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TiVo: beyond disruption

TiVo: beyond disruption

Digital video recording (DVR) firm TiVo successfully navigated the “disruptor’s dilemma” by gaining support from the TV ecosystem it disrupted, says study co-authored at Cambridge Judge Business School.

Digital video recorder (DVR) company TiVo, which was initially dismissed as a “cancer” by a frightened television industry, successfully navigated the “disruptor’s dilemma” by adjusting its strategy to gradually win support from the TV ecosystem, according to a new study co-authored at University of Cambridge Judge Business School.

TiVo alarmed a TV industry concerned about viewers skipping or fast-forwarding commercials, prompting headlines and analyst reports in 2000 predicting “The End of TV (As We Know It)” – but the start-up company over time skilfully (if fitfully) convinced a broad swathe of the industry that DVRs would help create a brighter future of interactive television for advertisers and content makers in addition to viewers, the study found.

The TiVo study entitled “The disruptor’s dilemma: TiVo and the US television ecosystem”, just published in Strategic Management Journal, came up with a term for the paradox faced by TiVo Inc. The company not only encountered the expected resistance from incumbents but also “intertemporal co-opetition” – a situation in which a newcomer’s innovation can offer incumbents benefits through cooperation that might materialise only in the future, whereas the innovation’s disruptive effects through changed competition are felt immediately.

“Most studies on disruptive innovation focus on challenges faced by incumbent firms, but this study instead looks at how disruptive companies, often start-ups, find ways to survive and grow by gaining the support of entrenched incumbents that feel threatened,” says study co-author Shahzad Ansari, Reader in Strategy at University of Cambridge Judge Business School.

“Navigating these tensions are not easy, so the findings hold useful lessons for disruptive innovators and incumbents in many industries.”

The study cites car-sharing company Uber and Internet radio firm Pandora as two start-ups that are now adjusting their approaches as they navigate regulatory backlash and public-relations issues in their industries.

The term “disruptive innovation” was popularised in the 1990s by academic Clayton Christensen, but the lack of follow-up studies looking at how disruptors navigate tricky waters “is surprising given low survival rates for entrants,” the TiVo study says.

Dr Shahzad Ansari

Dr Shahzad Ansari

The study is co-authored by Shahzad Ansari of University of Cambridge Judge Business School, Raghu Garud of Smeal College of Business at Pennsylvania State University, and Arun Kumaraswamy of the College of Business and Public Affairs of West Chester University of Pennsylvania.

The study was based on patent and other regulatory filings, interviews by the authors with past and current TiVo executives (including co-founder Jim Barton and current CEO Tom Rogers), analyst reports on TiVo and other TV industry firms, and other sources including scholarly and press articles on the TV industry dating back to 1995, or two years before TiVo’s precursor firm was founded.

The study chose to focus on TiVo because it presented a revealing case in which a disrupted ecosystem comprises many players with “different interests and motivations” regarding DVR technology – including broadcast networks, advertisers, content providers and distributors, audience ratings firms and TV viewers.

By analysing data and attitudes since 1995, the researchers found that TiVo managed very well in adjusting its strategy to address the tensions its disruptions created, and also used its increasing popularity and technological knowhow (including an impressive array of patents to protect its innovations) to gain “greater latitude to frame its innovation as being sustaining to the operations of ecosystem members.”

For example, TiVo sought to minimize the perceived threat to incumbents by not offering a commercial skip button, instead allowing subscribers the option to fast-forward commercials – while rival DVR company ReplayTV did offer the skip option (ReplayTV was sold in 2003 and proved far less successful than TiVo). “Because of this, we were perceived by the industry as the relatively good guys among the disruptors,” TiVo co-founder Jim Barton told the authors.

TiVo also hired an executive familiar with the media industry to reach out to ecosystem incumbents and appear less pugnacious. TiVo co-founder Barton also highlighted the persistence required to forge such relational ties despite being rebuffed repeatedly: “We knew that there would be a lot of resistance. We were thrown out of the office the first time and we just said that we will come back another time.”

Although TiVo realised it had powerful patents, CEO Tom Rogers told the authors that intellectual property alone cannot replace the human touch. “You can’t hold a gun to people’s head,” he said, because such an approach won’t yield “the strategic partners that you need. So, you need patents but you also need a superior product going forward. You can extract value from IP but it can’t be your backbone like your operating business.”

TiVo also reached out to other incumbents such as the Nielsen ratings firm, satellite distribution company DirectTV and other major players, often striking partnerships, while offering technological tools such as “tagging” to allow advertisers to offer targeted and interactive commercials to interested subscribers, says the study.

One key theme of the study is that the uncertainties of the disruptor’s dilemma requires continual adjustment over time, so the paper cautions: “Though TiVo has so far managed to survive and gain acceptance within the TV industry ecosystem, success for the company and for other similarly placed start-ups is not guaranteed.”