New Digital Media and Devices

As discussed in the previous chapter, the technological innovation process has a pervasive influence on the whole digital metamarket featured by the gradual convergence of three traditionally distinct sectors: IT, telecommunications, and media (Sculley, 1990; Bradley, Hausman & Nolan, 1993; Collins, Bane & Bradley, 1997; Yoffie, 1997; Valdani, 1997, 2000; Ancarani, 1999; Pagani 2000). The numerous innovations that could lead to “convergence” between TV and online services occur in various dimensions (Figure 2.1). The technology dimension refers to the diffusion of technological innovations into various industries. The growing integration of functions into formerly separate products or services, or the emergence of hybrid products with new functions, is enabled primarily through digitalisation and data compression. Customers and media companies are confronted with technology-driven innovations in the area of transport media as well as new devices. Typical characteristics of these technologies are digital storage and transmission of content from a technical perspective and a higher degree of interactivity from the user’s perspective (Schreiber, 1997). The needs dimension refers to the functional basis of convergence: functions fulfill needs of customers which can also merge and develop from different areas. This depends on the customers’ willingness to accept new forms of need fulfillment or new products to fulfill old needs. When effective buying power creates a significant market demand for integrated functions, then boundaries are likely to be dissolved between different consumer groups (Grant & Shamp, 1997). The industry and firm dimension refers to relevant industry variables that affect convergence.1 Market barriers to convergence include industry cultures and traditions, regulation and antitrust-legislation prohibiting the creation of alliances, mergers & acquisitions. Deregulation often leads to a removal of artificial barriers that then promotes industry convergence. Firm-specific barriers to convergence include differences in company cultures and core competencies. Different activities along or across traditionally separated value chains may be merged by “management creativity” (Yoffie, 1997) such as the creation of new businesses, acquisition, or the creation of strategic alliances and networks. Convergence describes a process change in industry structures that combines markets through technological and economic dimensions to meet merging consumer needs. It occurs either through competitive substitution or through the complementary merging of products or services, or both at once (Greenstein & Khanna, 1997). The problem is that the notion of “convergence” itself is generally taken to be a characteristic of digital media, suggesting a possible future in which there might just be one type of content distributed across one kind of network to one type of device. Convergence remains ill defined particularly in terms of what it might mean for businesses wishing to develop a new media strategy. This chapter argues for a definition of convergence based on penetration of digital platforms and the potential for cross-platform Customer Relationship Management (CRM) strategies, before going on to develop a convergence index according to which different territories can be compared. The model herewith discussed specifically refers to the European competition environment.