Professor Charles Fine Co-Chair, Value Chain Dynamics Working Group Communications Futures Program http://cfp.mit. edu Massachusetts Institute of Technology October 2009 firstname.lastname@example.org Value Chain Dynamics And the OIPs
Wireless Value Network Structure What is Value Chain Dynamics? Voice and/or data consumer Device Manufacturers Portals and Access Providers Application Developer Content Provider Wireless network operator Mobile Phones PDAs Smart Phones SIM Pads Controls LANs Network Network equipment Sw. games messaging Voice,browsing, WAP Third party content Software application developer Hardware application developer Photo camera MP3 player, DVD Game consoles Non-Circuit Component Manufacturers Circuit Board Component Manufacturers PSTN/Internet component manufacturers Cell switching component manufacturers Base Station component manufacturers Content Aggregator Wireless infrastructure operator Wireless service provider Device value chain Infrastructure Value chain Application Value chain Content Value chain Network value chain Platform infrastructure service Service provisioning Billing Support User content
Business Cycle Dynamics Regulatory Policy Dynamics Corporate Strategy Dynamics Industry Structure Dynamics Customer Preference Dynamics Capital Market Dynamics Gears differ by size/speed Each has an engine & clutch Technology & Innovation Dynamics What is Value Chain Dynamics?
THE DYNAMICS OF PRODUCT ARCHITECTURE, STANDARDS,AND VALUE CHAIN STRUCTURE: “ THE DOUBLE HELIX” MODULAR PRODUCT HORIZONTAL INDUSTRY OPEN STANDARDS INTEGRAL PRODUCT VERTICAL INDUSTRY PROPRIETARY STANDARDS Fine & Whitney, “Is the Make/Buy Decision Process a Core Competence?” INCENTIVE TO INTEGRATE PRESSURE TO DIS-INTEGRATE ORGANIZATIONAL RIGIDITIES HIGH- DIMENSIONAL COMPLEXITY NICHE COMPETITORS PROPRIETARY SYSTEM PROFITABILITY SUPPLIER MARKET POWER INNOVATION & TECHNICAL ADVANCES Examples: IBM, Autos, Embraer/Boeing, Nokia, Small Firms What is Value Chain Dynamics?
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?
Inductive System Diagram What is Value Chain Dynamics? - Content Consumption + Content Profit Opportunities Content Provided + + + R5 For-profit Content Generation Loop Piracy Innovations + - B3 Piracy Innovation Loop R6 Free-Content Generation Loop + + Terminal Volumes Terminal Prices + - - + Component Standardization & Outsourcing Terminal Costs - R4 Terminal Scale Economies Loop Customer Adoption New Entrant & Incumbent Innovation in Services & Applications Network & Technology & Innovation Investment Network Revenue Per user Network Usage Service & Application Profits + + + + + + + Service & Application Investment & Innovation Loop Service & Application Revenues + Network Capacity + + Price Competition + - Price Competition Loop B2 R2 Network Revenue + + Network investment Loop R3 + + User Population + Value/User due To network effects Willingness to pay By marginal adopter + Market Saturation Loop B1 R1 Network Externalities Loop + + Total expected Benefit to New adopters Social Externalities
Creative Artists Content Marketing Content Distrib. Content & HW Consumption Content Publishers Content Sales iPod/ iPhone iTunes iTunes iTunes homepage Listening accessories Open, then license Content Networks Closed to all but one carrier per region; slowly opening Applications Closed 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
VoIP: Voice communication is alive and well. VoIP is part of the landscape.