Finite players play within boundaries,infinite players play with boundaries.James CarseFlow Economy FrameworkThe Flow Economy Framework encompasses allactivity based on the flow <strong>of</strong> information and ideas.The diagram shows its six elements: Standards,Relationships, Connectivity, Interfaces,Content, and Services. All six elements arerequired to deliver value to customers.STANDARDSEach <strong>of</strong> these elements can be run as a standalonebusiness. However the greatest valueis unlocked in how they are combined. Only ahandful <strong>of</strong> companies have the capacity to play inall six elements <strong>of</strong> the flow economy, and even then theymust rely heavily on alliances. The heart <strong>of</strong> strategy in theflow economy is in leveraging existing strengths to moveinto a higher-value strategic position. As the landscapedevelops, this repositioning is a continuous process.More informationFull details on the Flow Economyframework and strategy process can befound in Chapter 7 <strong>of</strong> Living Networks.Free chapter download from:www.livingnetworksbook.comownershipFRAGMENTEDpeoplepowerwaiting forthe futureOPEN PROPRIETARYPLATFORMSplatformplaystitansclashCONCENTRATED<strong>Future</strong> <strong>of</strong> <strong>Media</strong>: Strategy ToolsScenario Planning for <strong>Media</strong>Classic scenario planning is one <strong>of</strong> the most powerful tools for rigorouslong-term strategy development in the media industry. In the face <strong>of</strong>multiple uncertainties, including technological development, consumerbehavior, standards battles, regulation, and many others, a well-designedscenario planning process assists the development <strong>of</strong> robust businessstrategies.Generic scenarios are <strong>of</strong> limited use. Scenarios need to be developedaround specific business issues and key decisions. A typical scenarioplanning process would include:•••••••••CONNECTIVITYCONTENTIn uncertain times, don’t try to predict thefuture. Systematically explore possible futures.Define objectives and key strategic decisionsIdentify driving forces and critical uncertaintiesSelect key dimensions<strong>Ross</strong> <strong>Dawson</strong>Create scenario frameworkDevelop distinct, plausible, complementary scenariosTest existing strategies across scenariosGenerate new strategic optionsINTERFACESSERVICESDefine a core strategy and contingent responsesBuild strategic responsiveness across the organizationRELATIONSHIPS3 Examples: Strategic repositioningin the Flow Economy1AppleApple has proved very effective atrepositioning itself across the floweconomy. Most prominently, it has usedits strong positioning in Interfaces (e.g. iPod, Mac)to shift to Content (iTunes). It has also built directRelationships with its iTunes customers whereasbefore distributors held all customer relationships.Apple’s adoption AAC as the default music encodingStandard on iTunes provided some lock-in as it was aless common though still open standard. For iPhoneit has selected and generated revenue from selectedpartners for Connectivity (AT&T in the US), and isnow taking part <strong>of</strong> the Service revenue for iPhoneapps provided by a broader developer community.2British Sky Broadcasting (BSkyB)BSkyB began with part ownership <strong>of</strong> the satellitesproviding the Connectivity for TV delivery,creating and buying Content, and using theseto create customer Relationships. In the early 1990s itsold its satellite ownership and since then has used theAstra satellites to provide the necessary Connectivity. Itsexclusive live TV Content rights for the FA Premier Leaguesince 1992 has been leveraged into strong subscriber growthand many new Relationships. In 2001 BSkyB introducedSky+, a combination set-top box and digital video recorder,providing an Interface to generate greater revenue andbuild more entrenched Relationships. BSkyB is now shiftinginto new Services including broadband and phone. It is alsodistributing its Content over new channels including mobileusing Sky Anytime.You have to learn the rules <strong>of</strong> thegame. And then you have to playbetter than anyone else.Albert EinsteinGame Theory: Strategies for Openness1.Flow Economy Strategy Process - SummaryDefine your spaceThe inexorable shift to openness dominates the media strategic landscape today. Allsuccessful platforms provide rich programming interfaces, open standards are swiftlybeing adopted, data portability is gaining momentum, most content is available on RSSfeeds, and controls on intellectual property are being loosened.The extraordinary pace <strong>of</strong> these trends means that media strategy is becoming morechallenging. New business models are required, competitive responses must be swift, andstrategic choices need to be made and implemented in real-time.In this environment game theory is extremely relevant and a valuable strategic tool.Game theory studies how multi-player situations may evolve as participants respond toeach others’ actions. This can be done using mathematical modelling, or more simply as aframework for thinking through strategic options, their impact on the industry landscape,and optimal short and long-term strategies.• What is the “total customer experience” you participate in creating?• Which elements <strong>of</strong> the flow economy do you currently providewithin this?• Who provides the other flow economy elements required?• What is your current relationship with these providers?2. Redefine your space• What is driving change in the flow <strong>of</strong> information and value in the space?• How can you redefine the total customer experience?• What are competitive drivers within each <strong>of</strong> the flow elements required?• How can you leverage your existing positioning into new sources <strong>of</strong>revenue or value?3.Reposition• Build internal capabilities.• Acquire existing businesses.• License content or technology.• Build alliances with complementary firms.• Outsource business activities.3NTT DoCoMoThe flow economy framework is especially relevantto telecoms providers that need to reposition fromcommoditized Connectivity into higher valuespaces. DoCoMo has distinguished itself by developingStandards including W-CDMA and i-mode, providing it withlocal market differentiation and access to international markets.Its alliances with phone manufacturers allow it to control theInterfaces used by its customers, creating more embeddedRelationships. i-mode’s staggering success after its 1999launch was largely attributable to its model <strong>of</strong> allowingthird-party Content and Services providers access to thesystem, with just a low margin for DoCoMo. DoCoMo is nowproviding financial Services through its DCMX mobilecredit cards, and, as other mobile companies, seekingto leverage its existing customer Interfaces toprovide search functionality.Strategy •Thought Leadership•Sponsored Content•For additional <strong>Future</strong> <strong>of</strong> <strong>Media</strong> Resourceswww.futureexploration.netSTRATEGYMAPCOMPETITORACOMPETITORBCOMPETITORCSTRATEGY1STRATEGY2STRATEGY3
: : FUTURE OF MEDIA : REPORT : : JULY <strong>2008</strong>SNIPPETSMEDIA SNIPPETSMore than 57% <strong>of</strong>online video viewersshare links to the videosthey find with othersPewUS newspapercirculation is the sameas in 1978, when therewere 100 million fewerpeople in AmericaNewspaper Association<strong>of</strong> AmericaThere are 1.4million newbroadband usersin China everymonth.China MobileSix in ten (59%) arenot comfortablewhen websites usebehavioural informationto tailor advertisementsor content.HarrisIn 2007 YouTubeconsumed as muchbandwidth as theentire Internetin 2000.Daily TelegraphRoughly one-fifth<strong>of</strong> all U.S. households aredisconnected from theInternet and have neverused e-mail.Parks AssociatesFrance has thelargest number <strong>of</strong> IPTVsubscribers in the world, withthree <strong>of</strong> the world’s four largestIPTV service providers (Free,Orange France Telecom and NeufCegetel). The remaining serviceprovider out <strong>of</strong> the top four isPCCW in Hong Kong.dailyIPTVThe median age <strong>of</strong>a US live televisionviewer is 50, comparedto 38 for the entirepopulation.Magna GlobalThirty seven percent<strong>of</strong> consumers saythey would rather payfor online contentthan be exposed toadvertisementsDeloitteAlmost 70% <strong>of</strong>journalists read blogsregularly, while 20% saythey spend over one hourper day reading blogsMarketwatchPage 10
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