Due to my stronger focus towards the media industry and qualitative approach I will have in the collection of data for my thesis, I have decided to continue my work in Swedish. Sadly, I will no longer be able to use fancy words such as enabling logic, value constellation or density of offerings. However, I will be able to convey the results from interviews in a better and more exact way (interviews will be conducted in Swedish).
I’m sorry to dissapoint all my English speaking fans out there, but my thoughts will still be available in English via Google Translate and comments in English are always welcome!
Ten years ago I consumed Dagens Nyheter in printed form over breakfast and then on the subway on my way to school with my favourite part stuffed in the backpack.
This morning I consumed Dagens Nyheter firstly through Google Reader via their RSS-service, later on the train I catched up with the news on my cellphone (Mobil.dn.se). While at work I stumbled upon their website (DN.se) several times, firstly via a discussion I found on a blog, then when an article was promoted on the digg-style link service Pusha.se.
I found one of their photos on Bing image search which I found very inspirational and used in a picture I made. One of my favourite blogs had made a short rewrite of a news piece from them which I quickly scanned. Before leaving the office, I took a quick look at Google News where i noticed one of their headlines.
What changed?
Compare the number of actors involved in delivering my news today to the one actor delivering them ten years ago. Each of these actors add something to my news experience and the sum of them are incredibly much larger than the experience I could get from only Dagens Nyheter itself.
It is my belief that the future of old media companies is strongly dependent on how they tackle this new landscape with new forms of partnerships, revenue sharing models and products. One clue is in the new forms of media companies that are emerging following this evolution. Therefore a refined version of my thesis subject might be:
A new world of distribution requires new ways of organising. How are old media companies adjusting to this situation and how are new media companies organising to meet it?
By diggesting some thoughts and reading some more on the subject, I believe I might be on track of finding my so long sought after thesis subject!
This is my main thought that I would like to examine:
What has happened internally to media companies since the introduction of the Internet and thereby thousands of new distribution channels?
In the old days, media companies were all about traditional supply chains where news were produced in one end of the chain, printed and then delivered to the end customer in the other end. Quite straight forward, and the media company could control the entire process.
As the density of offerings have increased with the microprocessor (very cool way of saying that things have changed from “Designing Interactive Strategy: From Value Chains to Value Constellations“) the end customer’s value creation has started to take new forms. Media is consumed in new ways, via new channels (Google News, Digg.com, personal blogs and so on).
The major driver for this change has been the everyday lower external transaction costs of communication which is also the largest driver of organizing in value constellations with several smaller actors instead of in one large firm (Coase, Theory of the Firm).
What I would like to examine is this: Have the media companies (specifically the newspapers) adjusted internally to this transformation (by working more in networks with other actors) or are they still run like they used to be (by doing most of the work in-house and trying to maximize revenue from each additional channel)?
What’s great about this subject is that there is a large amount of data to be collected qualitatively and the end product might actually result in something useful for media companies!
My perspective here originates with the idea taking shape in the form of a blog post. We will immediately have a number of impressions due to the direct and search traffic that a blog usually enjoys (not in the graphics).
Distributed content
The content is then distributed in different forms, pictured here are RSS and e-mail newsletters. This kind of channel is the hardest to build, but it is also the most rewarding. These channels don’t tend to give the same spread as the other channels but on the other hand they offer those users that have made the largest commitment to you.
Opt-in Promotion
To further promote the idea we work with Opt-in Promotion and Other Promotion. Opt-in promotion is promotion via channels where the receivers have given us permission to put information in front of them. I have divided these in microblogs, social networking sites, e-mail newsletters (that instead of distributing the idea promotes it) and your own other blogs (this is a tricky one, somewhere between opt-in and other promotion i believe).
Other Promotion
Other promotion is all forms of activities where no one has given you explicit permission to promote, but where you believe that they might benefit from knowing of your idea. Please note that this is not about spam.
Our options here are to e-mail or instant message a contact with the objective of promoting our blog post. Another form of this is to promote the blog post in an open forum such as the comment field of a blog (here visualised with the Google Talk logo due to the mysterious lack of a standardised “comment” icon).
Conclusions
This is just a rough draft of the channel options and work needs to be done to categorise and exemplify them nicely. However, I believe there to be great need for a model like this to get a more structured perspective on the channels of idea distribution.
Please feel free to help me out in completing this!
And something else, note how one particular channel keeps coming up!
While competing on price, reconfiguring your cost structure is the most obvious road to success.
However, while competing with Free, lowering your costs might give you money to engage in other activities but it won’t give you an advantage in the marketplace.
The result of this is that many companies have stopped focusing on minimising costs and turned to maximising end user value creation. This doesn’t just apply to free, but to all industries where price no longer is as important as it used to be.
Right now I’m trying to figure out how this affects our perception of value, what happens when there is neither price nor cost?
As Chris Anderson notes in Free! it is true that you can’t compete with free in the economy of bits in the long run. If your marginal cost is close enough to zero, either you or your competitor will stop charging for the service. With the cost of storage, bandwidth and processing power halving each year, this day will inevitably come.
So, how do you compete with a good enough service such as YouTube that offers high functional quality, rich features and solves the users problem (a demand for video clips) for free? One thing is certain, price is taken out of the equation. In order to charge your users for a similar service, you would have to offer a hefty amount of extra value and somehow make sure that YouTube just don’t copy your model and offer it for free.
What you need to do is look at each part of the process that adds value to the end product for the users and firstly decide on if you could do it cheaper than your competitor (e.g. if you could stream high quality videos cheaper than YouTube) or, if in fact the customer is adding this value himself. If you can find a value-adding task that is in fact executed by the user in your competitors business, it might prove to be a deal changer. If you are able to carry out this task for the customer instead, that might be just the extra value you add to your service that beats the competition (note that this is without competing on price).
The most classic example of the opposite of this thinking is what IKEA has done to reconfigure the value constellation. By letting the buyers perform a value adding task (assembling the furniture), IKEA is able to sell it cheaper. The genius of this is that IKEA figured out that the customers value their money more than the time it takes to assemble the furniture, therefore customers take on part of the value creation while still feeling that they have done a bargain. This reconfiguration enables IKEA to keep a lower price than the competition.
But, think about what would happen if furniture was free. Would you choose to buy furniture from IKEA where you have to do some of the value adding yourself or would you prefer to get ready assembled furniture? Suddenly, what was a competitive advantage has turned into a major disadvantage.
So, how are users part of the value creation on YouTube? The most obvious example would be in their quest to find relevant and interesting material. Much of the value a user gets from using YouTube actually comes from his/her own ability to find relevant stuff. What if a competitor came up with a recommendation engine that took care of this value adding and served relevant stuff without the user having to participate in the process?
Suddenly we have a situation where the user pays for neither service, but gets more value (as in output of value minus participation in the value creating process) from the new service. That might be enough for a major shift in the competitive landscape.
When the market leader is good enough (who would compete with Facebook or Google on functionality?) business developers tend to start looking into niches. Is this strategy due to the hopeless position of being second or a customer demand?
“…in an information-rich world, the wealth of information means a dearth of something else: a scarcity of whatever it is that information consumes. What information consumes is rather obvious: it consumes the attention of its recipients. Hence a wealth of information creates a poverty of attention and a need to allocate that attention efficiently among the overabundance of information sources that might consume it.”
- Herbert Simon on attention economics
Found in Free! by Chris Anderson which seems to be the major inspiration for the beginning of this week
Micropayments doesn’t work because they aren’t easy enough. Even if the amount requested is only a couple of cents, the transaction cost of just clicking through all the steps with your payment provider (in some cases providing all your VISA details and in other logging in with your e-mail and password) is often to high. For me at least, its rare to find information on the web that I figure would be worth this trouble without having the possibility to consume it beforehand.
This has however been a major reason to believe in the future of micropayments, they would work if they were one-click or even automatic. The evidence of this model would be the iPhone App Store, where buying stuff is so easy (only insert your account password) that the transaction cost of the payment itself becomes close to zero. I’ve bought tons of stuff in the App Store without even reflecting on if the application is worths it’s price (most applications are priced at a low 7 SEK).
However, something is missing in my transaction cost calcuation: the transaction cost of having to make a decision. Interestingly, this is the sole focus of transaction costs in Chris Anderson’s book Free! when he tries to explain the difference between price and zero price.
Chris Andreson refers to the George Washington University economist Nick Szabo’s concept of “mental transaction costs” (more on mental accounting). Basically the mental transaction cost is the value we put on not having to think about a buying decision, the mental part of our different feelings towards price and zero price.
These two transaction costs (the effort of the body in filling in VISA details and the effort of the mind to make a conscious decision) together with the price itself sum up to the total transaction cost of a buying decision.
What still bothers me is the App Store situation, how come my perceived mental transaction cost is so low in that particular setting? Could the App Store hold the key to the future of other micropayment systems?
While reading through Chris Anderson’s widely hyped book “Free: the future of a radical price“, I can’t help myself to think that the focus of the book is somewhat misleading.
As Chris notes, free is nothing new, it’s just a way of disconnecting the cost of the product and the customer’s direct expenses. What is new is that where the customer someway or the other always had to pay in the end, when the cost of digital goods approaches zero, there is nothing to pay. The cost of the product is zero and therefore the price can approach zero too.
This is an extremely interesting shift, but it is not driven by price but by cost. Its the cost structures that are changing and that is what has the power to affect an entire industry. Price is something entirely different and even though the end customer pays zero, the costs have to be covered.
New ways of re-configuring the value chain (such as analysing the users behaviour and presenting information accordingly instead of hiring an editor) and lowering costs (such as replacing humans with algorithms) are the real game changers here.
Still, Free is a really interesting book and I’m sure to get lots of inspiration from reading it!
With lovely icons from 
While reading through Chris Anderson’s widely hyped book “