the companies who have been most successful and copied for using social media,

allowing the media to postulate the features of future releases of technology and, although never

proven, launching leaks to the influencers as a means of using social media to launch tipping points to

derive the market to their benefit.

Apple has used this strategy on an annual basis for the iPad, the iPod, the iPhone, Apple TV and a host of

other products too numerous to mention. In 2008, Apple sold 60 million Apps for the iPhone within 1

month of its introduction, and became the third largest handset supplier in the world due to the

popularity of the iPhone. Apple successfully utilizes early adopters and “leaked” specs and other

information about impending product launches as a vehicle to engage early adopters to virally spread

information. This activity is specifically intended to influence the markets and create buzz for the new

products, which also results in turbulence for everyone but Apple.

In 2010, Apple used the same strategy for the launch of the iPad, and more than 300,000 iPads were

sold on the first day they were available and 500,000 in the first introductory week.

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Example 2 | Cyber-Monday

Shop.Org launched the concept of Cyber-Monday in 2005 to disrupt the traditional Black Friday with

eCommerce sales, or the date that traditional brick and mortar retailers become profitable for the year.

The concept was based on Tony Valado’s 2003 White Wednesday day, to sell flowers from

1800Flowers.com before florists could sell Thanksgiving flowers. The concept of Cyber-Monday survived

and represents approximately $3.5 Billion of the holiday season sales on an annual basis, of course at

the expense of sales occurring on Black Friday. The growth of Cyber Monday has been phenomenal,

from $610 Million on November 26th, 2008 to $3.450 Billion on November 29, 2016, a five-fold increase

since 2006.

Example 3 | Shopping Malls

Shopping malls have been on a decline for years with the advent of the digital economy, but there is the

matter of the real estate and what to do with it that is of extreme importance to the owners of the

shopping malls.

A recent phenomenon has been occurring to transform the shopping mall from a place to shop to a

center for entertainment, which houses the best restaurants, a myriad of entertainment opportunities,

the largest cinema outlets and a host of other visionary changes to the definition of the shopping mall to

maintain its viability.

For example, aside from shopping venues, the Mall of America has a full-blown amusement park in the

mall.

Figure 3 Mall of America amusement park

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About the Author

Mark Albala is the President of InfoSight Partners, L.L.C. Mark has

served in a variety of information strategy, architecture and

governance roles and has been an influential futurist in defining

ways in which information could be wielded, and has been an

active advocate of the disciplines of information economics and the

acceptance and management of information as an organizational

asset. Mark currently serves as an advisor to companies and

analysts. Mark can be reached at mark@infosightpartners.com.