Skype Qnd the Chqnge of the Value Curve in Voip Industry

Topics: Blue Ocean Strategy, Innovation, Voice over Internet Protocol Pages: 8 (2176 words) Published: May 23, 2013
The intention of this essay is to evaluate the change of the value curve in the chosen industry caused by a recent innovation in its industry. To develop this theoretical analysis, it seems interesting to mention the case

of Skype which has revolutionized the telecommunication industry. Originally released in 2003 by three Estonian developers, the service allows people to communicate thanks the voice-over-IP solution. Bought by Microsoft in 2011 for $8.5 billion, it reached 663 million users in 2012. Moreover, Skype reveals the essential shift from analogue phones to digital communication. Within this essay, several theoretical concepts would be developed and underpinned practical examples taken from how Skype has revolutionized the

telecommunication industry. Firstly, the new value innovation which constitutes Skype   would   be   characterized.   Afterwards,   the   impact   of   Skype’s   new   value   innovation on its industry would be explained. Secondly, it would be seen how innovation and entrepreneurial intensity of firms introducing new services or products can influence the shape of the industry value curve, using strategic canvas framework. Thirdly, the identification of new groups of customers that enable the new innovation would be demonstrated.



o begin with it seems relevant to define innovation. According to Steve Job cited in Fortune in 1998, innovation does not depend on the amount of money you spend but on “the  people  you  have,  how  you're  led,  and  how  

much  you  get  it”.  Besides  according  to  Drucker  (1985, cited in Kuratko and Hodgetts, 2004:137),  innovation  is  “the  specific  instrument  of  entrepreneurship  [...]  the  act  that   endows   resources   with   a   new   capacity   to   create   wealth.” Drucker asserts that innovation leads to wealth creation. Kim and Mauborgne nuance the notion of innovation introducing the new value innovation.   According   to   them,   “Value   Innovation   is   the   cornerstone   of   blue   ocean   strategy. It focuses on making the competition irrelevant by creating a leap in value for buyers and for the company, thereby opening up new and uncontested market space.” This works if there is the simultaneous effort to differentiate and to reduce the cost for buyers. They emphasize that value innovation benefits to customers and to the company which initiates it (see figure 1, p.10). Besides, value innovation integrates a different approach than the conventional logic and applies a strategic logic of high growth including five dimensions: industry assumption, strategic focus, customers, assets and capabilities and product/service offering (see figure 2, p.10) In the case of Skype, the company did this leap and created an uncontested market by transforming the way we communicate, using the shift from analog to digital (Rosenberg J. ,2012). In 1876 analog telephone was invented by Graham Bell and   in   1960’s   it   became   global.   It   is   just   in   the   1980’s   that   digital   connections   appeared, followed by the entrance of the mobile phone. Infrastructures for the digital technology were developed, and reduced the cost of information transmission. In 2003, Skype used this revolution and revolutionized habits by launching the software which allows users to communicate –peers to peers on internet- with video


and voice, to share files, to tchat and do video conferences, all of that free of charge. This combined voice and video offering gives users much higher value at lower cost than alternatives such as long distance calling, where you cannot see each other (Rosenberg J., 2012). Furthermore, it ridicules complex and high costs calls from room-based video conferencing and reduces the costs of business or leisure travel. The impact on the industry was huge.  “We  are  in  the  middle  of  an  incredible   revolution of how technology works as a whole. Voice Over IP has already transformed communication,  ...
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