During the coronavirus lockdown in the United Kingdom (2020), 45% of workers reported to be working from home (fully online). Using the theories discussed in the module Digital Business, explain the phenomenon from the enterprise digitalisation perspective. Critically discuss the potential outcomes of this experiment
Introduction
When a large percentage of the workforce adopts an enforced new way of working, the organisations that have the technology in place, are quick to adapt their methods of communication, and understand the impact of such a drastic change on their workforce are better placed to weather the external disruption to their business by minimising the internal disruption.
Technologies that enable working online
Working from home would not be possible without internet-connected digital tools and platforms that allow workers to connect, communicate and collaborate. These Enterprise 2.0 technologies are networked through internet connections and contain ‘social’ or collaborative layer functionality such as sharing documents with other workers, communicating in faster, less formal ways through instant messaging, and finding information across a wider pool of sources.
Types of Enterprise 2.0 technology
Enterprise 2.0 technologies are defined by their characteristic collaborative layer that increases workers productivity through fostering connected, collaborative ways of working.
The technologies include:
- Shared documents
- Wikis
- Social networks
- Blogs
- Video sharing
- Video conferencing
- Instant messaging
- Podcasts
- RSS
- Microblogging
- Tagging
- Rating
- Mash-ups
- Prediction markets
Video conferencing, social networking and collaborative document editing are the most adopted of the various types of technologies. These are all internal working tools, perhaps suggesting that companies haven’t yet fully realised the benefits of using these technologies to create more permeable boundaries between the organisation and its customers, suppliers, other organisations, etc., in order to increase openness and drive innovation.
Benefits of Enterprise 2.0 technology
During a time of global crisis organisations might consider the ability to continue to operate to be a sufficient benefit from having implemented Enterprise 2.0 technologies, but there are also additional longer term benefits. Andrew McAffe says that Enterprise 2.0 “offers significant improvements, not just incremental ones, in areas such as generating, capturing, and sharing knowledge” (McAfee, 2009).
The top five measurable benefits from technology adoption are (McKinsey, 2013):
- Increasing speed to access knowledge
- Reducing communication costs
- Reducing travel costs
- Increasing speed to access internal experts
- Reducing operational costs
Enterprise 2.0 technologies grew rapidly between 2006 and 2013 (McKinsey, 2013) with 61% of companies reporting using video conferencing in 2013. The growth of these collaborative tools had plateaued (McKinsey 2015) but it is not inconceivable to assume that during the lockdown far more companies are utilising the benefits of technology to undertake almost every business task. The lockdown may serve as an accelerator for better utilisation of collaborative working technologies and achieve greater and previously unrealised benefits than if organisations had not been forced to adopt them.
Communication methods that support distributed workforces
The emergence of Enterprise 2.0 as a new form of interaction (rather than purely a technological phenomenon) between workers has enabled those who had to work from home during the lockdown to continue to communicate effectively with colleagues. The new communication methods required acceptance of the reconceptualisation of how information flows in Enterprise 2.0.
Communication networks
Traditional enterprise communication followed the lines of organisational hierarchy whereas Enterprise 2.0 communication follows the paths of a network and so flows more quickly and efficiently.
Steven Johnson (2010) suggests that individuals perform better when they belong to more networks as they can benefit from information shared by other people. The more nurturing a network, the more information openly shared, the more innovative ideas that can emerge.
Collaborative communities
Enterprise 2.0 enables the creation and growth of collaborative communities; groups of people that leverage technology and communication networks to organise themselves around different principles to the traditional hierarchical organisation, in order to have a collective means to participate and collaborate. This means of organising, foregoing the authority of traditional means, would have enabled employees to quickly mobilise to figure out new ways of responding to the challenges they faced during the lockdown.
A collaborative community could include the following characteristics (Savalle et al, 2010):
- Organic
- Decentralised
- Self-organising
- Autonomous
- Asynchronous
- Self-regulating
- Varied in size
Collaborative communities emerge bottom up when people see the value of their contribution. In this there are network effects occurring as the more people contribute to the community, more people experience a benefit and so contribute more.
Companies benefit from providing the technologies and allowing this type of organisation to prosper as information sharing and crowd thinking can solve problems that traditional siloed team structures cannot, it supports new ideas to emerge, and strengthens social ties.
Ways of collaborating
Different types of organisational structure require different ways of collaborating, especially in a crisis situation such as lockdown. Allowing collaborative ways of working to emerge through communities takes more time than companies may have to enable effective working from home, and so considering the ways in which collaboration can be initiated and supported can speed up adoption among a distributed workforce.
Pisano and Verganti (2008) proposed a model of governance and participation that whilst describing how companies can approach innovation with partners could also be a valid model for describing how innovative ways of collaborative working could be understood. This model provides some understanding of how bottom up communities and top down hierarchies may interact in collaborative ways to develop innovative solutions to problems, such as the pressing problem facing companies at the start of the lockdown of how to begin working collaboratively.
Impacts on employees
Introducing Enterprise 2.0 technologies and ways of working to an organisation carries with it a considerable impact for its employees, especially if undertaken during a crisis such as lockdown. Understanding the social ties between individuals, how they develop social capital, and what motivates them to adopt the new technologies and ways of working can provide some insight into how the shift to Enterprise 2.0 can be more successful.
Social ties
McAfee (2009) described four types of ties people have with others. The ties can be weak, strong, potential or none. Strong ties exist between people who know each other and work together, but it is weak ties that are important for connecting people who don’t know each other very well in order to spread information (Gravonetter, 1973). Enterprise 2.0 enables more weak ties to form across an organisation and so encourage information to flow that might have otherwise if it was reliant on the hierarchical structure.
Social capital
Social capital exists in the relations between individuals in a group. Faraj and Wasko (2001) refer to it as a “collective orientation”, a social system that develops because of “closure, shared history, goal interdependence, and frequent interactions”. When those interactions happen online whilst using Enterprise 2.0 technologies the norms of acceptable behaviour become even more paramount, and the opportunities for sharing information and resources are increased.
Motivation
Achieving adoption of Enterprise 2.0 technologies and ways of working requires an appreciation of the intrinsic and extrinsic motivations of the employees, even more so at a time of crisis where they may have additional pressures outside of the workplace. If workers are intrinsically motivated to be successful in the roles, and they understand how new technologies can help with this, they would seem to be more likely to adopt and adapt to the change.
Conclusion
For some businesses the coronavirus lockdown will serve as an accelerator for the adoption of Enterprise 2.0 technologies, new ways of working, and new ways of unlocking value within the organisation. This enforced innovation that is making the organisational boundaries more permeable, spreading knowledge and new ways of collaborating, and enabling employees to make the most of the shift to Enterprise 2.0 has the potential to support businesses to be more innovative and successful.
Using the theories presented in the module Digital Business, critically discuss the differences between a DVD film and streaming services such as Netflix. You must use theories to frame the analysis and discussion.
Introduction
We can understand the characteristics of a DVD renting service business model and a video streaming service business model using Rayna & Struikova’s business model framework to compare to analyse the business models, and then consider how the characteristic differences between information and digital goods caused a change in the business models.
Characteristics of a DVD renting service business model
Value creation
The value network includes:
- Licensing with movie distributors.
- Purchasing DVDs from production companies
- Renting of shop space.
These complementary assets create a high barrier to entry into the market for competing businesses and ensure market dominance.
Value proposition
Offered the latest movies that are no longer at the cinema.
Implied urgency and limited availability through a fixed number of DVDs.
Reactive pricing with newly released movies are priced higher than older, less popular movies allows the revenue to be maximised.
Value delivery
Shops were the primary distribution channel, although delivery through mail existed for a short period of time.
The target market was people who owned DVD players and watched movies at home.
Value capture
Understanding customer behaviour through sales data which is used to plan the distribution of upcoming movie releases to optimise the number of DVDs available in the most popular shops.
The revenue model involved customers having membership so that the shop could record which DVDs were rented by which customers and a rental fee with late charges.
Value communication
The value communicated was in shops as customers browsed shelves full of DVDs, showing them that a large number of choices were available.
Characteristics of a video streaming service business model
Value creation
Video streaming services attempt to control their supply chain through licensing and then producing content.
The value networks include cloud infrastructure such as AWS for Netflix and Disney Plus, and payment services to collect subscription fees.
Value proposition
Customer’s watching whenever they want using high speed internet connections and mobile devices, shifted the customer’s relationship with watching movies away from something done at a particular time in their own home.
Discovery of new content is made as easy as possible, encouraging more time spent watching, which provides more data, and makes the customer more likely to continue to pay for the service.
Value delivery
The distribution channel for streamed videos is apps and smart TV’s connected to the internet, which creates a low barrier to entry by making them purely technological, requiring only an internet connection and a device for viewing.
The target market for video streaming includes the majority of adults with an internet connection and a desire to watch movies. Netflix, for example, has 182 million active users. Given the popularity of video streaming and the increasing segregation of content into specific services as those companies attempt to own particular segments of the market, it seems likely that customers will subscribe to multiple services which will reduce competition in the market.
Value capture
Video streaming uses price versioning. Different subscription levels with different features are offered at different prices. This allows the company to segment its customers by offering a basic service that suits the needs of most individuals, along with higher priced options for customers who value watching in high definition or ultra high definition and those who want to watch on multiple devices, often because of multiple users such as a family.
Video streaming enables data capture about customers behavior, including which customers watched which movies, what time of day they watched them, how far through they watched. This data can then be used to recommend other movies
Value communication
In the competitive video streaming services market, pricing is underplayed to signal to customers that they barely even need to consider the cost because it is so low and because the value they will receive is in being able to watch new movies when it suits them.
Analysis of the differences between business models
Video streaming and DVD rental differs on every element of Rayna & Struikova’s business model framework. The introduction of the internet revolutionised business models. Companies that provided DVD rental services and attempted to adapt their business model by moving part of it online, e.g. ordering DVDs through a website, were quickly replaced by companies that developed business models from an understanding of how the internet changes every aspect of their business.
| DVD rental | Video streaming | |
| Value creation | Aggregating assets into a physical location. | Segregating assets into a virtual location. |
| Value proposition | Rent weekly and watch at home. | Access anywhere, any time. |
| Value delivery | Physical shops, and home-bound devices. | Internet-connected home and mobile devices. |
| Value capture | Membership and rental fees revenue model. | Subscription revenue model. |
| Value communication | Delayed communication through trailers on DVDs and customers browsing availability in shops. | New content available every time the customer opens the app. |
The only aspect of consumer behaviour that doesn’t seem to have been affected by the shift in business models is that the majority of movie and TV consumption takes place as entertainment in the home.
Business model innovation came through utilising the ubiquitous adoption of internet technologies and mobile devices that enabled the asset (movies) to be shifted from being an information good to a digital good, along with the resulting change in the economics.
Information goods
DVDs are information goods. The value is in the information contained within the good, whilst the physical item holds very little value. Information goods cannot be replicated but can be copied, albeit with some loss of information that results in a poorer quality when the movie is played. The ability to copy enabled DVD piracy driven by the high price and limited availability of DVDs. Information goods enable the transfer of information, in this case from the disc to the TV screen.
Digital goods
Video streaming uses digital goods, which are intangible, codified, transferable and replicable. Digital goods are the only type of goods to have this combination of characteristics and so create different economics than information goods rely on. Digital goods may have a high production cost but thereafter the reproduction costs are near zero, whilst also being non-rival. These unique characteristics created challenges for businesses and drove the needs for a change of business model.
Analysis of the differences between information goods and digital goods
In addition to the differences in business models, the two services also have considerable differences in the nature of the goods they provide.
| DVD rental | Video streaming | |
| Intangible | No – information contained in a tangible medium. | Yes – information not contained in a tangible medium. |
| Codified | Yes – the physical medium contains codified information. | Yes – contains information and is information. |
| Transferrable | Yes – information can be transferred without direct contact | Yes – information can be transferred in a non-rival way. |
| Replicable | No – some loss of information occurs in copying. | Yes – enabling retrieval without loss of information. |
These differences in characteristics create different economic drives, including reproduction costs, non-rival usage and piracy reduction. Digital goods have reproduction costs at near zero. The usage of digital goods is non-rival because there is no limit on how many customers can watch at the same time. Utilising digital goods enables companies to introduce technical means to prevent piracy through replicating the movies but this drives a different consumer behaviour of sharing account details with friends and family, which causes another technical fix by services controlling the number of devices an account can be logged into.
Conclusion
The widespread adoption of the internet caused a shift from movies being an information good to a digital good which drove a change in business models that resulted in DVD rental services and video streaming service having considerable differences in business models and in the economics that follow from the nature of the goods.