Information Technology: Business Models Revisited!
“The information revolution is sweeping through our economy” is what Michael Porter and Victor Millar stated in their article How Information Gives You Competitive Advantage in 1985. “Dramatic reductions in the cost of obtaining, processing, and transmitting information are changing the way we do business”. They were one of the first not asking if information technology would have a significant impact on the competitive position, but when and how this impact would strike. Then in 2007, Henry Chesbrough stated that Information Technology was not just a source of competitive advantage anymore, but that innovation must include business models, rather than just technology and R&D – predicting the Internet bubble, that was characterized but the first part of the sentence, to collapse. Whereas first, information technology was applied to support the traditional channels to increase effectively and efficiency, now, information technology becomes the driver of business strategies.
In the publishing industry for example, traditional printed media is suffering significant decreases in demand and revenues due to a rapidly changing (technological) environment. In 2018, the turnover in this entire market is forecasted at 2.8 billion euros, as compared to 3.6 billion euros in 2013. In other words, a 20% decrease in total revenues within five years, whereas advertising budgets for Internet are expected to almost double up in the period from 2009 to 2018 (PwC, 2015). Recognized publishing companies lose market share even though innovative information technology is introduces. New business models arise as a result of radical innovation.
Blendle – founded in 2012 by the Dutch Alexander Klöpping en Marten Blankensteijn – is an online news platform that aggregates articles of a wide variety of magazines and newspapers in order to be redistributed on a pay-per-article basis. In October 2014, the business is valued at thirteen million euros at the moment when Alex Springer, the largest German publishing company, and The New York Times, the large American media company, together invested three million euro’s in exchange for 23% of shares in the digital news kiosk to expand to respectively Germany and the United States. The business model of Blendle is based on a pay-per-article basis; 30% of the article price, ranging from €0.10 to €0.89 dependent on the media and length of the article, is for Blendle. The publisher gets the remaining 70%, but their bargaining power is decreasing.
From my point of view, the reason that the traditional publishing companies were struggling with the so-called “payment wall”, is that they were biased and wanted to build on their current business model, viewing Information Technology as a tool, or channel, to support their current business strategies, rather than base strategies upon a solid foundation of analysis. Once you start thinking from the solution rather than from the problem, you are biased and will forget to take into account important aspects for success. But then again, big recognized firms have some solid financial back up, being able to buy that success from “the smart people”.
Henry Chesbrough, (2007),”Business model innovation: it’s not just about technology anymore”, Strategy & Leadership, Vol. 35 Iss 6 pp. 12 – 17
Maarten van Tartwijk for Wall Street Journal. (2014) New York Times, Axel Springer Invest in Dutch Startup Blendle. [Online] 27th October. Available from: http://www.wsj.com/articles/new-york-times-axel-springer-invest-in-dutch-startup-blendle-1414408997 [Accessed: 14th October 2015].
Porter, Michael E., and Victor A. Millar. “How Information Gives You Competitive Advantage.” Harvard Business Review 63, no. 4 (July–August 1985): 149–160.
PwC. (2015) Advertentiebudgetten definitief van tv naar internet. [Online] September. Available from: http://www.pwc.nl/nl/perscentrum/persbericht-archief.html [Accessed: 14th October 2015].