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Annet Aris
Brussels, May 22, 2014
Copyright 2014 Annet Aris. No part of it may be circulated, quoted, or reproduced for
distribution without prior written approval from Annet Aris. This material was used by
Annet Aris during an oral presentation; it is not a complete record of the discussion.
New rules of game in the
digital world: from strategic
planning to strategic
learning
Sanoma Media Parade
My perspective on the media and internet value chain
Content Creator
Content
packager
Network
operator
Content bundler
Hard-/ Software
provider
© Annet Aris
*
* Until 2011
2
Impact of digitization
Technological
game
changers
Tipping point
behavior
Value capture
by new entrants
New rules of
game for
incumbents
© Annet Aris
The adoption cycle of digital technology
What are Technological Game Changers?
© Annet
Definition Game Changer:
1. Offers true new benefits
2. Easy to use
3. Affordable
4. Ecosystem in place
© Annet Aris
Recent technological game changers
Mobile telephony
World wide web
Search
1980s
2010s
1990s
2000s
© Annet Aris
PC
Recent technological game changers
Mobile telephony
Broadband
World wide web
Search
1980s
2010s
1990s
2000s
© Annet Aris
PC
Recent technological game changers
Mobile telephony
Broadband
World wide web
Search
1980s
2010s
1990s
2000s
© Annet Aris
PC
Web 2.0, social
Recent technological game changers
Mobile telephony
Smart phones, tablets, apps
Web 2.0, social
Broadband
World wide web
Search
1980s
2010s
1990s
2000s
© Annet Aris
PC
8
Impact of digitization
Technological
game
changers
Tipping point
behavior
Value capture
by new entrants
New rules of
game for
incumbents
© Annet Aris
Technological game changes are adopted exponentially
Old behaviour and preferences will not disappear but new behaviour
will gain ground quickly
Expert pre-selection
(media companies)
Social recommen-
dations
Usage based recom-
mendations (e.g. col-
laborative filtering)
Search
How do people find content?
Old New?
Per piece
Subscription
Free + advertising
Piracy
How do people pay for content?
Old New?
Entertainment
Information
Opinions
Data
What type of content?
Old New?
Employed
Professionals
Talent Communities
Users
How will content be generated?
Old New?
Freelance
Professionals
Mass (e.g. TV, newspapers)
Behavioural targeting (e.g. search,
Portals)
Personal recommendations
(e.g. social media)
How will advertising evolve?
Old New?
Niche (e.g. magazines, cable TV)
© Annet Aris
Smart phone adoption surpasses Internet adoption
10Source: Mary Meeker, www.kpdc.com/internettrends2013
11
Household broadband penetration* and Internet advertising EMEA
Percent
0
10
20
30
40
50
60
70
1 2 3 4 5 6 7 8 9 10 11 12 13 14f 15f 16f 17f
12
* Estimation for 2001-2007
Source: PWC Outlook, OECD, own analysis
Household
broadband
Penetration
(%)
Internet
Advertising
Share (%)
Year
Reach,
frequency
by segment
Payment
13
Adoption barriers in advertising ecosystem
Consumer
Advertiser
Media
company
Agency
Digital
Capa-
bilities
Measur
ment/
ROI
Quality of
inventory
Complex
technology
landscape
© Annet Aris
14
Marketeers late adopters of new technology
Technology roll-
out
Consumer
adoption
Marketeer
adoption
Time
Percentage
Source: Annet Aris
15
Impact of digitization
Technological
game
changers
Consumer/
advertiser
Tipping point
behavior
Value capture
by new entrants
New rules of
game for
incumbents
© Annet Aris
The traditional media industry mostly in a reactive mode with regard to
digitization
16
New global giants are taking over the game in digital world
17
http://www.businessinsider.com/alibaba-ipo-
facts-2014-3
10 out of 25 “non-USA”,
of which:
• 6 from Asia
• 2 from Russia
• 1 from Latin America
• 1 from Europe
$150-$200bn?
There is a difference between international scale effects and network
externalities
18
Scale
effects
Network
Externalities
© Annet Aris
Facebook is one of main drivers of increased time spend on social
media
Type of network externalities
CONSUMER
© Annet Aris
Apple’s ecosystem
Apps
iBooks
Ads
iTunes
account
iTunes
account
© Annet Aris
Type of network externalities
CONSUMER
PRODUCTS
© Annet Aris
Google network effects
Moreandbetterfreeservices
© Annet Aris
Will Google drive the change in the advertising eco system?
Adwords
Adsense
Admob
Ad technology
platform
Unsold TV inventory
In game advertising
Intelligent display advertising
Real Time Display
Ad auction
Search
Display
© Annet Aris
Advertising optimization
for publishers
Buildupofoperatingsystems
Adwords Adsense Admob
Larger and better advertising offering
BIG
Data analysis!
Paid content services
Moreandbetterfreeservices
© Annet Aris
Google network effects
The virtuous cycle
26
External
network
effects
Cash
© Annet Aris
Dominant
revenue
positions
Acquisition
best start-
up’s/
talents
Googles acqusitions since Motorola
27
Source: http://en.wikipedia.org/wiki/List_of_mergers_and_acquisitions_by_Google
Type of network externalities
CONSUMER
ECOSYSTEM
© Annet Aris
BIG DATA
Impact of digitization on industry structure
29
Key characteristics
• No competition
• High barriers to entry
• High profitability
• Low consumer benefits
Monopoly Oligopoly
Perfect
competition
• Limited competition
• Medium barriers to entry
• Profitability depends on
industry conduct
• Medium to high consumer
benefits
• High competition
• Low Barriers to entry
• Low profitability
• Medium to high consumer
benefits
Examples
• US telco’s/cable co’s
• US local newspapers
• Internet giants?
• TV broadcasters
• Magazines/ newspapers
• Music majors
• Independent TV
producers
• Free lance journalists
• Book publishing
Impact
digitization
© Annet Aris
• Search
• Portals
• Social
networks
• E-commerce
• Telecom
Impact of digital on industry structure
• Mobile
• Set top
• PC
• Websites
• Applications
• Consumers
• Hidden
talents
• Crowds
Content Creator
Content
packager
Platform
operator
Content bundler
Hard-/ Software
provider
Impact
on
Industry
structure
• More
competion
• More
hypes
• Competitive
oligopolies
• Functional
monopolies?
• Competitve
oligopolies
• Competitive
oligopolies
For discussion Unfavourable
Favourable
Mixed
New
entrants
Role in
value
chain
© Annet Aris
User
?
Content Creator
Content
packager
Platform
operator
Content bundler
Hardware
provider
• Pay TV
• Cable operators
Terrestial
Satelitte
Cable
TV
Game console
TV channels
Newspapers/
magazines
Music majors
Artists
TV/Movie
Producers
Sport associations
Journalists
Industry
structure
Competition/
Oligoploy
Friendly
oligopoly
Regulated
monopoly/
competitive
oligopoly
Regional
monopoly/
competitive
oligopoly
Competitive
oligopoly
31
Impact of digitization
Technological
game
changers
Consumer/
advertiser
Tipping point
behavior
Value capture
by new entrants
New rules of
game for
incumbents
© Annet Aris
The traditional media industry mostly in a reactive mode with regard to
digitization
32
Traditional strategy approaches do not work in the current situation..
Levels of uncertainty
3
Adoption of internet
services
Range of possible out-
comes around 2-3 key
uncertainties
A range of futures
Portfolio of Big bets,
Options to play, No
regret moves
Roll out of
networks
Description
Example situations
Can develop a
strategically relevant
forecast
1
A clear future
3-5 year strategy
plans
Strategic Approach
2
Sale of mobile licenses
A few distinct outcomes
define the future
Alternative futures
1
2
3
Scenario planning
4
Next Technogical
game changers
Multiple dimensions
of uncertainty; most
difficult to forecast
the future
True ambiguity
?
Strategic capability
building?
Source: Curtney, Kirkland and Viquerie, Strategy under uncertainty © Annet Aris
THE STRATEGIC BUILDING BLOCKS IN LEVEL 3
Large
investment
Small
investment
High risk Low risk
No-regret
move
Big
bet
Safety
net
Real
options
Source:“Robust Adaptive Strategies,” by Eric Beinhocker, Spring 1999, Sloan , Management Review, Vol. 40, no. 3
KEY STRATEGY DECISIONS NETWORK OPERATORS
34
Network
operators
Upgrade
network
• Fibre
• LTE/4G
Regulation
• Network
Access
• Net
neutrality
Internet
services
• Content
• Payment
• Cloud
Data offering
• Pricing
• Customer
service
• Sales-
channels
© Annet Aris
KEY STRATEGIC INITIATIVES
Large
investment
Small
investment
High risk Low risk
No-regret
move
Big
bet
Safety
net
Real
options
Source:“Robust Adaptive Strategies,” by Eric Beinhocker, Spring 1999, Sloan , Management Review, Vol. 40, no. 3
• Network
investments
• Mobile/fixed
integration?
Internet
services
Regulatory
agreements?
Operational
excellence
(pricing,
service,
channels..)
© Annet Aris
36
Traditional strategy approaches do not work in the current situation..
Levels of uncertainty
3
Adoption of internet
services
Range of possible out-
comes around 2-3 key
uncertainties
A range of futures
Portfolio of Big bets,
Options to play, No
regret moves
Roll out of
networks
Description
Example situations
Can develop a
strategically relevant
forecast
1
A clear future
3-5 year strategy
plans
Strategic Approach
2
Sale of mobile licenses
A few distinct outcomes
define the future
Alternative futures
1
2
3
Scenario planning
4
Next Technogical
game changers
Multiple dimensions
of uncertainty; most
difficult to forecast
the future
True ambiguity
?
Strategic capability
building?
Source: Curtney, Kirkland and Viquerie, Strategy under uncertainty © Annet Aris
Googles acqusitions since Motorola
37
Source: http://en.wikipedia.org/wiki/List_of_mergers_and_acquisitions_by_Google
New role of management: create an agile and learning organization
38
Strategy
planning
Strategic
learning
• Portfolio of intiatives
• Do it, Try it, fix it
• Capture learnings across organization
© Annet Aris
THANK YOU!!
39

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Annet Aris - New rules of game in the digital world

  • 1. 0 Annet Aris Brussels, May 22, 2014 Copyright 2014 Annet Aris. No part of it may be circulated, quoted, or reproduced for distribution without prior written approval from Annet Aris. This material was used by Annet Aris during an oral presentation; it is not a complete record of the discussion. New rules of game in the digital world: from strategic planning to strategic learning Sanoma Media Parade
  • 2. My perspective on the media and internet value chain Content Creator Content packager Network operator Content bundler Hard-/ Software provider © Annet Aris * * Until 2011
  • 3. 2 Impact of digitization Technological game changers Tipping point behavior Value capture by new entrants New rules of game for incumbents © Annet Aris The adoption cycle of digital technology
  • 4. What are Technological Game Changers? © Annet Definition Game Changer: 1. Offers true new benefits 2. Easy to use 3. Affordable 4. Ecosystem in place © Annet Aris
  • 5. Recent technological game changers Mobile telephony World wide web Search 1980s 2010s 1990s 2000s © Annet Aris PC
  • 6. Recent technological game changers Mobile telephony Broadband World wide web Search 1980s 2010s 1990s 2000s © Annet Aris PC
  • 7. Recent technological game changers Mobile telephony Broadband World wide web Search 1980s 2010s 1990s 2000s © Annet Aris PC Web 2.0, social
  • 8. Recent technological game changers Mobile telephony Smart phones, tablets, apps Web 2.0, social Broadband World wide web Search 1980s 2010s 1990s 2000s © Annet Aris PC
  • 9. 8 Impact of digitization Technological game changers Tipping point behavior Value capture by new entrants New rules of game for incumbents © Annet Aris Technological game changes are adopted exponentially
  • 10. Old behaviour and preferences will not disappear but new behaviour will gain ground quickly Expert pre-selection (media companies) Social recommen- dations Usage based recom- mendations (e.g. col- laborative filtering) Search How do people find content? Old New? Per piece Subscription Free + advertising Piracy How do people pay for content? Old New? Entertainment Information Opinions Data What type of content? Old New? Employed Professionals Talent Communities Users How will content be generated? Old New? Freelance Professionals Mass (e.g. TV, newspapers) Behavioural targeting (e.g. search, Portals) Personal recommendations (e.g. social media) How will advertising evolve? Old New? Niche (e.g. magazines, cable TV) © Annet Aris
  • 11. Smart phone adoption surpasses Internet adoption 10Source: Mary Meeker, www.kpdc.com/internettrends2013
  • 12. 11
  • 13. Household broadband penetration* and Internet advertising EMEA Percent 0 10 20 30 40 50 60 70 1 2 3 4 5 6 7 8 9 10 11 12 13 14f 15f 16f 17f 12 * Estimation for 2001-2007 Source: PWC Outlook, OECD, own analysis Household broadband Penetration (%) Internet Advertising Share (%) Year
  • 14. Reach, frequency by segment Payment 13 Adoption barriers in advertising ecosystem Consumer Advertiser Media company Agency Digital Capa- bilities Measur ment/ ROI Quality of inventory Complex technology landscape © Annet Aris
  • 15. 14 Marketeers late adopters of new technology Technology roll- out Consumer adoption Marketeer adoption Time Percentage Source: Annet Aris
  • 16. 15 Impact of digitization Technological game changers Consumer/ advertiser Tipping point behavior Value capture by new entrants New rules of game for incumbents © Annet Aris The traditional media industry mostly in a reactive mode with regard to digitization
  • 17. 16 New global giants are taking over the game in digital world
  • 18. 17 http://www.businessinsider.com/alibaba-ipo- facts-2014-3 10 out of 25 “non-USA”, of which: • 6 from Asia • 2 from Russia • 1 from Latin America • 1 from Europe $150-$200bn?
  • 19. There is a difference between international scale effects and network externalities 18 Scale effects Network Externalities © Annet Aris
  • 20. Facebook is one of main drivers of increased time spend on social media
  • 21. Type of network externalities CONSUMER © Annet Aris
  • 23. Type of network externalities CONSUMER PRODUCTS © Annet Aris
  • 25. Will Google drive the change in the advertising eco system? Adwords Adsense Admob Ad technology platform Unsold TV inventory In game advertising Intelligent display advertising Real Time Display Ad auction Search Display © Annet Aris Advertising optimization for publishers
  • 26. Buildupofoperatingsystems Adwords Adsense Admob Larger and better advertising offering BIG Data analysis! Paid content services Moreandbetterfreeservices © Annet Aris Google network effects
  • 27. The virtuous cycle 26 External network effects Cash © Annet Aris Dominant revenue positions Acquisition best start- up’s/ talents
  • 28. Googles acqusitions since Motorola 27 Source: http://en.wikipedia.org/wiki/List_of_mergers_and_acquisitions_by_Google
  • 29. Type of network externalities CONSUMER ECOSYSTEM © Annet Aris BIG DATA
  • 30. Impact of digitization on industry structure 29 Key characteristics • No competition • High barriers to entry • High profitability • Low consumer benefits Monopoly Oligopoly Perfect competition • Limited competition • Medium barriers to entry • Profitability depends on industry conduct • Medium to high consumer benefits • High competition • Low Barriers to entry • Low profitability • Medium to high consumer benefits Examples • US telco’s/cable co’s • US local newspapers • Internet giants? • TV broadcasters • Magazines/ newspapers • Music majors • Independent TV producers • Free lance journalists • Book publishing Impact digitization © Annet Aris
  • 31. • Search • Portals • Social networks • E-commerce • Telecom Impact of digital on industry structure • Mobile • Set top • PC • Websites • Applications • Consumers • Hidden talents • Crowds Content Creator Content packager Platform operator Content bundler Hard-/ Software provider Impact on Industry structure • More competion • More hypes • Competitive oligopolies • Functional monopolies? • Competitve oligopolies • Competitive oligopolies For discussion Unfavourable Favourable Mixed New entrants Role in value chain © Annet Aris User ? Content Creator Content packager Platform operator Content bundler Hardware provider • Pay TV • Cable operators Terrestial Satelitte Cable TV Game console TV channels Newspapers/ magazines Music majors Artists TV/Movie Producers Sport associations Journalists Industry structure Competition/ Oligoploy Friendly oligopoly Regulated monopoly/ competitive oligopoly Regional monopoly/ competitive oligopoly Competitive oligopoly
  • 32. 31 Impact of digitization Technological game changers Consumer/ advertiser Tipping point behavior Value capture by new entrants New rules of game for incumbents © Annet Aris The traditional media industry mostly in a reactive mode with regard to digitization
  • 33. 32 Traditional strategy approaches do not work in the current situation.. Levels of uncertainty 3 Adoption of internet services Range of possible out- comes around 2-3 key uncertainties A range of futures Portfolio of Big bets, Options to play, No regret moves Roll out of networks Description Example situations Can develop a strategically relevant forecast 1 A clear future 3-5 year strategy plans Strategic Approach 2 Sale of mobile licenses A few distinct outcomes define the future Alternative futures 1 2 3 Scenario planning 4 Next Technogical game changers Multiple dimensions of uncertainty; most difficult to forecast the future True ambiguity ? Strategic capability building? Source: Curtney, Kirkland and Viquerie, Strategy under uncertainty © Annet Aris
  • 34. THE STRATEGIC BUILDING BLOCKS IN LEVEL 3 Large investment Small investment High risk Low risk No-regret move Big bet Safety net Real options Source:“Robust Adaptive Strategies,” by Eric Beinhocker, Spring 1999, Sloan , Management Review, Vol. 40, no. 3
  • 35. KEY STRATEGY DECISIONS NETWORK OPERATORS 34 Network operators Upgrade network • Fibre • LTE/4G Regulation • Network Access • Net neutrality Internet services • Content • Payment • Cloud Data offering • Pricing • Customer service • Sales- channels © Annet Aris
  • 36. KEY STRATEGIC INITIATIVES Large investment Small investment High risk Low risk No-regret move Big bet Safety net Real options Source:“Robust Adaptive Strategies,” by Eric Beinhocker, Spring 1999, Sloan , Management Review, Vol. 40, no. 3 • Network investments • Mobile/fixed integration? Internet services Regulatory agreements? Operational excellence (pricing, service, channels..) © Annet Aris
  • 37. 36 Traditional strategy approaches do not work in the current situation.. Levels of uncertainty 3 Adoption of internet services Range of possible out- comes around 2-3 key uncertainties A range of futures Portfolio of Big bets, Options to play, No regret moves Roll out of networks Description Example situations Can develop a strategically relevant forecast 1 A clear future 3-5 year strategy plans Strategic Approach 2 Sale of mobile licenses A few distinct outcomes define the future Alternative futures 1 2 3 Scenario planning 4 Next Technogical game changers Multiple dimensions of uncertainty; most difficult to forecast the future True ambiguity ? Strategic capability building? Source: Curtney, Kirkland and Viquerie, Strategy under uncertainty © Annet Aris
  • 38. Googles acqusitions since Motorola 37 Source: http://en.wikipedia.org/wiki/List_of_mergers_and_acquisitions_by_Google
  • 39. New role of management: create an agile and learning organization 38 Strategy planning Strategic learning • Portfolio of intiatives • Do it, Try it, fix it • Capture learnings across organization © Annet Aris