By Josep Valor, Research Director, IESE

Digital terrestrial television is growing but up to now only at a snail’s pace. In Spain it has gained a meager 2% of the market share and only 12.5% of all Spaniards have ever tuned in. This is about to change. In 2007, there will be a significant increase in the presence of this type of television in households, since we are actually only three years away from the shutoff of analog transmission, an event that is unikely to be postponed.
DTT will bring many more television channels along with devices such as the PVR (personal video recorder) and the DVR (digital video recorder). These devices are designed to help consumers get the most out of the growing television viewing options via electronic program guides.
The industry is notably concerned about the audience fragmentation and share drop brought along by DTT, and is thus reticent towards these devices. Their attitude is due to the awareness that these devices allow users to see programs at a later time, thereby ignoring prime-time scheduling and bypassing commercials.
Nevertheless, these devices also open the door for those able to capitalize on the opportunity. A traditional player such as U.S. broadcaster CBS realizes that those tuning in to new channels are still very much avid viewers of the prime-time programs broadcast by the top networks. Therefore, the strategy being taken is to offer viewers new options for watching their favorite shows, whether through websites, podcasts or mobile devices. Meanwhile, the creators of Kazaa and Skype have launched The Venice Project, which allows users to select their own channels and receive them via Internet on their computers or new media center devices, such as those recently unveiled at CES and Macworld Expo. The growing demand revolves around content and only those who understand and accept this new trend will be able to survive in this new environment.

Reports in eMarketer and MediaWeek

By Joan Enric Ricart, Director of General Management Department, IESE

Since the 2003 video of a boy who videotaped himself imitating a character from Star Wars traveled the globe through P2P networks, the importance of user-generated content has steadily grown to become the preference of most Internet users. A study by eMarketer shows that the leading websites offering this type of content—such as Wikipedia, MySpace, YouTube and Bebo—keep visitors connected for over an hour. Visits to the leading sites without this kind of content last barely 34 minutes.
In 2007, we will see how companies try to capitalize on user participation in their marketing strategies. Essentially, they will be promoting the use of new tools such as blogs, social networking sites and buzz marketing.
Up to now, corporate use of this type of tool has been minimal. According to a report by eMarketer, in 2005 just 5.8% of the Fortune 500 companies had corporate blogs. At the end of the year, in the United States just 13% of all companies used blogs or social networking as marketing tools. Nevertheless, 38% said they would be doing so sometime in 2006, such as the online magazine TheStreet.com, which has announced it will launch a new social network. The new site, called Stockpickr, will let readers compare their investments and exchange ideas. General Motors already runs FYI Blog, where employees of the automaker share news from the sector as well as their own opinions. Without a doubt, it is a double-edged sword but if managed skillfully it could give the company great visibility. Putting the power of information in the users’ hands is always risky, but…  is there an alternative?

News in Wikipedia and Reuters
Articles in Washington Post, Business Week and Adotas
Reports in Trendwatching and eMarketer (premium service)

By Jaume Ribera, Jaume Ribera, professor of Production, Technology and Operations Management, IESE

The recent unveiling of the iPhone—the new mobile telephone from Apple that takes the features of its famous iPod digital music player and adds Internet surfing and a digital camera—highlights one of this year’s key trends: technological convergence.
Many users nowadays want a single device that combines a variety of features. Thus, 39% of Spanish mobile phone users consider Bluetooth a requisite for their next phone purchase, while 27% want above all to be able to listen to mp3 music files and another 24% will demand a digital camera, according to data provided by TNS.
Meanwhile, the battle for control of the consumer’s living room leads to the launch of products that converge different functions. One example of this is the videogame console Xbox 360, which also plays high-definition video and, according to an announcement by Bill Gates at the recent CES show, it will soon include the option of streaming video broadcasts done via Internet (IPTV).
This combination of functions in a single device exists alongside another rising trend, namely the increasing availability of highly specialized products that are also extremely user friendly. One example of this would be the mobile telephones for kids that were so heavily advertised during the recent holiday season. Its potential for success lies in the fact that while the market penetration of mobile phones among users over 15 years of age is above 90%, with children under nine the figure is at just 5%, this according to Telefónica.
In the end it is about combining the search for products that offer more and more features with those aimed at users who will settle for simpler, more economic models. Many times the key to success lies in this segment of the market.

Articles in El País, El Mundo and La Vanguardia
Reports in TNS

By Sandra Sieber, Director of the Information Systems department, IESE

In contrast to innovation that is restricted by the limits of a company, open innovation promotes the use of outside ideas for improving business and helps jumpstart internal innovation en route to achieving greater results. Henry Chesbrough, professor at the University of California - Berkeley, coined the phrase “open innovation” back in 2003 but it will be this year when companies begin to capitalize on the paradigm.
Incoming innovations can become new products for a company, while the outgoing ideas can be licensed to third parties. Examples of the former are IBM and General Mills—owner of brands such as Yoplait and Häagen-Dazs—whose websites have sections encouraging visitors to share their ideas. Amazon.com has done a fine job cashing in on the latter possibility. The company has used its internal online sales platform to let users market their own products. This way, Amazon.com turns users into partners and makes profits on every sale.
The fact is that funneling ideas down a narrow tube only makes sense for large companies, who were historically the major driving forces behind R&D. In 1981, seven out of every ten dollars invested on innovation came from companies with over 25,000 employees. But in 2001 the figure was down to four out of every ten dollars, whereas the companies with fewer than a thousand employees amounted to 25% of the overall investment in R&D, according to the online magazine News.com.
While having a centralized internal R&D department is no longer a viable option in certain industries, open innovation gives medium-sized companies a quicker and cheaper way to get their innovations on the market.  This way they are ensured a competitive advantage in an increasingly globalized economy.

Websites Open Innovation, General Mills and IBM
Artciles in Techweb, CNet, Optimize and McKinsey Quarterly (free registry required)

By Xavier Oliver, Professor of Marketing Department, IESE

When deciding on an IT project it is crucial to assess the financial cost, however the return on investment should not be the only factor taken into account. The challenge is to make decisions by evaluating the needs of the entire organization and not just aspects benefiting one particular department.
High on every IT manager’s list of worries for 2007 is the issue of aligning technology with business objectives. A study by Forrester reveals that half of America’s CIOs cite this task as one of their top three priorities. This statistic should be extrapolable to Europe. A total of 68% of the CIOs surveyed by Intel and Coleman-Parkes consider this problem to be the most important challenge they will need to face in the short term.
In order to manage technology as a business, technology decisions must a joint responsibility of IT directors and upper management. Although upper management is not usually well-versed in technical issues, there is a growing need to have them involved in strategy decisions regarding technology. Both groups should be able to understand one another in order to maintain effective communication and to ensure that decisions made in this area are truly tied in with the business processes.

Study in Forrester (premium service)
Study in Intel (In Spanish)

The simple act of communication between people is what ultimately led to the success of new high-risk business ventures such as Hotmail, Skype and YouTube. If word of mouth is powerful, the electronic version is even more so for its speed, persistence and measurability. In “Electronic Word of Mouth: What Do We Know About This Powerful Marketing Tool?” Julián Villanueva and Guillermo Armelini of IESE explain how to design an e-WOM strategy for boosting sales through the use of tools such as blogs and viral marketing.

Full Story (PDF, 921 Kb)

The Internet Global Congress (IGC) is now accepting applications from proposed panelists for the ninth edition of the event, which will take place April 16-19, 2007, in Barcelona. If you are interested in participating, proposals may be submitted until January 31 through the Call for Papers section on the IGC website.