professor charles fine co-chair, value chain dynamics working group communications futures program ...
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Professor Charles FineCo-Chair, Value Chain Dynamics Working
GroupCommunications Futures Program
http://cfp.mit.eduMassachusetts Institute of Technology
October [email protected]
Value Chain Dynamics And the OIPs
What is Value Chain Dynamics?
Voice and/or data
consumer
Voice and/or data
consumer
Device Manufacturers
Device Manufacturers
Portals and Access
Providers
Portals and Access
Providers
Application Developer
Application Developer
Content ProviderContent Provider
Wireless network operator
Wireless network operator
Mobile PhonesPDAsSmart PhonesSIM PadsControls LANs
Network Network
Network equipment
Network equipment
Sw. gamesmessaging
Voice,browsing, WAP
Third party contentThird party content
Software application developer
Software application developer
Hardware application developer
Hardware application developer
Photo cameraMP3 player, DVDGame consoles
Non-Circuit Component
Manufacturers
Non-Circuit Component
Manufacturers
Circuit BoardComponent
Manufacturers
Circuit BoardComponent
Manufacturers
PSTN/Internet component manufacturers
PSTN/Internet component manufacturers
Cell switching component manufacturers
Cell switching component manufacturers
Base Station component manufacturers
Base Station component manufacturers
Content Aggregator
Content Aggregator
Wireless infrastructure
operator
Wireless infrastructure
operator
Wireless service provider
Wireless service provider
Device value chain
InfrastructureValue chain
ApplicationValue chain
ContentValue chain
Network value chain
Platform infrastructure service
Service provisioning Billing Support
User contentUser content
Wireless Value Network StructureWhat is Value Chain Dynamics?
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BusinessCycle
Dynamics
Regulatory Policy
Dynamics
Corporate Strategy
DynamicsIndustryStructureDynamics
CustomerPreferenceDynamics
CapitalMarket
Dynamics
Gears differ by size/speedEach has an engine & clutch
Technology& Innovation
Dynamics
What is Value Chain Dynamics?
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THE DYNAMICS OF PRODUCT ARCHITECTURE, STANDARDS,AND VALUE CHAIN STRUCTURE:
“THE DOUBLE HELIX”
MODULAR PRODUCTHORIZONTAL INDUSTRY
OPEN STANDARDS
INTEGRAL PRODUCTVERTICAL INDUSTRY
PROPRIETARY STANDARDS
Fine & Whitney, “Is the Make/Buy Decision Process a Core Competence?”
INCENTIVE TO INTEGRATE
PRESSURE TO DIS-INTEGRATEORGANIZATIONAL
RIGIDITIES
HIGH-DIMENSIONALCOMPLEXITY
NICHE COMPETITORS
PROPRIETARY SYSTEM
PROFITABILITY
SUPPLIERMARKET POWER
INNOVATION & TECHNICAL ADVANCES
Examples: IBM, Autos, Embraer/Boeing, Nokia, Small Firms
What is Value Chain Dynamics?
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ALL COMPETITIVE ADVANTAGE IS TEMPORARY
Autos: Ford in 1920, GM in 1955, Toyota in 2000
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 2008, Yankees not lately :-)
The faster the clockspeed, the shorter the reign
What is Value Chain Dynamics?
-
ContentConsumption
+
ContentProfit
Opportunities
ContentProvided
+
+
+
R5For-profit Content
GenerationLoop
PiracyInnovations
+
-
B3
PiracyInnovation
Loop
R6Free-Content Generation
Loop
+
+
TerminalVolumes
TerminalPrices
+ -
-
+ ComponentStandardization& Outsourcing
TerminalCosts
-
R4
TerminalScale
EconomiesLoop
Customer Adoption
New Entrant& Incumbent Innovation in Services
& Applications
Network &Technology& InnovationInvestment
NetworkRevenuePer user
NetworkUsage
Service &Application
Profits
+
+
+
+
+
+
+
Service &ApplicationInvestment
& InnovationLoop
Service &ApplicationRevenues
+
NetworkCapacity
+ + PriceCompetition +
-
PriceCompetition
LoopB2
R2
NetworkRevenue
+
+
Networkinvestment
Loop
R3
+
+
UserPopulation
+Value/User due
To network effects
Willingness to payBy marginal adopter
+
Market Saturation
Loop
B1
R1Network
ExternalitiesLoop +
+Total expected
Benefit toNew adopters
SocialExternalities
Inductive System DiagramWhat is Value Chain Dynamics?
Creative Artists
ContentMarketing
ContentDistrib.
Content & HWConsumption
ContentPublishers
ContentSales
iPod/ iPhone
iTunes
iTunes
iTunes homepage
Listening accessories
Open, then license
ContentNetworks
Closed to all but one carrier per region; slowly opening
ApplicationsClosed to non- Apple apps; then explosive App Store Growth
THE CASE OF APPLE iPod/iPhone
Retail Stores
App Store
Music closed to non-MP3, non-Apple formats
Media Value Chains: Sports Over the Air,
On Cable, and On the Internet
But first: A Brief 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’s1. VoIP: Voice communication is alive and well.
VoIP is part of the landscape.VoIP, so far, is a sustaining innovation; eBay overpaid for Skype.
2. MoIP: Music consumers seem pretty happy.Traditional music companies mildly(?)
disrupted,or, perhaps disrupted in slow motion.Big opportunity for Apple.
A Brief Review of the oIP’s1. VoIP: Voice communication is alive and well.
VoIP is part of the landscape.VoIP, so far, is a sustaining innovation; eBay overpaid for Skype.
2. MoIP: Music consumers seem pretty happy.Traditional music companies
significantly (?) disrupted. Big win for Apple & Users.
3. TVoIP: Trying not to follow music? Disney keychest; Hulu by NewsCorp, Disney & NBC; Comcast w/ TV
Everywhere; Sony w/DECE (Digital Entertainment
Content Ecosystem,)
A Brief Review of the oIP’s1. VoIP: Voice communication is alive and well.
VoIP is part of the landscape.VoIP, so far, is a sustaining innovation; eBay overpaid for Skype.
2. MoIP: Music consumers seem pretty happy.Traditional music companies mildly(?)
disrupted,or, perhaps disrupted in slow motion.Big opportunity for Apple.
3. TVoIP: Trying not to follow music.4. NoIP:In USA, newspapers declining rapidly;
Can bloggers and an army of “volunteers” fill
the gap?
A Brief Review of the oIP’s1. VoIP: Voice communication is alive and well.
VoIP is part of the landscape.VoIP, so far, is a sustaining innovation; eBay overpaid for Skype.
2. MoIP: Music consumers seem pretty happy.Traditional music companies mildly(?)
disrupted,or, perhaps disrupted in slow motion.Big opportunity for Apple.
3. TVoIP: LoTrying not to follow music.4. NoIP:In USA, newspapers declining rapidly;
Can bloggers and an army of “volunteers” fill
the gap?5. AoIP:Is “consumption” of the arts different?
Important distinctions among the arts?Classical, Contemporary,
Performing, . . . ?
A Brief Review of the oIP’s1. VoIP: Voice communication is alive and well.
VoIP is part of the landscape.VoIP, so far, is a sustaining innovation; eBay overpaid for Skype.
2. MoIP: Music consumers seem pretty happy.Traditional music companies mildly(?)
disrupted,or, perhaps disrupted in slow motion.Big opportunity for Apple.
3. TVoIP: Looks to follow music?4. NoIP:In USA, newspapers declining rapidly;
Can bloggers and an army of “volunteers” fill
the gap?5. AoIP:Is “consumption” of the arts different?
Classical, Contemporary, Performing, . . . ?
Museums vs Websites; Venues vs Streaming
6. SPoiP: Sports as a fast-clockspeed performing art;
Time shifting reduces value . . .
1. Research: • Modeling value dynamics is feasible for the media/communications value chain• We seek to quantify the effects of Internet channels on overall system performance (e.g., value dynamics in the sports/media value chain)
2. Hypotheses:• Internet viewing can grow the size of the viewer base,but may also reduce revenue opportunities for some value chain members.• All the oIP’s grow the pie for communications service providers.• Innovative business model design is big opportunity.• Regulations could play a crucial role
3. Questions:• Will the advertisement revenue model change with WebTV?• Will new sources of revenue be created?• Who will capture most of the revenue flow: Traditional broadcasters, service providers, Google, Apple, MLB, Players ??? • What are the best strategic plays for network operators?
Sports/Video Dynamics Model(work in progress, w/Emmanuel Blain, MIT MS
student)
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All Conclusions are Temporary
Clockspeeds are increasing almost everywhereValue Chains are changing rapidly
Assessment of value chain dynamics
Build Strategiesand Roadmaps