Newspapers aren’t the only target

Decoupling disrupts all kinds of business models

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Where were we?

Oh yes. We were talking about the research findings of Thales Teixeira, as presented at the 2017 New England Newspaper Convention. Which is to say, we were talking about digital disruptors, how they wreak havoc, and what can be done to fend them off — or become one of them.

In this post, we’re going to review examples of decoupling. That’s Teixeira’s term for breaking a link between consumer activities that have traditionally been done together. It’s how the disruptor succeeds.

As we run through Teixeira’s examples, we’re also going to characterize each consumer activity. Does it create value for the consumer? If not, does it capture value for the producer? Or does it just erode value for the consumer, without capturing value for the producer?

Example 1, TV

The traditional chain of consumer activity for watching TV is: watch a program (creates value), watch a few ads (captures value), watch a program (creates value).

In their paper, “The Decoupling Effect of Digital Disruptors,” Teixeira and Peter Jamieson explain that TiVo, a maker of digital video recorders, enables viewers to skip the ads, “in effect separating the consumption of these two sequential activities.”

Why did TiVo succeed? Because it decoupled the activity that added no value for the consumer from the activity that did, and offered that one to consumers separately.

Example 2, radio

The traditional chain of consumer activity for listening to radio is:

  1. listen to a song you like (creates value for you)
  2. listen to an ad (captures value for the station from you)
  3. listen to a song you don’t like (erodes value for you; doesn’t capture value for station)
  4. listen to promoted value, a song the station was paid to play but one you don’t like (captures value for the station from you)

Pandora decouples steps 1-2 from steps 3-4. You can listen to only those songs you like, or are likely to like. So valued is this personalized music service that consumers are willing to listen to ads (step 2), or, for a small monthly fee, listen without ads (which completely decouples step 1 from the other steps).

Example 3, car ownership and use

The traditional chain of consumer activity for someone who  wants to drive a car is to conduct research, choose a vehicle, buy it, use it, and maintain it.

Turo, an online matching service, has decoupled the activity that creates value, driving the car, from the rest of the steps in the chain. Turo will help you find and rent the car of your dreams, one that’s owned by another person.

The sharing economy, notes Teixeira, decouples the value-creating activity of using from the value-eroding activity of owning.

The bottom line

“Viewed at a broad level,” writes Teixeira and Jamieson, “it is clear that decoupling is pervasive and poses a major threat to incumbent players in many industries. The media and entertainment industries are the most obvious targets for decoupling (as they were for unbundling) because the digital nature of their products allows for piecemeal delivery of content and because they have long relied on unnecessary value-capturing activities to generate profit.”

This is the fourth in a series of posts reviewing a presentation given by Thales S. Teixeira, Harvard Business School professor, at the 2017 New England Newspaper Convention. If you’d rather read Teixeira straight, visit his working knowledge papers. To read this series in order, please view:

  1. Time for a new recipe — Why do digital disruptors succeed?
  2. Breaking apart the product — Disaster by another name: unbundling
  3. Attacking the weak links — Decoupling the stages of consumption

 

 

Author: TAM

For more about me, please visit https://savemydaily.wordpress.com

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