MBA dissertation


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MBA Dissertation on Digital Convergence authored in 2010.

This Dissertation scored a distinction rank of 73%- one of the top marks in the University (in a class of 84 students)

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MBA dissertation

  1. 1. DIGITAL AVATAR- The Strategies for Digital Convergence 099018609 University of Leicester 8/26/2010
  2. 2. DIGITAL AVATAR- The Strategies for Digital Convergence Digital Avatar- The Strategies for Digital Convergence Student Number: 099018609 August 2010Dissertation submitted to the University of Leicester in partial fulfilment of the requirements for the degree of Masters of Business Administration (MBA-Full Time) Sep 2009-2010MBA Dissertation by Student no. 099018609 Page 2
  3. 3. DIGITAL AVATAR- The Strategies for Digital Convergence DIGITAL AVATAR- THE STRATEGIES FOR DIGITAL CONVERGENCE TABLE OF CONTENTS:CONTENT PAGE NUMBERCover page……….……………………………………………….……………………1Title Page………………………………………………………….……………………2Table of Contents……………………………………………………………………..3Acknowledgements ………………………………………..............................8Executive Summary………………………………………………..………………11Chapter 11.1 Introduction for dissertation………………………………………………..141.1.1 Scene Setting: The making of Digital Avatar……………………….…14MBA Dissertation by Student no. 099018609 Page 3
  4. 4. DIGITAL AVATAR- The Strategies for Digital Convergence1.2 Changing Market Place………………………….................................151.3 Objective of the Research …………………………………………………..19Chapter 2……………………………………………………………………………202. Literature Review…………….……………………………………………………20 • 2.2.1 Literature Review on Digital Convergence…..…………………21 • 2.2.2 Literature Review on Strategy Perspective….…………………25 • 2.2.3 Literature Review on Strategic Alliances………..………………26 • 2.2.4Literature Review on Bundling…………………….………………34 • 2.2.5Literature Review on Integration Strategy………..……………43 • 2.2.6 Emerging Questions: Research Questions ………….…………49Chapter 3……………………………………………………………………………513. Research Methodology……….…………………….……………………………51Chapter 44. Data Analysis: Views on transformation of Digital Avatar………….....574.1 Data Analysis –Strategic Alliance……..……………………………………57 • 4.1.1 Strategic Alliances- Nature of strategic alliance..................59 • 4.1.2 Strategic Alliance & cross-media participation………………..71 • 4.1.3 Social Marketing due to Strategic Alliance……………………..78 • 4.1.4 Telcos seek a solution through Strategic Alliance…………….81MBA Dissertation by Student no. 099018609 Page 4
  5. 5. DIGITAL AVATAR- The Strategies for Digital Convergence • 4.1.5 Conclusion………………………………………………….………...884.2 Data Analysis -Bundling Strategy………………………………………….89 • 4.2.1 Attractiveness of Bundling…………………………………………90 • 4.2.2 Bundling strategy to retain customer base………….………..98 • 4.2.3 Bundling eases audience hyper-targeting……………….……104 • 4.2.4 Conclusion……………………………………………………….….1074.3 Data Analysis -DigitalIntegration…………………………………………………………………………109 • 4.3.1 Integrate to create synergies……………………………………110 • 4.3.2 Organisational challenges with Integration Strategy……….120 • 4.3.3 Marketing Communication currently is disintegrated………122 • 4.3.4 Conclusion………………………………………….……………….127Chapter 5…………………………………………………...........................1285.1 Discussion: Analysing the transformation of Digital Avatar…………128 • 5.2 Discussion over critical review of Digital Convergence…….…129 • 5.3 Discussion over Bundling Strategy……………………………….130 • 5.4 Discussion over Strategic Alliance………………………………..137 • 5.5 Discussion over Integration Strategy…………………………….140 • 5.6 Conclusion of Discussion……………………………………………..144MBA Dissertation by Student no. 099018609 Page 5
  6. 6. DIGITAL AVATAR- The Strategies for Digital ConvergenceChapter 6…………………………………………………………………………1476.1 Recommendations……………………………………………………………1476.2 Limitations of the research…………………………………………………1516.3 Conclusion of Dissertation: Digital Avatar transformed...………….153Chapter 7………………………………………………………………………….1567.1 Bibliography……………………………………………………..……………1567.2 Conferences attended………………………………………………………1827.3 References of Interviews.........................................................1837.4 List of Websites Accessed………………………………………………….185Chapter 88. Appendix………………………………………………………………………189Annexure 1: Contents of the DVD ………………………………………………….……189Annexure 2.1: Profile of 20 Senior Professionals interviewed………………1902.2 Complete set of questions………………………………………………………………2012.3 Sample of Consent Form…………………………………………………………………205MBA Dissertation by Student no. 099018609 Page 6
  7. 7. DIGITAL AVATAR- The Strategies for Digital Convergence2.4 Consent Form……………………………………………………………………………………2072.5 Supplementary Charts……………………………………………………………………..2102.5. a) Thematic Chart for Strategic Alliance ………………………………………2102.5. b) Navigation Chart of key strategies ……………………………………………211END………………………………………………………………………………….212MBA Dissertation by Student no. 099018609 Page 7
  8. 8. DIGITAL AVATAR- The Strategies for Digital Convergence ACKNOWLEDGEMENTSI am pleased to offer my sincere thanks and heartfelt gratitude to mysupervisor, Professor Steve Brown for his constant support, guidance andmotivation to successfully complete the dissertation. I can‘t stop myselffrom saying that it would not have been possible without ProfessorBrown‘s dedicated mentoring and encouragement. Professor Brown‘svision, immaculate thought process greatly helped me refine my ideasand organize the emanating views into the carefully drafted dissertation.My sincere thanks to the module leaders, faculty and staff members ofthe School of Management, University of Leicester for imparting theirvaluable knowledge and extending their continued support to make thisyear an enlightening experience for me.I have always had a passion for communications industry and thank theopportunity to serve this industry for 7 years of my life, as a newspresenter and finance news journalist. Towards my contribution to theacademic world, I am highly obliged to present this dissertation to theMBA Dissertation by Student no. 099018609 Page 8
  9. 9. DIGITAL AVATAR- The Strategies for Digital Convergenceprestigious University of Leicester and thank the University for giving methis opportunity to gain knowledge and conduct this research. As aresponsible professional, I take the opportunity to state that I will beobliged to offer my contributions to the University of Leicester even in thefuture.I am highly obliged to the 20 Senior Professionals who have given metheir precious time and valuable information, without which thisdissertation would not have been successful. I hereby offer my gratitudeto: Andrew McGrath, Executive Director (Commercial), Virgin Media ;John Denton, Managing Editor, TV Platforms, BBC London; GiulianoStiglitz, CEO, Orange Advertising (USA) & Global Sales Director (UK),Orange-FT; Tim Hussain, Head of Mobile & Video Advertising, BSkyB; PaulCowan, VP, New Ventures, Syncapse Ltd.; Eric Elia, VP, TV Solutions,Brightcove Inc; Tom Weiss, CEO, TV Genius Ltd; Harry Strasser,Executive Partner - Digital Convergence and Innovation, Germany; PeterBrimacombe, Former Vice President- Strategy at Disney UK- now anindependent consultant, London; Penny Power, Director, Ecademy UK;Aaron Bogucki, Senior Digital Campaign Manager, Universal Music; AdamField, Head of Social Media, Media Contacts UK; Carolyn Morgan,Managing Consultant, Penmaen Media; Oli Shaw, Digital Director, Oli, UK;Triona Campbell, Company Director of CR Films Entertainment, Ireland;Paul Armstrong, Social Media Director, Kindred Agency Limited; CraigMBA Dissertation by Student no. 099018609 Page 9
  10. 10. DIGITAL AVATAR- The Strategies for Digital ConvergenceElder, Online Communications Editor, Conservatives; Endaf Kerfoot,Thinker-in-Chief, Brand New Adventures UK; Jack Willis, AccountsManager, Marketing Grin, UK and Edmund Chambers, Key AccountsManager, Affiliate Window, UK.I offer my special thanks to the world of academia and the scholars whohave contributed to the fundamental research about digital convergenceand allied strategies that this dissertation has made an attempt toresearch. I also offer special thanks to my parents and sister Vartika fortheir constant support, guidance and encouragement.MBA Dissertation by Student no. 099018609 Page 10
  11. 11. DIGITAL AVATAR- The Strategies for Digital Convergence EXECUTIVE SUMMARYThe 21st century is fast integrating the world‘s media, telecommunicationsand information technology and online industries under a single platform.Globally the communications industry is undergoing a transformationowing to technological advancement and massive investment flows in theaforementioned four industries, leading to revolutionary changes in thedigital eco-system. This dissertation researches the digital convergencephenomenon that has been brought about by coming together (and clash)of the eco-systems of four industries- media, telecommunications,internet and technology. Such converging (and diverging) businessobjectives are building interesting scenarios where vicious competitionand intense inter-dependence are co-existing. In order to capitalizethe separate yet converging business interests, the digital convergenceMBA Dissertation by Student no. 099018609 Page 11
  12. 12. DIGITAL AVATAR- The Strategies for Digital Convergenceindustry calls for a strong strategic orientation to mentor the change. Thebiggest strategic issue concerning the Digital Convergenceindustry is the challenge to capitalise on the newly-emergingdistribution mechanisms of information flow. This dissertationanalyses the strategies to encash the potential benefits ofdistributing content across the multiple-platforms that has beencreated by the digital confluence of the four industries. The keystrategies responsible for bringing around the Digital Convergencetransformation are Strategic Alliance, Bundling and Integration and havebeen explored in this dissertation. Based on a qualitative researchmethodology, views from a carefully selected sample of 20 highly-influential professionals (media & communications industry) have beencompiled over in-depth interviews and data has been analysed usingthematic analysis. The dissertation observes that a creative combinationof the three strategies has a tremendous potential to lead the digitalconvergence industry towards creating converged communicationapplications that can transform human lives. Though in the currentcircumstances, issues over digital rights, existence of a standard metricfor performance evaluation, skilled talent to meet the burgeoning demandand user-privacy concerns still remain unanswered. But, once thesebarriers are crossed, digital convergence can have a powerful impact onthe way the world communicates and interacts. To a consumer, digitalconvergence would mean an enhanced digital experience, easierMBA Dissertation by Student no. 099018609 Page 12
  13. 13. DIGITAL AVATAR- The Strategies for Digital Convergenceapplications and convenient multiple-access to information. Convergencetranscends the geographical and physical barriers of providing informationto innovate services and applications to a point where almosteverything - and everyone - is connected.Such is the impact ofdigital convergence that its omnipresence reaches the user attheir point of location. CHAPTER 1MBA Dissertation by Student no. 099018609 Page 13
  14. 14. DIGITAL AVATAR- The Strategies for Digital Convergence INTRODUCTION 1.1 Scene Setting: The making of Digital AvatarComing together of media & entertainment, telecommunications andinformation technology (abbreviated as IT hereafter) and the online industriesare transforming the communications landscape by offering digitallyconverged solutions. Rapid technological advancement combined withmassive investments flows buoyed under deregulation and globalisationushered a revolution in the digital communications space. This strategictransformation called - Digital Convergence implies the blurring ofboundaries between the four industries. It offers easy-to-use, value-added digital solutions at cost-effective rates and faster pace, marking aparadigm shift towards a globallyintegrated digital omnipresence.MBA Dissertation by Student no. 099018609 Page 14
  15. 15. DIGITAL AVATAR- The Strategies for Digital ConvergenceThis strategic transformation is addressed in the title of the MBAdissertation as ‘Digital Avatar-The Strategies for DigitalConvergence’…..a transformation unfolding. ‘Avatar’ meaning‗metamorphose: transformation‘ (Collins English Gem Dictionary,1966:325). Avatar implies ‗transformation of a single soul‘, is originally aword from Sanskrit language and hails its origin to Hindu mythology. Butnow, the word ‘avatar’ has gained wide acceptance in English language.Evidence of a global familiarity to the word ‘avatar’ is well documented ina recent Hollywood movie (James Camerons science-fiction epic, 2010) bythe name ‘Avatar’ (2010). The Title of this dissertation hence implies‘avatar’ as transformation of traditional communication practices to itspresent form of converged digital version. Hence ‘Digital Avatar’ is thedissertation analysing the strategies for bringing about asuccessful and sustainable Digital Convergence. 1.2 Changing Market PlaceThe stages that have led to the transformation of digital convergencehave left an impact with the passing of each era of the time-line. Thefirst phase (1970s-1990s) of the current millennium affected traditionalprint business with the substantial growth of online applications, withadvertising revenues diverting to the emerging online players. Even theMBA Dissertation by Student no. 099018609 Page 15
  16. 16. DIGITAL AVATAR- The Strategies for Digital Convergencewave of electronic commerce (e-commerce) applications hit the retail-sales inthe high-street stores. Traditional players like newspapers and magazinesstruggled to survive on subscription revenues amidst decreasingnewsprint demand. Among them, the only survivors were the specialistsegments- like financial news content, lifestyle magazines (example: finewine, fashion, travel et cetera). The second phase (mid-1990s) witnessed anexplosion of mobile communication. The online media continued to growin this time-period and did not much affect the television players.Currently, the third phase (year-2000 onwards) is transforming itselfboosted by high-speed net connected TV. It means a bright side forinternet and media content producers but pose a tough challenge to thecurrent distribution channels, namely telecom, satellite and cable carriersand the broadcasters.But interestingly, amidst this transformation, increased customer focusand value-addition remain the driving factors in the heart of digitalconvergence. Applications like smartphones, on-the-move communicationdevices have become digital life-lines (those which can be used without fixed-lines example: Apple iPad). Traditional newspapers and magazines continue tosee a dwindling growth unless they form strong strategic alliances withonline business models or are recognised as strong brands names likeForbes, Time etc. The transformation will mark some players emerging asmovers and shakers of the changing landscape, giving nervous times toMBA Dissertation by Student no. 099018609 Page 16
  17. 17. DIGITAL AVATAR- The Strategies for Digital Convergencethe traditionally dominant players. The new dawn will see niche players(like Google and Facebook) who would completely change the rule of thegame-posing a stiff competition to the existing business models. There isa shift in the level playing field. Digital Convergence is paving way tointeresting business solutions to converge, compete and change thedigital eco-system. This calls for a strategic perspective to manage andmonetise the convergence. Hence, this dissertation critically analyses thethree key strategies- namely- strategic alliance, bundling and integrationthat are closely responsible in bringing about this digital transformation. Digital convergence will come with a lot of pride, discontent, politics, human emotions and a clash. A clash of titans of the four competing industries- media, internet, telecommunications (mobile) and technology (IT)- will be like strong tectonic plates colliding. Highly competitive digital world will give way to smart business solutions, innovative integration amidst the power struggle of colliding business interests over content and revenues. During this evolutionary phase, there is a constant battling on the level playing field with new entrants threatening existence of traditional old players or at times, the old playing joining hands with new-age business to promote mutual gains.MBA Dissertation by Student no. 099018609 Page 17
  18. 18. DIGITAL AVATAR- The Strategies for Digital Convergence Digital Hot Spots of the World Source: 2009 World Factbook cited in World Digital Media Report (Deloitte and Touche, 2009) Description: This picture reflects the level of global participation over digital access. Countries like USA, UK, Canada and most parts of Europe are found to be most active participants. While, parts of Africa, Latin America, Vietnam et cetra are found to still catch up the connectivity to log on to the world of digital experience.MBA Dissertation by Student no. 099018609 Page 18
  19. 19. DIGITAL AVATAR- The Strategies for Digital Convergence 1.3 Objective of the ResearchThis dissertation will critically analyse the strategies to build creativecombinations of competing digital technologies. Success in masteringdigital convergence can be gained by balancing the right strategies,maintaining high-standards of quality and using an effective pricingstrategy. The channels of distribution like- internet, mobile and mobileapplications, television, cable distributors have become significant playersin this emerging eco-system. But the most challenging strategic issue inthe evolving business model is the question of monetization of profitsover newly emerging distribution mechanisms.The transforming digitaleco-system is caught between questions over form of effective businessmodel, nature of agreement within business models, pricing strategy andevaluates the techniques for seeking cross-functional participation. Thisdissertation conducts a detailed evaluation of the strategies that can beMBA Dissertation by Student no. 099018609 Page 19
  20. 20. DIGITAL AVATAR- The Strategies for Digital Convergenceused by digital convergence industry to unleash an unprecedentedconsumer experience and monetise emerging business opportunities. CHAPTER 2 2. LITERATURE REVIEWThis part of the dissertation explores and empirical evidence based onpast literature to evaluate the applicability of the three key strategies –Strategic Alliance, Bundling and Integration, considered in thisresearch.MBA Dissertation by Student no. 099018609 Page 20
  21. 21. DIGITAL AVATAR- The Strategies for Digital Convergence Organisation of Literature Review The literature review for this dissertation is discussed under the following categories: 2.2.1. Digital Convergence giving a Strategy Perspective and discussing Moore‘s Law 2.2.2. Strategic Alliance 2.2.3. Bundling Strategy 2.2.4. Integration Strategy 2.2.1 Literature Review on Digital ConvergenceThe convergence phenomenon is unification or coming together ofpreviously distinct products that employ digital technologies (Yoffie,1997:2). Digital Convergence is essentially a fusion of technologies suchas voice (and telephony features), data (and applications) video andonline that now share resources and interact with each other to createnew efficiencies. It is a process by which separate media becomedigitalized to be delivered via the global networks (European Commission,Green Paper, 1997). Popularly known as the ‗media convergence man‘,Henry Jenkins describes the present moment of digital convergence, as aRenaissance culture- one being transformed - for both better andworse - as the social, cultural, political, and legal institutions respond tothe media change (Jenkins, 2007). The process of digital convergenceinvolves flow of content across multiple media platforms, mainly due toMBA Dissertation by Student no. 099018609 Page 21
  22. 22. DIGITAL AVATAR- The Strategies for Digital Convergencecooperation between multiple media industries targeting the mediaaudiences searching for varied entertainment experiences (Jenkins,2007:3). The information-age means blurring and redefinition of industryboundaries of the ‗new competitive landscape‘ (Bettis & Hitt, 1995;Porter, 2001; Sampler, 1998). Industry convergence ‗the converging oftwo or several hitherto separate industries‘ has tended to focus ondevelopments within the information technology, communications &media industries with further intensification of competition. Revolutionarychanges are taking shape and industry convergence owing to ‗digital‘convergence (Grant, 2008:209), (Yoffie, 1997; Lei, 2000; Stieglitz, 2003)cited in (Weaver, 2007:3). A strong driver for convergence is an‗electronic super-highway‘ that is beginning to bind together the globe asvoice, video and data converge, defining a new basket of digital,multimedia and interactive communication technologies (Negroponte,1995). The root causes for convergence are ‗innovation and competition‘brought about by digitization (Bernabo et al., 2009:3).Digitization compresses the information of bits and bytes (0s and 1s)that the computer can understand. Digital material can be reproduced atany resolution to offer unlimited bandwidth and storage.Digitization changes the distribution of intelligence and the transpositionof one medium to another so that information can be consumedMBA Dissertation by Student no. 099018609 Page 22
  23. 23. DIGITAL AVATAR- The Strategies for Digital Convergencedifferently by different people at different times thus, empowering users(Negroponte, 1995:231-2). Digitization will increase dramatically witheach generation becoming more advanced [digitally] than the precedingone. Being digital is not about the future: "We are not waiting for anyinvention. It is here. It is now" summarises (Negroponte, 1995:231).Information and digital content being self-multiplicative avoidredistribution losses (Rowley, 2008). Operation within the existingcapacity can give rise to economies of scale in production in advertisingand distribution of information (James & Trautman, 1990:13).Digital Convergence is an outcome of a technological revolution, but itsimpact is both economical and social. The economics of DigitalConvergence is justified by the empirical observation underMoore’s Law. Moores Law says that component density andperformance of integrated circuits doubles every year. Under MooresLaw, prices of technology-based products fall by 30% every year andabout 50% in every two years (Moore, 1965). "Reduced cost is one of the big attractions of integrated electronics and the cost advantage continues to increase as the technology evolves toward the production of larger and larger circuit functions on a single semiconductor substance" (Moore, 1965:115). Depiction:Gordon Moore at Intels headquarters at Santa Clara, California Image Source: Associated Press (AP)MBA Dissertation by Student no. 099018609 Page 23
  24. 24. DIGITAL AVATAR- The Strategies for Digital ConvergenceThis implies smart optimization, timely introduction of new processingtechniques, device structures and materials. Cost-benefits and qualityimprovements make digital convergence a strategically viablephenomenon (Sorensen et al., 2010:1). Moore‘s law has continuedunabated for 40 years (Thompson & Parthasarathy, 2006:21;Lundstrome, 2003). It is predicted that by year-2053, Moore’s Law willreach stunning new levels awakened by the progress on theDigital Convergence (, 2010). However, Moore(2000) has pointed out that the rapid decrease in semiconductor andcomputer prices may reflect a decreasing marginal utility as technologyreaches redundancy very soon as higher versions of technologicalproducts soon replace the previous counterparts.MBA Dissertation by Student no. 099018609 Page 24
  25. 25. DIGITAL AVATAR- The Strategies for Digital Convergence 2.2.2 Literature Review on Strategy PerspectiveStrategy is the art of creating value. Successful company‘s strategicanalysis is a value-creating system within which different economicactors-suppliers, business partners, allies, and customers-work togetherto co-produce value (Norman and Ramirez, 1993:65). Analysing thechanging digital space, Porter says, ‗Internet should be viewed as acomplement to, not a cannibal of, traditional ways of competing‘ (Porter2001,2). (Fransman, 2000), (Nyström & Hacklin, 2005) suggest thatconvergence will create new opportunities for both incumbents and newentrants in the firm of new technical possibilities and new marketopportunities. As indicated by (Grant, 2008) that ‗the greater the changein external environment, the more likely it is for the firm will depend onits internal resources and capabilities to create a secure foundation forlong term strategy‘. The unexplored potential in the complementaryfirms has been identified by (Brandenberger and Nalebuff, 1996:117),MBA Dissertation by Student no. 099018609 Page 25
  26. 26. DIGITAL AVATAR- The Strategies for Digital Convergencedefining the room for profitable cooperation. It is not the size of thefirm‘s resource base but much depends on the firm‘s ability to leverageits resources effectively by the means of converging, balancing and co-opting (Prahalad & Hammel, 1990). Hence, in strategic decision-making,cohesive and integrated role of the firm make it better enabled tocompete (Kay, 1999). 2.2.3 Literature Review on Strategic AlliancesA strategic alliance is a business relationship in which two or morecompanies, work to achieve a collective advantage, attempt to integrateoperational functions, share risks, and align their corporate culturesMBA Dissertation by Student no. 099018609 Page 26
  27. 27. DIGITAL AVATAR- The Strategies for Digital Convergence(Chan-Olmsted & Kang, 1998:34-5). Alliance may be in form of a simplelicensing agreement to a joint-marketing effort or joint-ventures.Companies are found to be interested in alliances to capitalize on differentexpertise, speed up a venture with combined resources and developeconomies of scope (Chan-Olmsted, 1998:35). Benefits of strategicalliances include conserving resources, sharing risk, reducing costs andimproving technological capabilities. Hence the rate of strategic allianceformation has increased radically (Dyer et al., 2001) cited in (Lee andDing, 2010:707).Networks formed by inter-firm alliances have received considerableattention from strategy and organization scholars. To better understandalliances, they are made to work in partnerships (Bleeke and Ernst,1992). Research on alliance outcomes has shown that preferred positionsin inter-organizational networks confer on firms such advantages ashigher innovation rates (Powell et al., 2005), lower financing costs (Uzzi &Gillespie, 2002), and higher performance (Baum et al.,2000; Burt, 1992).The relationship between network structure and advantage has prompteda large body of research on the patterns of alliance partner selection thatpropel network emergence (Gulati, 1995; Gulati & Garguilo, 1999) citedin (Baum et al., 2005). Much is now known about partner selectionMBA Dissertation by Student no. 099018609 Page 27
  28. 28. DIGITAL AVATAR- The Strategies for Digital Convergencecriteria and collaboration build-up (Larson, 1992; Li & Rowley, 2002;Oxley, 1997; Simonin, 1997).Strategic Alliances for PartnershipsFor digital convergence to work effectively it has to transcend a widerange of networks, devices, applications and content to offer high-speedconnectivity whenever and wherever (Miner, Google: 2008) cited in(Deloitte Report, 2008:133). Albarran and Dimmick (1996) identified therecent trends of conglomeration and consolidation in the media industriesas seen in multinational media conglomerates like News Corporation,Time Warner and Viacom expanding horizontally, vertically and globally tomaximize their growth potentials. Rise of communication empires reflecthigh level of interest for strategic alliance (Picard, 1996). Suchorganisations form strategic alliance under strong leadership, visionarymentorship and high visibility under high uncertainty. Alliance results ingreater stability and risk-reduction. This phenomenon has been witnessedin growth of the broadcaster CNN (Chan-Olmsted, 1998:35). Presenting askill-based view of the firm, Prahalad and Hamel, (1990) assert that it ispossible to conceive of a firm as a portfolio of core competencies.MBA Dissertation by Student no. 099018609 Page 28
  29. 29. DIGITAL AVATAR- The Strategies for Digital Convergence For instance, Finnish handset leader Nokia employs strategic actions to build [collaborate on] a sustainable competitive advantage in an emerging market by taking advantage of the opportunities arising from the convergence of digital home technologies cited in (Bunduchi & Berar, 2007:102).One important way of navigating the value-chain isthroughpartnerships. Companies specializing in one phase of the valuechain partner with companies who are able to manage other parts of thevalue-chain. The operators create value in the convergence process byseeking the most profitable partners for developing products and services(Nyström and Hacklin, 2005). Porter (1980, 1985) describes the needs forcorporations to identify and exploit inter-relationships among relatedbusinesses to reduce costs or enhance differentiation. Pitofsky (1992,1996) stressed the importance of alliances in the new global technologicalinnovation market. The development of ownership integration acrossmedia industry boundaries is well documented in recent years (Chan-Olmsted, 1998:35).Strategic Alliance for Core-competence:Global competition highlights asymmetries in the skill endowments offirms. Collaboration may provide an opportunity for one partner toMBA Dissertation by Student no. 099018609 Page 29
  30. 30. DIGITAL AVATAR- The Strategies for Digital Convergenceinternalize the skills of the other and thus improve its position both withinand without the alliance (Hamel, 1991:83). Hamel, points out that corecompetencies and value-creating disciplines are not distributed equallyamong firms. Core-competencies are built through a process ofcontinuous improvement and enhancement. A company that failed toinvest in core competence building will find it very difficult to enter inemerging markets (Prahalad and Hamel, 1990:15), (Prahalad, 2006).Competition is not only contributing to digital convergence but is alsopaving way for formation of strategic alliances. Such affiliations enablefirms to exploit core competencies while taking advantage ofsynergies with other companies (Bernabo et al., 2009). Companies areunder the pressure of responding to increasingly technical demands,network relationship management, that are virtually impossible toaccomplish as a single entity. Hence, engaging in an alliance, they give achance for another party to help shoulder the burden (financially and/ortechnologically) and allow a company to remain competitive (Bernabo etal., 2009). (Mello, 2003:3) says if the biggest pitfall to growth isthe failure to define a core business, the next biggest is thepremature abandonment of a core business. Hamel supports theemphasis on core competencies and suggests that inter-firmcompetition, as opposed to inter-product competition, is essentiallyconcerned with the acquisition of skills (Hamel, 1991:84). However,MBA Dissertation by Student no. 099018609 Page 30
  31. 31. DIGITAL AVATAR- The Strategies for Digital Convergencealliances must be carefully struck as there is uncertainty over futureknowledge requirements and where new products offer early-moveradvantages (Grant & Baden-Fuller, 2004:65). A change in strategicpriorities may suddenly make a partnership much more or much less vitalfor one of the partners (Franko, 1971), (Harrigan, 1985).Strategic Alliance for cost-optimization:Alliances can avoid many of the costs associated with knowledgetransactions across markets. However, it is observed that alliances limitopportunism by converting single period into multi-period games andfostering investments in trust (Gulati, 1995; Ring and Van de Ven, 1992;Simonin, 1997; Teece, 1992) cited in (Grant & Baden-Fuller, 2004:65).Effective strategic alliances overcome the problems of under-utilizedknowledge arising from incongruent product and knowledge domains.Strategic Alliances and ownership concern Strategic alliances are more efficient than internalization within a single firm in integrating and utilizing knowledge. The advantages of alliances are especially apparent under conditions of uncertainty and early mover advantages cited in (Grant and Baden-Fuller, 2004:65).MBA Dissertation by Student no. 099018609 Page 31
  32. 32. DIGITAL AVATAR- The Strategies for Digital ConvergenceAfter Telecommunications Act (1996), many media andtelecommunications companies have formed strategic partners inpreparation for the showdown in an integrated global informationmarketplace (Chan-Olmsted, 1998:34). Globalization has been widelycredited for provoking a shift to collaborative strategies (Ghemawat,Porter and Rawlinson, 1986; Hergert and Morris, 1988; Ohmae, 1989;Perlmutter and Heenan, 1986). Bargaining power at any point in timewithin an alliance is, ceteris paribus, a function of who needs whom themost. This, in turn, is a function of the perceived strategic importance ofthe alliance to each partner and the attractiveness to each partner ofalternatives to collaboration (Hamel, 1991:86).Although alliance break-ups and member withdrawal are also common,running as high as 50 percent in some industries (Broschak, 2004:608;Burt, 2000; Podolny & Page, 1998) but an understanding of them is basicto the development of realistic and informative models of alliancebehaviour and network dynamics (Kogut, 1989) cited in (Greve,2010:302-5). An ‘embeddedness’ perspective (Granovetter, 1985), inwhich alliances are viewed as economic transactions that occur in a socialcontext, is also common. Previous studies have suggested that partnerselection favours formation of alliances with firms that are relationally‗embedded‘ through prior direct ties and structurally ‗embedded‘ thoughnetwork connections to common third partners (Gulati & Gargiulo, 1999;MBA Dissertation by Student no. 099018609 Page 32
  33. 33. DIGITAL AVATAR- The Strategies for Digital ConvergencePodolny, 1994) cited in (Greve et al., 2010). This is not surprising, giventhe role of social interaction among partner firms in alliances in thedevelopment of the trust and cohesion are necessary for mutuallybeneficial inter-firm relationships (Larson, 1992; Li & Rowley, 1999;Mohr & Spekman, 1994; Ring & Van de Ven, 1992; Seabright, et al.,1992) cited in (Greve et al., 2010:302-5). Strategic alliance is better thanmerger and acquisitions as the industry prefers to have flexible and agilealliances (Kasama, NIFTY Corp., 2008) cited in (Deloitte Report,2008:106) & (Alaxender, 2001:482).But, its hard to escape the conclusion that the companies that aremaking most money are those that maintain a close guard. Cueing fromexamples from Apple Inc. and its applications, it is probably a goodstrategy to choose selective openness. As, Economist (May, 2010)looks at Microsoft, Apple and Google about the future of cloud computingwhere the three companies compete and collaborate when it suits theirbusiness objectives. The companies that will strive and in the future thosethat are most open to collaboration, and collaborative innovation(Tapscott, 2010). Openness through innovation across corporateboundaries is a result yielding strategy (Friedman, 2007), (Tapscott,2007).MBA Dissertation by Student no. 099018609 Page 33
  34. 34. DIGITAL AVATAR- The Strategies for Digital Convergence 2.2.4 Literature Review on Bundling StrategyBundling can be defined as a typical pricing strategy to offer two or moreproducts (goods or services) that are available for purchase as one singleproduct (Guiltinan, 1987; Gaeth et al., 1990 and Semonin, 1995). Productbundling has attracted increasing interest from researchers mainly withinthe fields of economics and marketing. Bundling is seen as a devicefor leveraging market power from one good to another (Whinston,1990) cited in (Saligner, 1995:85). It helps in reducing competitionthrough differentiation (Carbajo et al., 1990; Chen, 1997).Cost-saving aspect under bundling makes it a profitable strategy wellapplicable to most telecommunications companies product/service offerscutting across voice, video or internet access. Product bundling strategyinvolves retailing several identical products in a single package at areduced unit price (Adams & Yellen, 1976). Bundling can also becategorized as pure or mixed, with pure bundling referring to bundlesMBA Dissertation by Student no. 099018609 Page 34
  35. 35. DIGITAL AVATAR- The Strategies for Digital Convergencewhere the individual products cannot be purchased individually and mixedbundling referring to bundles where the individual products can bepurchased both as single products and also as part of the product bundle(Adams and Yellen, 1976).Adams and Yellen (1976) argue that mixed bundling at least weaklydominates pure bundling. (McAfee et al., 1989) suggest that while mixedbundling virtually always strictly dominates pure bundling, the optimalbundle price is sometimes greater than the sum of the prices of theindividual goods cited in (Saligner, 1995:86). Schmalensee (1984) wasone of the first authors who discussed bundling in a context thatfits the characteristics of e-commerce, described the phenomenonof heterogeneous buyers’ taste in a monopolistic market. Heassumes the marginal-utility for the second (reproduced) good to be zerofor all buyers. Study by Bakos & Brynjolfsson (1996, 1997, and 2000)analyzed why information goods can be sold with higher profits asbundles. Companies build customer-experience around the productby bundling-strategy as a means of selling potentially separablecomponents to customers, as integrated system or ‘bundle’,usually by collaborating with their B2B partners (Porter,1985:425). Core-product and services are sold as a bundle (example:Software-hardware maintenance package). This implies, marketers shouldcombine sales-leadership and deliver specialized-service.MBA Dissertation by Student no. 099018609 Page 35
  36. 36. DIGITAL AVATAR- The Strategies for Digital Convergence For example: Ericsson collaborated with Vodafone to create highly customized solutions for commercializing the new generation 3-G mobile system technologies offering convergence-benefits to consumers (Davis et al., 2007:186).Bundling as a profit Strategy: Paid content on the web advanced only from the year-2000 but compelled the academic thinking to analyze the effect of competition on bundling strategies of firms that sell information goods.Bundling entails cost savings, product complementariness, enlarged scopeof profitability, high costs and positive correlation of valuations (Salinger,1995) and creates entry-deterrence (Nalebuff, 1999). Complementors(example: Microsoft and Intel) increase the value of each others offerings andthe size of the total market. However, discord can develop in many areas,such as pricing, technology, standards, and control of the market, both interms of which company has the most influence over customers andwhich one gets the biggest slice of the pie. The issue of pricingperfectly captures this tension in a bundled offer. Ideally, thepricing will be pegged higher than complementor’s price. The firststep in managing relationships with complementor‘s is ‗to develop a deepMBA Dissertation by Student no. 099018609 Page 36
  37. 37. DIGITAL AVATAR- The Strategies for Digital Convergenceunderstanding of their economics, strategies and goals, their existingcapabilities, their incentives for cooperation, and any potential areas ofconflict, then, to gain an upper-hand‘ (Yoffie & Kwak, 2006:88-98). Now-a-days, unbundling strategies are moving towards quadruple play by incorporating mobile on top of home wire-line products. For example: NTL-Telewest in the UK bought Virgin to develop a new quadruple play company called Virgin Media. The advantage of ‘unbundled’ sales is the vendor’s ability to obtain the highest price for each component product from individual buyers, whereas bundling can increase sellers profit by extracting more consumer surplus by reducing the heterogeneity in buyers’ reservation prices (Adams and Yellen 1976; Schmalensee, 1984) cited in (Häubl, 2010:110-115).On contrary, (Ware & Dippon, 2010:54-64) analyse that communicationsnetwork are subject to unbundling at different levels for different services.Assessing the cost-benefit of unbundling is complicated because ofconvergence and competition among the video, wireless and telephoneproviders. While, bundled products/services marketers aim for cost-effectiveness and strive for better control over their promotional toolset(Silva-Risso et al., 1999) cited in (Foubert et al., 2010:880),(Stremerschand Tellis, 2002; Hanson and Martin, 1990). Unbundling of networks canadd disincentive to investment in new infrastructures when it may beMBA Dissertation by Student no. 099018609 Page 37
  38. 38. DIGITAL AVATAR- The Strategies for Digital Convergencecheaper to make use of regulated access to the existing national telecomsnetwork (European Union, Green Paper, 2007).Another stream of analyses has focused on how bundling affectscompetition. Economists such as Schmalensee (1984), McAfee et al.(1989), Saligner (1995) and Armstrong (1996) demonstrate that bundlingmay lead to effective price differentiation. Bundling can also act as amechanism of market foreclosure, creating concern of anti-competitivebehaviours cited in (Foubert, 2010:880).Information goods are presumed to have very low marginal costs. Chae(1992) has analyzed a subscription TV market where bundle is used dueto economies of scope in distribution technology, pricing and productiondecisions of a supplier. Bakos and Brynjolfsson (1999) have discussed thepricing and profits when marginal costs are negligible and customers haveidentically distributed valuations. They have shown that pure bundling oflarge numbers of goods is optimal. Chung and Sirbu (1999) establishedthat mixed bundling is the dominant strategy. Wu et al. (2008) solved thecustomized bundle pricing problem in which consumers are allowed tochoose up to N goods from a larger pool of J goods by considering thetrade-off between offering more choices and incurring greater menu cost.Fana et al. (2009) analyzed the bundling of a software product with adelivery and maintenance service cited in (Yang, 2010:473).MBA Dissertation by Student no. 099018609 Page 38
  39. 39. DIGITAL AVATAR- The Strategies for Digital ConvergenceLack of Standard MetricAnother important yet unexplored area of pricing for digital content is thelack of standard metric to evaluate financial performance of digitalcontent. Distorted revenues, costs and share prices have been matchedby the unreliability of the financial metrics that companies have adopted.The executives of companies conducting business over the Internet have,conveniently, downplayed traditional measures of profitability andeconomic value.Instead, they [executives of internet companies] have emphasized expansivedefinitions of revenue, numbers of customers that might somedaycorrelate with revenue [such as numbers of unique users (reach), numbers of sitevisitors, or click-through rates]. Creative accounting approaches have alsomultiplied. Indeed, the internet has given rise to an array of newperformance metrics that have only a loose relationship to economicvalue, such as pro forma measures of income that remove ‗non-recurring‘costs like acquisitions (Porter, 2003:4).‘The dubious connection between reported metrics and actual profitabilityhas only served the confusing signals about what has been working in themarketplace. The fact that those metrics have been taken seriously by thestock market has muddied the waters even further. For all these reasons,the true financial performance of many internet-relatedMBA Dissertation by Student no. 099018609 Page 39
  40. 40. DIGITAL AVATAR- The Strategies for Digital Convergencebusinesses is even worse than has been stated’ (Porter, 2001:5).However, (Bennison, 2009) points out that Google Analytics is a softwaretool to measure the success of your digital marketing has been availablefor a few years since the advent of Google Analytics is free to set up.[Analytics software measures the website‘s performance]. But this maynot be successful in evaluating true-economic value of digital content(Bennison, 2009).Freemium Model The internet customer is accustomed to free information. (Swatman et al., 2006:64)Some of the new-age thinkers researched the significance of Freemiumstrategy to target the paid user of content. In a ‗Freemium‘(free+premium) model, products/services are offered in free basic andpaid premium versions (Andersen, 2009b). The word freemium is created by combining the two aspects of the business model: free and premium (Heires, 2006:36). Freemium model works by offering basic web services like basic digital content in a downloadable format for free while charging a premium for advanced or special features.MBA Dissertation by Student no. 099018609 Page 40
  41. 41. DIGITAL AVATAR- The Strategies for Digital ConvergenceThe business model has gained popularity with Web 2.0 companies and ispopular for making advertising revenues by targeting the potential paidcustomer (Heires, 2006:36). The freemium model is especially relevant inthe case of digital media (internet) companies, where the creation ofrevenue streams is often most perplexing because of customerexpectations that basic services should be free.Digital content measures include straight usage statistics, the ImpactFactor, the Eigen factor and newer metrics that begin to take into accountthe linkages and interdependencies that characterize modern,interdisciplinary research. Though in the 1980s, Ives et al., (1983), Davis(1989), Baroudi and Orlikowski (1988) and Doll & Torkzadeh (1988)developed a number of general-purpose measures of success ofinformation systems. However, these measures are too general purposefor benchmarking. In addition, ‗they all focus on benefits from the pointof view of individual users as stakeholders, not management‘ cited in(Shang, 2000:1).Bundling occurs often where there is a strong and large-scale changeagenda, through peer pressure scope for providing cheaper alternativeswith limited resources (Willcocks & Oshri, 2009). Bundling strategy beinga pricing strategy usually comes under the regulation scanner. The mostnotable contributions to the literature exploring the regulation of amonopolist that screens its consumers include Sherman & Visscher (1982)MBA Dissertation by Student no. 099018609 Page 41
  42. 42. DIGITAL AVATAR- The Strategies for Digital Convergenceand Srinagesh (1986) who examine the effects of rate-of-returnregulation on two-part tariffs and Besanko et al. (1987, 1988), who studythe regulation of a quality- differentiated monopolist. However, Bakos andBrynjolfsson (2000) showed a non-monopolistic environment ofcompetition for information goods.MBA Dissertation by Student no. 099018609 Page 42
  43. 43. DIGITAL AVATAR- The Strategies for Digital Convergence 2.2.5 Literature Review on Integration StrategyVertical integration refers to a firm‘s ownership of vertically relatedactivities (Grant, 2008:350). The assumption behind theory of verticalintegration is reduction in transaction cost and attainment of marketshare by taking over the competitors (Ahn & Litman, 1997:13). It isuseful to concentrate on the core-competencies to help the firm assembleits news production and broadcast capabilities to experience a bettervertical integration of its resources. This move will also create barriers toentry for the firm (Prahalad & Hamel, 1990).Benefit of Integration:Empirical evidence on market dominance has been established byintegrating advantages and challengesof one player that are bredinto that of the other to create increasing market integration as studiedMBA Dissertation by Student no. 099018609 Page 43
  44. 44. DIGITAL AVATAR- The Strategies for Digital Convergenceby (Veugelers et. al, 2001; Rondi et al.,2003; Rondi and Vannoni, 2005,DeVoldere et al., 2004) cited in (Belderbos et al.,2009). Past studiessuggest that vertical integration is a way of increasing a firms value-added margins for a particular chain of processing from ultra rawmaterials to ultimate consumers. Research by (Arrow, 1975; Coase,1937; Williamson (1969, 1971, & 1975) noted integration economiesgained from shared facilities, information, or other resources cited in(Harrigan, 1985). Adelman (1949), Bork (1954), and Kaserman (1978)recognized the market power conveyed by this strategy, but the analysesthey employed in studying it were static (Harrigan, 1985:398). The aim ofan integration strategy is to accomplish a commanding position withinall stages of the value-chain to secure the largest possible marketdomination for the players involved. Porter suggests the other way toachieve advantage is strategic positioning—doing things differently fromcompetitors, in a way that delivers a unique type of value to customers.This can mean offering a different set of features, a different array ofservices, or different logistical arrangements. It creates operationalefficiency advantages. Operational effectiveness can take myriad forms,including better technologies, superior inputs, better-trained people, or amore effective management structure (Porter, 2001:10).Every economic revolution redefines the roles and relationships on whichofferings are based. This was true during the industrial revolution whenMBA Dissertation by Student no. 099018609 Page 44
  45. 45. DIGITAL AVATAR- The Strategies for Digital Convergencetechnological breakthroughs in the application of energy to useful workmade possible the factory system with its highly specialised division oflabour (Norman & Ramírez, 1993:2). As an outcome, integration resultsin creating more value per person (customer, supplier and employee) andin securing greater total profit from and for its financial and humanresources than all but a handful of other companies in any consumerindustry (Norman & Ramírez, 1993:4). The result is an integratedbusiness system that invents value by matching the various capabilities ofparticipants more efficiently than was ever the case in the past (Normanand Ramírez, 1993:4). The availability of digital information highways, incommerce will give consumers fast and increased access to a vastselection of goods and will also cause an evolution from retail channels toelectronic markets. The virtual products offered will be ordered on-screenand delivered direct to the home (Magretta, 1998; Ghosh, 1998) cited in(Wirtzab, 1999:19).The change from an industrial to an information society connected therewith will above all else be affected by the dynamics of technologicaldevelopments (Wirtzab, 1999). This change has been bolstered by birth ofinternet. The internet came as a strong force. This disruptive force brokedown the concentration of power from the hands of a few, to the hands ofmany. Andersen (2009a:3) asserts, ‗there have never been a morecompetitive market than the Internet, and every day the marginal cost ofMBA Dissertation by Student no. 099018609 Page 45
  46. 46. DIGITAL AVATAR- The Strategies for Digital Convergencedigital information is drastically reducing‘. In most upstreamtelecommunications markets, incumbents are subject to a number ofobligations, including a requirement not to engage in ‗undue‘ price andnon-price discrimination. However, enforcement of non-pricediscrimination is inherently difficult. In light of this, considerable academicliterature has focused on the ability and incentives of a verticallyintegrated operator to engage in non-price discrimination. By puttingdownstream rivals at a disadvantage, a vertically integrated operator isable to capture a higher share of the downstream profits (Crocioni, 2007:464). Further, (Yoffie, 1997) predicts that consumer multi-media industrywill change from three vertical businesses to five horizontal segments andsuggests that content providers are in the strongest position to prosper,while hardware companies face limited prospects. New informationtechnologies are divisive in allowing such a flexible, adaptive model toactually work (Castell, 2000:177). Digital technology allowed thepackaging of all kinds of messages including sound, images & data- anetwork was formed that was able to communicate its nodes withoutusing control centres (Castell, 2000:45).Lack of vertical integration may lead to a reduction in quality(Economides, 1996:22). By 2011, the world will witness truly interactivetelevision that will interface consumers, communications, content andcommerce into a seamlessly flow to and from other devices (Friedman,MBA Dissertation by Student no. 099018609 Page 46
  47. 47. DIGITAL AVATAR- The Strategies for Digital Convergence2010). With vertical integration one can be an efficient producer. Butvirtual integration makes one efficient and responsive to change at thesame time (Dell, 1998) cited in (Magretta, 1998:7). More opportunitiesalso mean more uncertainty and greater risk. Forecasts based onprojections from the past become unreliable. Factors that have alwaysseemed peripheral turn out to be key drivers of change in a companyskey markets. Invaders from previously unrelated sectors change the rulesof the game overnight (Normann and Ramírez, 1993:65-8).Economides & Woroch (1992) find that vertical disintegration is notdesirable for the firm that offers end-to-end service. Once disintegrated,its constituent parts realize lower total profits (Economides, 1996:22).The lessons of networks can be applied to industries where verticalrelations play a crucial role; conversely, the economic and legal learningdeveloped in the analysis of vertically-related industries can be applied tonetwork industries (Economides, 1996:4). In so in a competitiveenvironment, strategy is no longer a matter of positioning a fixed set ofactivities along a value chain. Increasingly, successful companies do notjust add value, they reinvent it. Their focus of strategic analysis is not thecompany or even the industry but the value-creating system itself, withinwhich different economic actors - suppliers, business partners, allies,customers work together to co-produce value (Prahalad, 2008) cited in(Leavy, 2008). Their key strategic task is the reconfiguration of roles andMBA Dissertation by Student no. 099018609 Page 47
  48. 48. DIGITAL AVATAR- The Strategies for Digital Convergencerelationships among this constellation of actors in order to mobilize thecreation of value in new forms and by new players. And their underlyingstrategic goal is to create an ever-improving fit between competenciesand customers. To put it another way, successful companies conceive ofstrategy as systematic social innovation: the continuous redesign ofcomplex business systems (Prahalad, 2008).The literature review has identified some gaps. Despite theenthusiasm building around digital convergence, significant factors likeregulation, standards, nature of business model, changing customerrequirements and management of dynamism in the industry remainignored. Little attention has been paid to the true total costs forconvergence were looming indirect costs may threaten to overpower thebenefits of cost reductions attained under Moore‘s law. It calls for astandard metric of evaluation of real-growth in the digital convergenceindustry. This real-growth parameter would remain unaffected by the un-real digital exuberance. This dissertation has made an attempt to analysethese issues in the Data Analysis section.MBA Dissertation by Student no. 099018609 Page 48
  49. 49. DIGITAL AVATAR- The Strategies for Digital Convergence Strategic Alliance Bundling Integration 2.2.6 Emerging QuestionsBased on the critical review of the empirical study of the phenomenon ofdigital convergence and strategies to compete in the converging market,a series of unanswered questions have sparked up. The greatest concernfor the digital convergence industry is the search for a strategicmentorship to suggest ways to monetise the benefits of the comingtogether of multiple-channels of distribution. It calls for a tremendouschange on the strategic canvas by companies seeking competentalliances, opting for a competitive pricing strategy to value real-growthand integration of the multiple platforms, currently working in silos.Hence, the major questions that structure the article and the theorymaking process are:MBA Dissertation by Student no. 099018609 Page 49
  50. 50. DIGITAL AVATAR- The Strategies for Digital Convergence Main questions for research Strategic Alliance: In the face of digitally changing ecosystem, does the strategic alliance help the companies to evolve more competent in the digital interface? Bundling: Does the pricing strategy of bundling emerge out successful to the players of the digital era? How do you see the relevance of unbundled content being priced? Integration: How can companies efficiently integrate heterogeneous applications with so many businesses so as to be mutually benefiting all business capacities? What are the strategic implications of such a business process for today‘s managers who are setting the scene for digital convergence to unleash its potential?MBA Dissertation by Student no. 099018609 Page 50
  51. 51. DIGITAL AVATAR- The Strategies for Digital Convergence CHAPTER 3 3.0 RESEARCH METHODOLOGYThis part of the dissertation emphasises on the research methodologyemployed for this dissertation. The dissertation is based on a qualitativeresearch methodology followed by a thematic analysis of the datacollected. Qualitative approaches are incredibly diverse, complex andnuanced (Holloway and Todres, 2003), (Argyris et al., 1985) cited inBryman and Bell (2007:428) and thematic analysis is seen as afoundational method for qualitative analysis (Braun et al., 2006:78).Thematic analysis is firmly compatible with both essentialist andconstructionist paradigms within psychology (Braun et al., 2006:78).Theinterviews conducted are an account of in-depth perspective on thequestions that emanate from the critical review of past studies evaluatedin the literature review. Thematic analysis is a method for identifying,analysing and reporting patterns (themes). Thematic analysis organizesand describes the data set in (rich) detail (Braun et al., 2006:79).The focus of the dissertation is to analyze the real problems within thedigital convergence industry and weigh them against the strategies thatare reflective of the most recent changes in the digital landscape. It aimsat suggesting a practical solution that can prove beneficial to the digitallyconverging industry. The dissertation is based on strong theoreticalMBA Dissertation by Student no. 099018609 Page 51
  52. 52. DIGITAL AVATAR- The Strategies for Digital Convergencefoundations of strategic management and aims to arrive at findings thathave practical implications Bryman and Bell (2007:428). The objective ofthis dissertation is to seek effective digital strategies that can offer acompetitive edge to a company in this industry.Why qualitative research methodology?This dissertation research hasbeen conducted using the qualitative research methodology as theobjective of the research is to capture the emerging views from thecarefully selected group of interviewees. The author chose a qualitativeresearch method as it facilitates theoretical mapping of views and extractthe emerging thinking from the data into meaningful information.Qualitative research also potentially enhances managerial knowledge byproviding best-practice information as most participants have expressedtheir practical experience in the digital interface.Why Interviews? The ethnographic interview is a commonly usedinterviewing process employed by research-clinicians (Kuehl & Newfield,1991). It gives an opportunity to emerging ideas to be identified inobservable patterns. It is here that role of thematic analysis is broughtinto view. Thematic analysis focuses on identifiable themes and patternsof living and/or behaviour. The interview can be a combination of closedended and open-ended questions (Bryman & Bell, 2007:213). Further, ithas been highly advantageous to conduct the interviews from thecarefully selected set of respondents as the interviewees are highly-placedMBA Dissertation by Student no. 099018609 Page 52
  53. 53. DIGITAL AVATAR- The Strategies for Digital Convergencesenior professionals from the media and communications industry. Theserespondents represent the decision-makers across the four industries thatreflect the theme of digital convergence across- Media,Telecommunications, Internet and Information Technology. Further, therespondents have been interviewed in-detail over a fairly well distributedtime frame over each of the questions asked by the author. It has been acommendable opportunity for the author to use the seven-years of richwork-experience as a broadcast media journalist into the art ofinterviewing & analysing and interpreting the emerging patterns.Face-to-face interview gives the freedom to the interviewer to encouragethe interviewee to respond and develop a comfort level with the questionsput up. Further, the author‘s personal experience in interviewing is theimportance of eye-contact in face-to-face interview. Hence, based on thevalidity of importance of capturing emerging thinking from the data-setad based on strong background of professional experience, thisdissertation has chosen Qualitative Research Methodology: Semi-structured interviews using a standardized interview protocol for eachinterview would be conducted with focus groups. The semi-structuredinterviewees, in this dissertation analysis will be the senior/managers indigital media, communications, and telecommunication, entertainment &IT industries. The above mentioned industries are rapidly witnessing aMBA Dissertation by Student no. 099018609 Page 53
  54. 54. DIGITAL AVATAR- The Strategies for Digital Convergencedigital transformation and hence are expected to be a part of close reviewof this study.The candidates were first emailed a copy of the dissertation synopses,complete set of questions and the consent form at least 2-4 weeks aheadof the interview. They were requested for a convenient time of 45-60minutes for conducting the in-depth interview. A total of 20 in-depthinterviews (face-to-face and a few over Skype call) were conducted. Theaverage duration of an interview was 30-50 min to 85-90 minutes. Only 2interviews are on specific questions and range for 10 minutes. Allinterviews have been recorded on a digital voice recorder (OlympusVN5500PC) and professionally transcribed for the total duration. (Alltranscripts are attached in Appendix).Research Setting:This dissertation is a reflection of the most dominantfactors for changes in digital landscape in advanced, emerging anddeveloping markets for digital content. The data is collected from well-established players that represent the largest companies in the 4-industry confluence. Most of the data is collected from companies based in London (UK). But there are highly valuable contributions of views from industry leaders from Cambridge (MA), Toronto, Germany and Dublin.MBA Dissertation by Student no. 099018609 Page 54
  55. 55. DIGITAL AVATAR- The Strategies for Digital ConvergenceData Collection- The data had been collected from highly-crediblesources by conducting in-depth interviews of 20 of the responsibly placed,senior professionals (media & communications industry) between June2010 and July 2010. The objective of the interviews has been to capturethe views on research questions from the sample that reflects thediversity of experience in witnessing, managing and deciding the future ofdigital convergence. Apart from the interviews, a wide range of journals,publications, reports, trend have been referred. Apart from them, theauthor has attended 3 Conferences on digital media (between March-July2010) at London. This has been useful to gain meaningful insights intothe latest indications in order to throw a deeper analysis over thisdissertation. Selection of the topic of digital convergence also finds areflection into the minute observation of changing trends, gained over 7years of work-experience into the media industry. The areas covered inthe interviews include verbal-discussion on the firms perspectives ontechnology evolution in the digital convergence industry, major driversand barriers to the adoption of digital technologies, impact of competitionand detailed focus on the 3 strategies explored in this dissertationData Analysis-The data has been analysed using thematic analysisprocess where key patterns have been categorised under– strategicalliance, bundling and integration. The data analysis involves a rich inter-weaving of emerging perspectives of the interviewees who maintainMBA Dissertation by Student no. 099018609 Page 55
  56. 56. DIGITAL AVATAR- The Strategies for Digital Convergenceinfluential positions in their organisations and are at the helm of decision-making and retain powerful positions in their respective organisations.The emerging thinking is summarised by extracting details of informationthat run across the data and not within each participant. Data Analysis Data Collection 20 Qualitative In-depth interviews Data Immersion Identification of common themes, Data Reduction patters, emerging thinking from the interviews Data Processing Identification of Strategic Alliance, Bundling and Integration to be Analysis propelling forces to drive the Digital Ecosystem Systematic Data Collection Flowchart (Created by the author)MBA Dissertation by Student no. 099018609 Page 56
  57. 57. DIGITAL AVATAR- The Strategies for Digital Convergence CHAPTER 4MBA Dissertation by Student no. 099018609 Page 57
  58. 58. DIGITAL AVATAR- The Strategies for Digital Convergence 4.1 Expert’s Views on transformation of Digital AvatarDigital convergence is what has emerged from the pace of technologicalchanges in the era of technological dynamism. This convergence issustained by the fundamental co-existence of the three strategies- strategicalliance, bundling and integration (vertical and horizontal), interplaying to makedigital convergence a reality. This part of the dissertation captures theemerging picture that emanates from the data collected, defining theprominent trends attained from the set of interviews over the next-generation strategy canvas.This part of the dissertation conducts a thematic analysis to capture theemerging picture that emanates from the data collected from 14 (out oftotal of 20) senior media professionals who have been interviewed by theauthor during qualitative data-collection stage. The objective of this stageof the dissertation is to capture the common positions, points ofdifferences by cross-linking the thoughts of participants. Adoption ofstrategic alliance as a strategic management tool has been supported by14 participants. The seven major themes arising emphasise that strategicalliance helps in content sharing by developing smart partnership,achieves core-competence and cost-optimisation and balance of powerrelations under strategic alliance that lead into mutually beneficialrelationships. It leads to achieve cross-media integration, pursue socialMBA Dissertation by Student no. 099018609 Page 58
  59. 59. DIGITAL AVATAR- The Strategies for Digital Convergencemarketing and such alliances are proving to save the telecommunicationcompanies to adopt lucrative business models for revenue-growth. 4.1.1 Understanding the nature of strategic alliance:Why Strategic Alliance? Strategic alliance has been successful inimproving revenue models of cash-starved traditional media &telecommunications companies and results in funding cross-mediaadvertising. Companies can focus on core-competence of their specificareas and merge the specialities together under strategic alliance, toprovide an enhanced consumer experience. Under the current scenario,the traditional media companies have been losing advertisement revenuesto the digital space and telecommunication companies are hit by revenuesdiverting to new-age internet companies. Music industry is dented by freeonline music and cross-media advertising has not been well understoodby new-age advertisers.MBA Dissertation by Student no. 099018609 Page 59
  60. 60. DIGITAL AVATAR- The Strategies for Digital Convergence For example, Endaf Kerfoot, Thinker-in-Chief, Brand New Adventures UK says, ―Companies like BBC or CNN don‘t have to go back and re-engineer all content. They find it convenient to apply a protocol to all of that content which basically automatically optimizes that content on a device like say iPad. That is again in Apple‘s interest as well because the more content people can access via the iPad, the more successful the iPad will be‖. Source: Personal Interview conducted on June 29,2010 (Time:2-3pm) at Earl‘s Court office, LondonApple‘s iPad is a revolutionary device combining the benefits of web,email, photos and videos that sold about 3 million sets in 80-90 dayssince its launch in April 2010. Further media barons CNN or BBC areincreasingly generating content for mobile phones to harness theconvenience of cost-reduction. So, it gives rise to a set of contentproducers aligning with high-tech device providers to lead way to a digitalexperience for the users. As Endaf Kerfoot points out, strategicalliance involves ease of sharing content. This implies a commercialrelationship that works on mutual benefits for each of the competingindustries. Co-existing in atmosphere of strategic alliance also helps thecompany‘s focus on their core competence areas. For instance, thecontent owners (like CNN) can partner with distribution networks (likeVirgin Media) to make the content available to the consumer. AndrewMcGrath, Executive Director (Commercial), Virgin Media supportsMBA Dissertation by Student no. 099018609 Page 60
  61. 61. DIGITAL AVATAR- The Strategies for Digital Convergencethe view that with strategic alliances, the companies can focus on theirarea of core competence. Andrew McGrath says, ―What we want to be is really good at what we‘re good at and because we‘re the best at what we do. We want to work with really good systems integrators, combine ourselves and we do that just through commercial arrangement and mutual interest for each organization‖. Source: Personal Interview conducted on June 22,2010 (Time:4-5pm) at Virgin Media‘s office, Covent Garden, LondonIt can be inferred that companies supporting strategic alliances, resistbeing system integrators. They find solutions workable with mutuallybeneficial commercial agreements rather than complex strategicagreements and avoid complicated equity-partnerships. Under StrategicAlliance, the unique selling propositions of both assigned entities areclearly maintained by pursuing a clear understanding of what thecustomers requirement are to identify partners and also the alliance onewants to work with. This materialises in providing converged solution fromthe two or more companies that work for the customer. It is worthobserving the rising votes to strategic alliance due to the inherent criticalelement called core-competence. [Sofia’s Diary is an ‗interactive media soap inwhich teenagers can make decisions about Sofia‘s life (Cinekid, 2006)].MBA Dissertation by Student no. 099018609 Page 61
  62. 62. DIGITAL AVATAR- The Strategies for Digital Convergence Director of this popular soap- Sophia‘s Diary, Triona Campbell, Director, CR Films (London and Dublin) agrees with Andrew McGrath that strategic alliance strengthens the ability of the company to focus on core-competence. Triona says, ―we are being more independent on our core-content by working in partnership with others‖. Source: (Face to face) Skype Video Call interview from Dublin studio conducted on July 5, 2010 (Time: 1-2 PM)Focus on core-competence promotes bottom-up efficiency for firmsentering into strategic alliances. It is worth noting the fact that since2010, cable giant Virgin Media UK is working on offering high-bandwidthproduct of 400 Mbps that has been made possible by striking a strategicalliance by piling in more capabilities around the information technologypartners rather than just the telecommunications allies. Combinedcapabilities of two organisations are addressed through workingin commercial relationships with other organizations andconcentrating on core-competence.An observation of underlying importance is that, while some participantshave expressed strong views on focus on core-competence as a crucialfactor for strategic alliance to exist, there are some thinkers in theindustry who differ in their opinions. Influenced by the dynamic changesin the digital eco-system, these participants insist that strategic alliance isMBA Dissertation by Student no. 099018609 Page 62
  63. 63. DIGITAL AVATAR- The Strategies for Digital Convergencean outcome of smart-partnership ties between two companies orindustries. Harry Strasser, Executive Partner, Digital Convergence and Innovation, Germany says, ―I strongly believe in smart partnership to be the right way. It can be in form of strategic alliances. It can be seen in this era where internet is a strong driver, internet solutions applications have come about as a stronger driver to fix telecommunication‖. Source:Face-to-face Skype Video Call interview from Germany on July 20, 2010 (Time:12-1 pm)This implies that as the digital convergence is changing the digital eco-system, there are new forms of alliances teaming up where theconverging industry offers smart solutions to the customer. It is worthnoting that strategic alliances have been existing in the industrial eco-system, but in the dynamic world, partnership implies smart-customisedand personalised solutions that are far more customer oriented comparedto the contemporary offer a decade ago. It is interesting to observe someof the participants differ in their positions on smart partnership ties. Itcan be inferred from a different position taken up by one of theparticipants. Oli Shaw, Director, Oli UK resists the smart partnershipdebate by highlighting the imposed form of strategic alliance.MBA Dissertation by Student no. 099018609 Page 63
  64. 64. DIGITAL AVATAR- The Strategies for Digital Convergence Oli Shaw insists that, at times ―strategic alliances are mere collaborations to serve a legal mandate amongst viciously competitive companies. So, it is only in such situations that the competing industries enter into a strategic collaboration due to serve a legal mandate. For instance, BSkyB legally had to give up some of its channels to be broadcasted on Virgin platform…otherwise they would have to make a large amount of fines‖. Source: Personal Interview conducted on July 2,2010 (Time:2:30-4pm) Old Street Station, LondonSo, alliance may as well be a form of imposed relationship rather than amutual agreement. Tim Hussain, Head of Mobile & Video Advertising, BSkyB (London) differs from Oli shaw by saying that a legal mandate is only a regulatory requirement and can‘t be called a strategically allied solution. Tim asserts, ―I would not call this a strategic alliance, it is a mere arrangement to fulfil regulatory implications imposed by industry regulator, Ofcom‖. [Ofcom is the independent regulator and competition authority for communications industries in the UK]. Source:Personal Interview conducted on July 28, 2010 (Time:2-3 pm) at Sky‘s Office, Old Street, LondonInterestingly, the following opinion from BBC brings the observation backto square-one. It has to be noted that strong waves of dynamism haveMBA Dissertation by Student no. 099018609 Page 64
  65. 65. DIGITAL AVATAR- The Strategies for Digital Convergencemade BBC change from the earlier concept of partnership to that ofstrategic alliances. John Denton, Managing Editor (TV Platforms), BBC London believes, ―BBC has been very big in the last two years talking about partnerships. But there is a reason we‘ve got why the word partnerships isn‘t used quite a lot, because there is a lot of change, digital is affecting old business models, no one is entirely sure what is going to come out later. And with lots of hopes, and lots of plans and projections, but no one is entirely sure. So in that kind of a framework, where uncertainty ranges, I think people start to look to share the burden, share the pain. Thats why I feel strategic alliances are really important at the moment. People can‘t do it all on their own, people are nervous about investing huge sums of money and going down a path that then maybe the wrong one. So, I guess strategic alliances does a couple of things, it helps you get together as a team to do a bigger project, but it also means if you can convince someone to join that team, then hopefully it‘s a good idea!‖. Source: Personal Interview conducted on July 14,2010(Time: 10-11am) at BBC White City,LondonSuch alliances foster emphasis on research and development, create anddistribute clever interactive applicationsfor the 3-screen approach - TV,mobile and the internet, (referred to as multi-casting). So, informationMBA Dissertation by Student no. 099018609 Page 65
  66. 66. DIGITAL AVATAR- The Strategies for Digital Convergencebecomes quickly available to the mass audience. Strategic alliance isencouraging the content king, BBC to seek commercial partners whowould invest in software and hardware and share the content. BBCCanvas is the latest example in this respect. Further, JohnDentonbelieves, strategic alliance supports Moores law which says thatprocessing power doubles every 18 months over constant costs. John says, ―we all come to get new partnerships because no one entirely sure, but there is a lot of hope that we are right‖. Source:Personal Interview conducted on July 14,2010 (Time:10-11 am) at BBC White City, LondonJohn predicts another round of strategic alliance- would be with theGovernment of United Kingdom to partner in investment for BBC. Forpursuing UK government‘s ambitious-project of establishing ‗DigitalBritain‘ by 2012, the public service broadcaster, BBC seeks strategicalliance with the government for project-funding. John Denton says, ―if you [UK government] want Digital Britain by 2012, you got to help us [financially]. So that, BBC will roll up public service money to try and help other companies understand the difficulties and try and come up with some solutions and so we have to work together to solve it‖. Source: Personal Interview conducted on July 14, 2010 (Time: 10-11 am) at BBC White City office, LondonMBA Dissertation by Student no. 099018609 Page 66
  67. 67. DIGITAL AVATAR- The Strategies for Digital ConvergenceAn emerging thinking over the forms of strategic alliance emanating inthe digitally converging landscape point to a significant observation thatdraws attention towards the balance of power positions maintained bythe (converging and competing) industries. Such a balance of powerposition decides the level-playing field for the four converging yetcompeting digital convergence industries namely- TV, Web,mobile and technology. As Peter Brimacombe, Former VP, Disney World, says, ―It‘s whether you get those kind of the balance of power in the value chain and you find the one bigger player can extract value from others that people start thinking that they will need to integrate in order to protect their market position‖. Source: (Face to face) Skype Video Call interview conducted on July 23, 2010 (Time: 10:30-11:30 am) from Peter‘s office, LondonThis observation indicates the stiff-competition that can be expectedwithin the industry players. Supporting Peter‘s notion of balance of power,Tim Hussain, Head of Mobile and Video Advertising, Sky (London)expresses alliances coming in way with strong internet companies, likeGoogle. But expressing fear of losing ownership, Tim asserts thatstrategic alliances may have to be carefully plotted.MBA Dissertation by Student no. 099018609 Page 67
  68. 68. DIGITAL AVATAR- The Strategies for Digital Convergence Tim says, ― the same time they[Google] are trying to be a competitor but they also need our content. But we have to be careful else, we‘ll start to lose that ownership of relationship. Further... we may not have the ability to pull back as quick from that relationship. So we have to be very careful..‖. Source: Personal Interview conducted on July 28, 2010 (Time: 2-3 pm) at Sky‘s Office, Old Street, LondonThis view makes a strong suggestion that strategic alliances will have tobe an outcome of well-balanced analysis of relationship outcomes.Monetary gains must spread equally to both alliances in the long runotherwise; alliances start to feel the displeasure of relationship. A deeperthought into the stiff-competition scenario expressed by PeterBrimacombe, reflects the divergences building up over the convergingand competing scenario. This means the industry players compete tobuild up their market shares using innovation and adaptation of dynamictechnologies. There is a room for strategic alliances for traditional printmedia players (newspapers and magazines), that are already suffering adownfall in their market shares due to strong displacement caused byonline media (free news and views available over the internet) . The plight oftraditional media players may continue as the life-cycle of this industry isunder attack by the new-internet stars.MBA Dissertation by Student no. 099018609 Page 68
  69. 69. DIGITAL AVATAR- The Strategies for Digital Convergence Carolyn Morgan, Director, Penmaen Media predicts the slow death of traditional companies who fail to catch the verve of the smart, dynamic and young players (like Apple‘s iPad- launched on April 03, 2010 crossed over 10,000 subscriptions in mere 4 months). Carolyn says, ―I think it‘s still in the smaller groups that provide more (niche) specialized content that will survive. …But there is going to be quite a lot of blood in the floor, and they will have to make their businesses smaller. They [traditional media players] will have to reduce the number of journalists, reduce their overheads‖. Source: Personal Interview conducted on June 21, 2010 (Time: 11am-1pm) at Stamford, EnglandSo, unless the traditional players do not sign strategic alliancewith digital players, they may find survival getting harder. But it isobserved that while companies are trying new alternatives- print mediaaligning with online media, these strategies for Digital Convergence arestill not fully marketed to yield revenues. Eric Elia, Vice-President (TV Solutions), Brightcove Inc (Cambridge) believes, ―traditional print media companies trying a lot of different things by creating online versions of the content and using applications devices to to reach where the consumer is located‖. Source: Face-to-face Skype Video Call interview from Brightcove Office, Berkley, CA on July 12, 2010 (Time: 9-10 pm GMT)MBA Dissertation by Student no. 099018609 Page 69
  70. 70. DIGITAL AVATAR- The Strategies for Digital ConvergenceViews indicate that when it difficult to innovate start-ups, companiesprefers to ally with existing small-scale specialised firms. As the start-upbusiness models are nimble and agile and can be easily mouldedaccording to business objectives. Hence, in most cases the purpose offormation of strategic alliance- that is competence benefits are observedto accrue to both parties involved. So, this part of Data Analysis summarises that traditional media companies can have better revenues and a longer survival if they form strategic alliances with emerging channels of distribution like the online players.MBA Dissertation by Student no. 099018609 Page 70
  71. 71. DIGITAL AVATAR- The Strategies for Digital Convergence 4.1.2 Strategic Alliance and cross-media participationDigital Convergence still lacks the maturity on thinking about cross-mediaadvertising. Cross-media advertising means advertising the same productor service in several different types of channels offered by a single-company so as to target the same audience accessing content from TVand mobile, or on web and mobile than on TV alone. So, if an advertiserspend similar amount of money on TV, on mobile and web on the sameaudience‘s digital profile, they will be able to monetise better revenues. Triona Campbell, Director, CR Films (London and Dublin) says, ―with strategic alliance, you can have advertising that goes in all the platforms- media, mobile, internet and technology and not in just in two or three platforms….‖. Source: (Face-to-face) Skype Video Call interview from Dublin studio conducted on July 5,2010 (Time:1-2 PM)MBA Dissertation by Student no. 099018609 Page 71