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REPORT CONTENTS. A structured approach to the analysis . INTRODUCTION TO WebTV. Conceptually, WebTV was a simple product that connected to the internet via a standard television.
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REPORT CONTENTS A structured approach to the analysis ........
INTRODUCTION TO WebTV • Conceptually, WebTV was a simple product that connected to the internet via a standard television. • Aimed at novice users, WebTV offered a range of services including e-mail, online shopping and enhanced web browsing and TV content. • It’s important to note that this was 1996, supporting technology was still developing.
COMPANY BACKGROUND • Steve Perlman, an entrepreneur and inventor developed WebTV and formed WebTV Networks Inc in the early 1990’s. • During its development phase, the company raised capital from private investors and also companies such as Microsoft. • In 1997 Microsoft purchased the company and rights to the WebTV product outright for US$500m. Perlman joined Microsoft to continue the WebTV development.
INDUSTRY AND ENVIRONMENT • The overall industry fit was supportive of the WebTV strategy. • However integration problems would emerge due to the “bleeding edge” nature of the product. • High cost and lead times for enhanced content were largely outside of Microsoft’s control. • Issues with market positioning and the resulting shortfalls in revenue meant that differentiation and sustainability would be difficult.
INNOVATION ECOSYSTEM • Initiative risk was low as the product itself was in operation by the time Microsoft acquired WebTV. • Supporting infrastructure such as dial up internet and low picture quality TV made achieving the desired WebTV experience difficult. There were also technical incompatibilities. • Integration issues evolved throughout the value chain. Customers were not using the service as anticipated, impacting revenue returns. Content providers were reluctant to invest in supporting products.
THE WebTV STRATEGY Arenas • Internet / media player • Novice computer users • High performance yet simple technology Economic Logic Staging • Vehicles • Aggressively acquiring established technology companies • Distribution and manufacturing partners under licence • Acquisition strategy meant quick to market • First mover advantage • Scale and lower cost • Premium Pricing • Multi stream revenue Differentiators • Brand name • Reputation for quality • Promised features • Unique technology
STRATEGY FAILURE – EVIDENCE • Whilst WebTV was actually implemented, there was a failure to generate sufficient subscribers. • Numbers are difficult to confirm however Microsoft have previously stated that they had around 1 million subscribers. • For a corporation the size of Microsoft, this is not a business of sufficient scale to be commercially viable.
STRATEGY FAILURE – STRATEGY ELEMENTS • Primary failure element was marketing and product position, however the analysis identified four (related) elements in total. • The failure elements are all related to disruptive innovation.
MARKET POSITIONING FAILURE • The target market liked the product and did buy it. • Unfortunately users did not want the specific features and interactive web experience on offer. • Instead they did basic web browsing and checked their emails. • Online credit card usage was also in its infancy at this time. • Accordingly the revenue model failed and costs increased.
RELATED FAILURE ELEMENTS • Content / integration partners • Content partners were reluctant to invest in costly and lengthy production of enhanced web and TV content. • First mover strategy • WebTV fitted into this strategy perfectly as a product; however a first mover strategy also brings with it the elements of interdependence and integration risks that soon became apparent. • Revenue model • Customers failed to take up the enhanced, interactive services and functionality. This meant the revenue model did not deliver full value. Revenue model failed to deliver full value because of the related failure elements.
RECOMMENDATIONS A STAGED APPROACH TO DELIVERY? There are examples of technology innovation that is staged so as to better fit the prevailing innovation ecosystem. (HD Television had been in development many years prior to its release. Intel has advanced chip development running years ahead of release). InWebTV’s case advances in broadband internet and television picture quality would have better supported the innovation strategy. MORE DEPTH TO THE MARKET RESEARCH? The marketers failed to understand how customers would use the technology. The basic idea – internet over the TV was sound. WebTV however missed the target in terms of exactly what services customers wanted.
CONCLUSION • There were (and are) many brilliant and innovative features to consider with WebTV. • It remains a great idea, however in reality it was probably a decade ahead of its time. • The way that consumers interact with the internet now, is more suited to the thinking behind WebTV. An idea ahead of its time?
