It's not breaking news that ever–accelerating advances in digital technology are reshaping the very essence the communications, media and entertainment industries. Freed from the constraints of paper or any physical medium, digital content is being produced more quickly, distributed more easily and consumed more broadly than ever before. Fueled by mobility and increasingly ubiquitous broadband access, computing devices are shrinking before our eyes, becoming more pervasive and less expensive to own and operate, creating a reinforcing cycle of growth and change among service providers, content providers and consumers.
The rapid pace of innovation from all quarters presents great challenges to industry executives charged with leading their companies through the sea of digital change. As traditional boundaries fall, the coexistence of companies with similar value propositions is much harder to sustain. In response, select industry players are leveraging digital technologies to reduce costs, create new products and services and expand into non–traditional markets. As a result, established companies are questioning the very core of their traditional business models, and yet other players young and old are working overtime to protect what had been their advantage. In all cases, there is a clear need for all companies to formulate or revisit their strategies for harnessing – and profiting from – the forces of change.
History provides valuable insights. While the details may be new, core challenges to today's communications, media and entertainment (CME) companies are not novel. Over the years, these industries excelled at beating back competitive threats by embracing new technology, altering their business models and product offerings as well as leveraging disruptive process change to their own benefit.
Case in point: Piracy proliferated when cassette tapes and VCRs went mainstream; embracing these piracy–prone technologies to create new distribution channels and entertainment experiences, ultimately yielded record profits for the music and film industries. And movie studios faced indirect substitution from radio as it provided an alternate source of entertainment. Studios responded by producing content for radio, turning radio programs into feature films and introducing innovations (such as synch–sound and color) that enhanced the cinematic experience and ushered in cinema's Golden Age.
Fast forwarding to today, content delivered "over the top" (OTT) via the Internet and Voice over Internet (VoIP) are just two of the latest developments to challenge communications providers and content creators. These services are part of the emerging competitive battlefield, where CME companies can and will distinguish themselves. Formulating or analyzing an enduring strategy in a market characterized by this complexity and continuous change won't be easy. With all the potential options to pursue, today more than ever, it's critical for CME companies to define how they will create distinctive value in one of three fundamental areas of the industry value chain: production (P), search (S) or delivery (D).
Figure 1 shows how the value chain shifts from traditional to e–book publishing.
With the rise of digital publishing, long–time functions within the industry are disappearing (see Figure 2).
While these core areas of the value chain are not new, the options for how value is created in each one is dramatically different today. Developed in conjunction with researchers from the Massachusetts Institute of Technology (MIT), we have created a strategic planning framework that can help strip away some of the chatter and help CME executives focus on the core of how their companies create and sustain value in the quickly evolving global market place. Our PSD framework will also help to identify strategic bets on delivery platforms, or ecosystems, where complementary parties share risk and generate collective value. Thanks to social media, these emerging platforms deliver network effects that boost each participant's ability to contribute differentiated value and reap meaningful returns.
To read more about the MIT–Cognizant framework for Communications, Media and entertainment companies, you can access the full white paper, Finding Your Place in the New World of Communications, Media and Entertainment (PDF), or learn more about Cognizant's Communications Practice and Information, Media & Entertainment Practice..