Irene Ng, Professor of Marketing & Service Systems at WMG and Director of the International Institute for Product and Service Innovation
In 2011, digital music sales surpassed CD and record sales for the first time. Global revenues for record companies grew by an estimated 8 per cent to US$5.2 billion in 2011, with subscription services being the fastest expanding sector. According to recording industry body IFPI, the number of users paying to subscribe to a music service increased by 65 per cent in 2011 to 13.4 million globally, even while music piracy is still rampant.
Music as an offering is at the more advanced stages of digitisation, to the extent that the change to a digitised form has impacted its nature. This is termed as digital backwash – when the act of digitising something to be offered on the Internet fundamentally requires a rethink of how the offering itself has to change. Content can be changed and combined in such a way that the medium and the message almost function as one.
Most information-based offerings such as music and books can be almost fully digitised, and they will feel the full impact of digital backwash to the extent that it could threaten entire industries. For instance, the real challenge for train services usually lies in getting the customers onto the train, hence its service proposition is laden with high demand for information. Customers want to know which train they should get on, how many seats are available on which carriage, and where to put their luggage.
The digitisation of a train service proposition could warrant a redesign of trains, based on a completely different set of requirements. A train could provide informational resources for people so that they can get on to the train. New ways of configuring and digitising the train service could enable consumers to experience trains differently. The information provided to passengers and received from them could spawn innovative services, allowing for different types of revenue and business models. Because of digital backwash, the traditional train and the digitally connected train could be two very different offerings.
As digitisation moves to create services closer to contexts of use and experience, there will be better understanding of what information is needed from the way things and people are connected. To a certain degree, every product has a demand for information. The day will come when a barman will know you are running low on beer at your table, enabling him to come over and take the next round of orders.
Editorial adapted from Irene Ng’s upcoming book to be released in early 2013 ”Value and Worth: Creating New Markets in the Digital Economy” accessible at www.innovorsa.com
Professor Irene Ng is the Professor of Marketing & Service Systems at WMG, University of Warwick. She has recently been appointed as the Director of the International Institute for Product and Service Innovation. Read about her appointment here.