Solving The Innovator’s Dilemma in IPTV

Published on 18/12/2018

Category: Innovation

Back in 2000, Blockbuster passed up the chance to buy Netflix. “It’s not even on our radar,” they said.

One year later, Apple launched iPod and iTunes. “We’d rather compete with Sony than with Microsoft,” they said.

In 2010, Blockbuster filed for bankruptcy. “We can’t compete with Netflix,” they said.

The same year, Apple surpassed Sony to become the largest mobile devices company in the world. “It’s pretty amazing,” they said.

This year, Apple became the world’s first-ever trillion-dollar company. Blockbuster remains a cautionary tale and occasional punchline.

What did Apple do that Blockbuster did not?

Simple. Apple solved The Innovator’s Dilemma.

What is The Innovator’s Dilemma?

The Innovator’s Dilemma is the difficult choice that incumbent companies in any industry must make when confronted with a disruptive new technology that – while untested in the present moment – may eventually cannibalize their existing customer base.

It explains how successful companies can seemingly do everything right and still lose market share – or fail outright – as new and unexpected competitors enter the market.

The concept first appeared in a 1997 business book by Harvard Professor Clayton Christensen. Among its core principles:

The business value of innovation follows an S-curve. The first iterations at the start of the curve provide only minimal value to customers. Once that customer base is established, however, value and market share will increase exponentially. This is the middle of the curve.

At the end of the curve, as a market becomes saturated, the most valuable improvements are complete and the value per iteration becomes minimal again.

As a company establishes incumbency it becomes progressively less innovative. Incumbents are often the first to see new innovations coming, but often the last and least able to adopt them. The technology may be unreliable, its market still too small, or its margins still too low to meet shareholder expectations.

Newer, disruptive innovators do not yet have these concerns and, therefore, have more freedom to innovate.

Innovator's Dilemma S-curve
The Innovator’s Dilemma S-curve

How does The Innovator’s Dilemma affect Pay-TV operators?

Pay-TV operators have much to learn from The Innovator’s Dilemma.

The enabling technologies of internet video – cloud computing, content delivery networks, mobile devices, e-commerce, data science – were developed outside the Pay-TV industry.

Yet Netflix and OTT services have combined them into an entirely new disruption.

Pay-TV established incumbency through better picture quality than what over-the-air signals could provide. But the quality advantage faded as the Internet got faster and more reliable.

Having achieved parity in picture quality, OTT services are now aiming to deliver “better than broadcast” experiences, and without the need to invest in infrastructure.

What’s a Pay-TV operator to do?

Fortunately, the news is not entirely dire. Being at the end of an S-curve does not mean the end is near. Rather, it’s a moment when organizations must make changes to justify their incumbency to drive continued growth.

To compete with their streaming competitors, Pay-TV operators must reorient their operations to compete less on picture quality and more on user convenience.

The way to achieve this is by going completely digital themselves. In broad terms, this means:

  • Moving to the cloud: unlike on-premises technology, the cloud allows you greater IT flexibility, increased scalability, and faster time-to-deployment for new features and ongoing iterations, all at a reduced cost.
  • Going mobile: today’s viewers want instant access to content wherever and whenever they are, on whichever screen is in front of them. Providing them a mobile option for your content reminds viewers that yours is the go-to app for streaming video.
  • Embracing data science: the not-so-secret weapon in the Netflix arsenal, a data science and analytics strategy can provide near-endless opportunities to better understand your subscribers’ habits, preferences, needs, and wants. These insights help you resolve issues before subscribers pick up the phone, and offer new services you can be confident they’ll be receptive to.
  • Making it simple: e-commerce platforms have made interacting with service providers a one-click affair, regardless of industry. Replacing cumbersome phone menus with direct access moves you closer to your subscribers and allows for more opportunities to boost their satisfaction.

Finally, just as Apple worked with partners to develop its iPod software, operators should work with innovative partners who can help them make the difficult but necessary decisions, and who have the technical expertise to make their strategic vision a reality.

Espial can help

Espial is transforming viewing experiences worldwide by enabling video services at web speed and web scale. From immersive user experience and discovery solutions to advanced cloud-based platforms, Espial solutions help service providers manage, deliver and monetize video and entertainment services. Espial’s customers span six continents, have deployed tens of million devices, and are serviced through Espial’s global sales, support, and innovation centers across North America, Europe, and Asia.

With Espial, Pay-TV operators create responsive and engaging subscriber viewing experiences incorporating intuitive content discovery and instinctive navigation. Service providers achieve “Web-speed” innovation with Espial’s flexible, open software leveraging RDK and HTML5 technologies. This provides competitive advantage through an immersive and personalized user experience, seamlessly blending advanced TV services with OTT content.

Don’t go it alone

Operators that cannot meet modern viewers’ demands for on-demand viewing across devices and platforms will find themselves struggling to remain relevant.

But solving The Innovator’s Dilemma isn’t something you should tackle alone. The technologies that made Netflix possible are equally accessible to Pay-TV operators. And they’re all available through the Espial IPTV platform.

If you’re ready to drive greater revenue from your IPTV data, contact us to request a demo of our Elevate Cloud IPTV platform or call Ken Brazile at 1-888-4-Espial.

Alex Read

Jaison Dolvane
CEO at Espial
Jaison Dolvane
CEO at Espial

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