Post on 13-Jan-2015
description
Henrik Cort TranæsAugust 20 2009
Industry trajectories of changeCand. Merc. Master Thesis Defence
Industry trajectories of Change
Industry analysis of the Digital Video player industry
Agenda
• Intro- why this study
• Choice of theory
• Model
• Industry analysis
• Results and discussions
Industry trajectories of changeCand. Merc. Master Thesis Defence
Reason for the study
• CE incumbents not responding to outside threats, music players, and mp3 loosing competitive advantage.
• Problem that the firms only look at their current market and competitors, but substitute markets cannot be properly measured.
• Wanted to know what academic literature could help answer my questions
Industry trajectories of changeCand. Merc. Master Thesis Defence
Modes of industry convergence
competitive relations between two industries whereby core assets and/or activities in an emerging industry eventually come to substitute those of an existing industry.
Industry trajectories of changeCand. Merc. Master Thesis Defence
Industry dynamics
• Single industry life cycle • Changing industry boundaries, convergence of
products and tech. fulfilling same costumer need with dif. Assets and Activities.
• McGahan offered a comprehensive foundation for assessing both type of dynamics. However the Focus on creating assets and activities internally,
• creating assets such as first mover advantages of externalities and standards.
Partnerships Standards Complemnts in Network markets
• How to build a model where the market is showing network externalities. Shapiro & Varian.
• Network externalities important in this type of industry, one standard, equates to “winner takes all” market.
• Standards• Old closed DVD/blu-ray std, vs. new open video format standard.• The standard and the critical mass• Direct and indirect network externalities, • Complementors enhance the indirect network externalities. • Generic assets in network markets• Control over installed base • IP rights and patents
Industry trajectories of changeCand. Merc. Master Thesis Defence
Model
Industry trajectories of changeCand. Merc. Master Thesis Defence
Emergence
Convergence
Co-existence
Dominance
Industry vs. Industry, Threat to Core Assets and Activities
X 2 for industries Create A&A internallyAcquire ExternallyPartnering and Sharing,
If, network market, Unique assets, calls for partnerships. Standard as asset, not create alone, complements to enhance network effects.
Manufacturersof Digital
media players
Incumbent industryPhysical disc players
Rental servicesoffering pysical media rental of
dvd and blueray discs.
Manufacturers of DVD & Blu-
ray players
Emerging IndustryMultipurpose Digital media file
players
Online movie streaming services
Consumer electrioncs of Digital media Players devices, an industry Converging
Complementary services and products
Software & Internet Services
Internet & Home
Networks
Key attributes of the new digital media players that consumers value
Consumers prefer Non physical media players over Physical such as DVD and Blu-ray because, they are easier and better to use.
1. Digital movie catalog, no need to change discs2. Ability to stream on line video content 3. Digital meta-data on digital movie collection, such as movie
posters, plot, ratings 4. Windows like User Interface 5. Ability to Copy and Stream movies without limitations. 6. Seamless integration with home netwrok and other networked
devices in the household.
Key attributes of the new digital media players that consumers value
7. Ability to view photos and play music on same device. 8. No wear and tear on the media files like on a physical disc.
9. Faster load of media files compared to loading of a blu-ray movie disc 40 sek+ vs 3-4 sec.
10. Support for multi language subtitles and homemade subtitles. 11. Support for popular networks standards like NFS, SMB and
Upnp/DLNA.
12. Noiseless playback and no moving parts make player more relailabe and quit.
13. Support for universial Remotes such a Harmoney and Webbased RC
client on i.e Iphone and webbased.
Products and Technology• There is a revolution coming in
home entertainment. CD, DVD, Blu-Ray will all soon be a thing of the past. The future is HD digital media played through one box, the Media Player
• Network media players continue to be a popular addition to the home network for those who want to view their movies .It's feasible to have hundreds and hundreds of full-length movies and on your network and hard disk.
Industry trajectories of changeCand. Merc. Master Thesis Defence
Distribution
Media
Product
Activities Assets
Assets
Industry analysis
Industry trajectories of changeCand. Merc. Master Thesis Defence
Core Activites
Radical Change Creative Change
Intermediating Change Progressive Change
Threatened Not Threatened
Cor
e A
sset
s Thr
eate
ned
Not
Thr
eate
ned
Foundational change
Architectural change
Core Activites
Radical Change Creative Change
Intermediating Change Progressive Change
Threatened Not Threatened
Co
re A
sse
ts
Th
rea
ten
edN
ot T
hre
ate
ned
Core Activites
Radical Change Creative Change
Intermediating Change Progressive Change
Threatened Not Threatened
Co
re A
sse
ts
Th
rea
ten
edN
ot T
hre
ate
ned
Incumbent
Emerging
PHASE
Emergence
Convergence
Co-existence
Dominance
Performance by new approach improves dramatically
Growth in the new industry compared to growth in the old industry is high enough to cause convergence in volumes between the two industries.
Industry analysis
• Standards IP rights and Patents as core assets incumbent industry, built around the physical disc and the player.
• Network externalites for the emerging industry of IT; reason for entering business.
• Western digital sells harddisks, the more media palyers sold, the more harddsik sold
• Linksys/Netgear sell networking gear, the more media palyers sold, the more network gear sold.
• Same goes for Intel, chips, Syabas’s Software.• Incumbnet have no benefit of these externalites, but are
loosing money on the loss of network assets on ip rights and lisecnes fee on the physcial disc system.
Industry trajectories of changeCand. Merc. Master Thesis Defence
Results and discussions
Theory• The theory provided good ground for asessing ,
however if good have been relevant to look at other theories such as Creative destruction and disruptive Technology. A more fine-tuned theory is needed for assing the threat of industries and technologies in its making . Also a deeper insight in alliance creation could be added.
Industry trajectories of changeCand. Merc. Master Thesis Defence
Results and discussions
Model
• The model had is limited in focusing on buyers and suppliers and assets, but limited in assing the technology regime of the two industries, more is needed to develop a model that can also capture the evolution of industries from their assets creation.
Industry trajectories of changeCand. Merc. Master Thesis Defence
Results and discussions
Case• The case was limited in its scope of the
choice of industries, but is provided at good learning point on the viability of the theory and the model in a real world setting. It would be interesting to further test the validity of the model by appling it on other simliar convergence based intra-industries.
Industry trajectories of changeCand. Merc. Master Thesis Defence
Questions
Industry trajectories of changeCand. Merc. Master Thesis Defence
Backup
Industry trajectories of changeCand. Merc. Master Thesis Defence
Reseach Questions
Theoretical Research question
How can the firms asses the type of trajectory change in their industry, to understand if the change is threatening its core activities that generates profit for the firm, and if the change is threatening its ability to generate a return of investments on its core assets. How can firms respond and align to these changes in order for it to remain competitive?
Industry trajectories of changeCand. Merc. Master Thesis Defence
Managerial research question
• How can one construct a managerial model based for firms to use in their strategy formulation and business execution, to asses core assets and activities, and the need of partnerships and complements, to stay competitive in their industry, if it is converging with other industries?
Industry trajectories of changeCand. Merc. Master Thesis Defence
Empirical Research question
• How can firms that participate in the market of digital consumer video players to consumers, apply the managerial model on their industry, to asses if core assets and activities are coming under threats of generating profits and revenue from emerging industries?
Industry trajectories of changeCand. Merc. Master Thesis Defence
Industry analysis
• Core Assets• The core assets of license on the video format, falling
prices of products and IP rights and patents, because of lacking demand. ROI on capital working,
• Core Activities• Profitably hit by industry. • Buyer/supplier falling WTP/WTS• Consumers not buying new blu-ray players, specialized
buyers value products attributes of new industry higher.
Industry trajectories of changeCand. Merc. Master Thesis Defence