Product quality, hypertargeting, user personalization, and customization are today’s prescriptions for digital success. And they may be precisely why so many companies find digital transformation hard, misdiagnose threats to their business, and miss opportunities.
These prescriptions tend to lead firms to focus on customers one by one and miss the connections that arise from managing customers as a portfolio. They lead us to believe that content quality is the key to success — when connections are. They lead us to believe that the traditional hub-and-spoke marketing still wins — when, in fact, networks do! They lead us to believe that traditional media is threatened by better and more varied digital content that lures customers in droves — when, in fact, fixed costs are the real culprit! In each case, they lead us into the Content Trap.
User connections come in different forms: network effects (as in the PC wars or news classifieds), preference connections (as in print-digital usage or broadband-cable viewership), or fixed costs (as in most content businesses). See these connections and exploit them and you’ll create the conditions for large success—as Microsoft, eBay, Uber, Airbnb, Schibsted, and Tencent have done. Remarkably, in nearly every case billions of dollars of value were created without owning content or a product—simply by leveraging connections. Miss these connections and you’ll pay a price—as Apple did for two decades, and as so many content businesses did in reacting to digital threats.
Connections explain why the New York Times paywall was effective in 2011 although earlier paywall efforts by the paper had failed. They explain why cable bundles are a force of nature that refuse to go away, and why they might benefit not just cable operators but also viewers. They clarify why digital may not be the real threat for book publishers and cable operators. And they point to why fledgling start-ups, such as Tencent, have grown in a decade to become among the most valuable firms on the planet.
But managing user connections doesn’t come naturally, and there are two reasons for that. First, the centre of gravity in organizations tends to be products, not users. The value of newspapers was thought to reside in news; of cable operators, in channels; of PC manufacturers, in ease of use of their devices. But the real value came from classifieds, pipes, and interoperability. Second, the tendency is to treat the individual user as the unit of analysis, rather than connections between them. This trap is even more insidious than the first, arising as it does in organizations that are ostensibly user-centric or aspire to be.
Focus on your relationships with individual customers one by one, or on the content you produce for each of them, and you’ll miss the secret of success in a connected world.
Success comes not just from creating content—it comes from Creating to Connect.
Get Bharat Anand’s ‘The Content Trap‘ here.