These are my notes on the research paper, The Decoupling Effect of Digital Disruptors, by Thales S. Teixeira and Peter Jamieson.
- Three types of consumer activity:
- Those that create value for the consumer.
- Those that capture value from the consumer for the producer.
- Those that erode value for the consumer without capturing value for the producer.
- First wave of digital disruption was about unbundling. iTunes unbundled songs from albums. Google unbundled news articles from publications. Mostly limited to content providers and digital products.
- Next wave is about decoupling: the separation of consumer activities that have traditionally been done together. Example: Tivo decoupled watching shows and watching commercials.
- Examples of decoupling activities:
- Primary stages of consumption: Search > Purchase > Use.
- Disruptors: (1) find ways to provide value-creating activity without the other parts; (2) find ways to capture value.
- Two opposing forces:
- Integration Force: “One-stop shopping”.
- Specialization Force: Multiple vendors providing better value for specific needs.
Solutions and Responses
- Two options: Recouple and Rebalance
- Example: Impose ads over content so the two can’t be decoupled.
- Example: Charge in-store customers $5 for browsing but not buying.
- Works when firms can strengthen the Integration Forces and weaken Specialization Forces.
- Example: Best Buy charges manufacturers for preferred showroom placement. Capture value from previously value-creating activity (browsing).
- Example: Telefonica rebalanced so both connectivity and communication created and captured value.
- How decoupling is being used to disrupt markets:
- Birchbox: removes search cost
- Rent the Runway: removes ownership cost
- SaaS: removes ownership cost
- Sharing Economy: decouples using (value-creating) from owning (value-eroding)
- Freemium: Decouples usage from payment
- Question for established businesses: “Can another firm profitably deliver only the value-creating portion to the consumer at a lower cost by charging less, by reducing effort, or by letting them skip a non-value creating activity?”
- Two ways incumbents can protect themselves:
- (1) Increase bind, strengthen integration forces, weaken specialization forces. This may only be a short-term fix.
- (2) Best approach: preemptively decouple.
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