Tag: digitization

Theory

The transfer of value from content to experience

The disruptive impact of the Internet on the content industry – Music, movies – is now a known fact. The nature of the disruption, however, is not so well understood. Music majors and large media groups have grown out of the necessity to manage limited bandwidth and related resources. Up until recently, physical constraints had limited the number of TV channels and radio stations, which meant that those stations acted as de facto gatekeepers and could select who would go on air and who would not. They worked hand in hand with the majors, who performed the same function upstream. In a world of plastic, launching a new song was very expensive: expensive studio material had to be used, discs had to be physically created and distributed, so artists had to be selected and only a few could be produced. The business was about how to fill available physical slots in the most profitable way. Thanks to these industry players, people in the twentieth century were able to enjoy music, as they had not been able ever before. Radio stations and majors played the indispensable role of gatekeepers and, logically enough, could set up tollbooths to be rewarded for their service.

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Theory

Framing – an important concept for disruptions

The reaction of an organization to a major disruption in its environment (technological, regulatory, etc.) has long been studied by scholars and consultants. An important concept has recently emerged, that of Frames. The idea is that, when facing a disruption, the organization needs to rethink the way it sees the world. Old concepts don’t apply anymore, new competitors emerge seemingly from nowhere, major uncertainties exist in the marketplace, etc. Consider the case of Kodak, struck by the digital revolution, who had to change from a core competence of chemistry to that of electronics and software. The challenge for the organization is to dump old frames and create a new one, which will guide the strategy.

The concept of frames was introduced in the psychology and cognitive literature, but it applies well to the field of strategy. Among the interesting work in this field, let’s mention that of Clarke Gilbert, from Harvard, who wrote his PhD thesis on the reaction of traditional newspapers to the rise of the Internet and digitization. Gilbert shows how newspapers had to rethink their environment, which some did while other didn’t. Unfortunately, the thesis  is only available in paper form (Clarke, a pdf on your page would be cool). Gilbert is also the author of a working paper titled “Can competing frames coexist” (free download) where he shows that the difficulty for an organization to react to a disruption is not always or not necessarily due to a problem of commitment to its value network that hinders change (unlike Clayton Christensen‘s explanation).
On the contrary, the difficulty seems to reside in the way the disruption is perceived by the organization. If the disruption is seen as a threat, the reaction will be one of rigidity (hence the name threat rigidity). If, on the contrary, the disruption is framed as an opportunity, the organization will react more positively and will more easily embrace change. On this notion of frames, the work of Sarah Kaplan, from Wharton, is also worth noting. Kalpan is the author of “Framing contest: micro-mechanism of firm response to technical change“.
The idea is that when facing a new world, or rather an emergent world where everything is so uncertain, the strategy making process consists in a framing contest within the organization between individuals, departments, groups, etc. If everything goes well, at the end of the process, a common frame emerges that forms the basis of the new strategy. Sarah Kaplan also wrote an interesting article on the cognitive factors influencing an organization’s response to a disruption, in the particular case of the pharmaceutical industry: “Discontinuities and senior management – assessing the role of recognition in pharmaceutical firm response to biotech“. It can be downloaded for free and is worth reading.