TiVo: Failed Expectation
Business model innovations sound great as a strategy and if successful you can create a new market and escape the traditional competitors in your ex-industry. But the most important point in any innovation is not to have an idea, is not great execution, but the adoption of the innovation by customers. And that is the crux of business model innovation: The diffusion of the innovation. The TiVo is a perfect example.
Ten years ago the TiVo digital video recorder was presented at a broadcasters’s convention in Las Vegas. People expected that the TiVo as an easy time-shift machine would change the TV industry for ever. The great opportunity for TiVo’s users was to watch a show whenever they wanted and without commercials since they could skip that annoying part. The latter was seen as the death of the TV industry as we know it today since their revenue model is based on these commercials that nobody needed to see anymore with a TiVo. As predicted the TiVo sold well particularly as the price fell. But since 2007 the user base has fallen and the the TV industry is still existing as we know it.
It is the customer, stupid!
The Economist from April 25th, 2009 summarizes the problem with the TiVo very well: “Just because technology enables people to do something does not mean they will, particularly when it comes to a medium as indolence-inducing as television.”
But the dire fact is that so many great sounding innovations fail in the end since the customer is not willing to change their behavior. With the TiVo customers needed to adopt their behavior to the new device. They had to learn the function of the device and become more active in devising their evening entertainment. No more the TV station commanded when you can see what but it was up to the customer to design its own programm. But did the customer really want to have that control? Was this the point of watching TV? Is watching TV all about controlling your destiny?
Jobs to get done
The TiVo fell into the trap of customers’ phlegm. Watching TV is definitely not about taking control over your destiny but about passive entertainment and lulling. The job you want to solve by watching TV is all about passive entertainment and the TiVo did not help with this job. The TiVo was great for early adopters since they bought the device to actively take control over their content but the majority of users has a different open job to be done.
Competition is just around the corner
But it is not time to relax for the advertising -supported television stations. People shift time away from TV to the Internet. And the Internet is all about interactivity and therefore better suited for business models that require activity from their customers. Hulu and other HD-video streaming services are becoming popular and they give control to the users. The question will be: Do the customers really want that much control? And there is competition from the low end and with lousy quality but where interactivity is the main feature. It is youtube.
Customer Adoption as the biggest hurdle in business model innovation
In this blog I will write about business model innovations as a new strategy type but the diffusion of the innovation will be also covered in this blog. A great business model innovation without adoption by the customers is not great at all. And the adoption is the biggest hurdle in the business model innovation process. It is difficult to find interesting fresh business models. It is difficult to get them through at corporate resource allocation process or venture funding. It is difficult to execute them well. But the biggest challenge is to change the behavior of your customers. And even if you are able to change the behavior, it takes a lot of time!
(The idea of the post was inspired by the article in The Economist.)
The story of this TiVo reminds me strongly about the overcrowding of mobile phones with functions that the majority simply not adopts. Watching TV on a mini-screen for example has never been a doorbreaker in the market. Therefore german government sold UMTS-licenses at just the right time, when no one doubted the usability and profitability of this standard.
As you said in your article – the question is never ‘what can be done’ but ‘what job wants the customer to be done’. That supports the success of the combination of mobile phone & mp3-player because both serve the need for mobility…
You mention another important point. We love to add features and function to existing products. Actually, we call adding features product innovation. But we forget quite often what the basic idea was and that opens a gateway for a new value innovation. With the new features companies overshoot customers’ needs and therefore newcomers can enter the market from the low end.
Apple is a perfect example. It exercised the idea of easy music listening extremely well. Instead of making an even more “sophisticated” music player it reduced the complexity of digital music by bundling the iPod with iTunes and thereby creating a new distribution model for the music industry.
I doubt the failure of Tivo had anything to do with some deep philosophical statement on resistance to behavioral change. I think it had to do with the outrageously high cost of the subscription to the program schedule guide. Tivo was great when I got it on 2 TVs back in 2004, and back then (like most Americans) I had far more disposable income than now. Also back then a lifetime subscription was much cheaper than it eventually became. Around the time of this article, 2009, a lot of things changed:
1) Netflix streaming
2) Most networks began airing their shows online
3) The subscription fee rose drastically
4) Cable / satellite provided their own DVRs at a cheaper cost than Tivo
5) People became perpetually poorer
Also during this time the SD to HD shift rendered older Tivos useless forcing people to reconsider the value of Tivo, and Tivo’s value was not considered worthy of the cost. Tivo responded by doing absolutely nothing, and now here we are!