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Articles, Business Case
Sustaining success: Lessons from South Korea’s OhmyNews
May 2, 2015 419424ss Leave a comment
If you are one of the billions of people who use social media regularly, then it is most likely that you are familiar with the image on the left. It was diffused very fast throughout the internet, simply because it describes something strange, yet very real. These, and many other companies simply endorse the exchange between customer groups, while they just play the role of coordinator-facilitator. Companies with similar business models, realize that people hold in their hands valuable tangible or intangible property and that they just need the appropriate incentive in order to share it and create value, both for the company and for other people.
Eastern countries have surprised repeatedly the western business world with their creativity. OhmyNews is a company that comes from South Korea and it is an example of customer empowerment. OhmyNews is an online newspaper that was established by Oh Yeon Ho on February 22, 2000, while in 2004 an international website was created. Similarly to the companies of the image, OhmyNews has just 70 Journalists who produce less than 20% of the content, simply because this is a citizens’ job. As one of the most influential news websites in South Korea, the company operates on the principle “every citizen in the world is a reporter”. They allow the citizens to play the role of news hunters by promoting direct democracy at the same time. Specifically, company’s editors screen citizens’ articles before posting them on the website to ensure content integrity without exercising censorship. Consequently, OhmyNews is a representative example of a company that crowdsource almost 80% of its content.
Large news providers hire thousands of journalists around the world in order to support timely and effective news capturing. On the other hand, costs rise along with employees, something that forces them to introduce multiple revenue sources. For OhmyNews this should not represent a dilemma since its model allows access to the most specialized and diversified news with minor costs. However, there is another part of the story that is far from a fairytale.
The international site is inactive since 2010 because 70 employees were overloaded with information from around the world that they could not manage. The company was also struggling financially for a long period, with revenues that were falling dramatically month by month. The founder stated that the website was not a profit seeking move at the beginning, but like every organization, the company had to find a way to finance its expenses. It was clear to the executives that the existing model leads to failure with rapid pace. Thus, in 2009 OhmyNews started to make plans for a new and sustainable business model. The transformation was a great challenge. Back in the days most of their revenues (70%) were generated by advertisements. Now many local portals entered the game and absorb more than 90% of the advertisement revenues, something that does not leave room for fast growth towards this direction to OhmyNews. They introduced two new models that account about 50% of their revenues. The first is the “tip” model which allows readers to donate a tip for a story they like, while the biggest portion of the “tip” is given as reward to news contributors. The second is called “100,000 club” and consists of 100,000 members that pay €7 per month to attend live or recorded lectures organized by the company itself. Thanks to its passionate supporters the South Korean site is still running, but this time more sustainable.
What prevented the company leaders from taking advantage of the huge success of their business? Obviously, innovation and customer involvement do not guarantee success. OhmyNews-international experienced firsthand what a tremendous customer involvement means when you are unprepared. Furthermore, when your service is free, it is necessary to find other sources of income that could be sustainable in the long run. The lesson: Innovation does not last forever, it needs to be continuous. Even disrupters can be disrupted when they do not find new ways to adapt their business model into new situations.
Joyce, Mary, (2007). The Citizen Journalism Web Site ‘OhmyNews’ and the 2002 South Korean Presidential Election. Berkman Center Research Publication No. 2007-15
http://www.bloomberg.com/bw/stories/2006-11-01/ohmynews-oh-my-biz-problembusinessweek-business-news-stock-market-and-financial-advice (Last accessed: 2/5/2015)
http://www.businessweek.com/globalbiz/content/jul2009/gb20090714_537389.htm (Last accessed: 2/5/2015)
http://www.forbes.com/forbes/2009/0330/050-oh-my-revenues.html (Last accessed: 2/5/2015)
https://vimeo.com/17184251 (Last accessed: 2/5/2015)
business caseco-creation
Star Wars: The consumer strikes back
April 26, 2015 419424ss Leave a comment
How Does the Variance of Product Ratings Matter?
What do consumers look when they make a purchase decision? Consider that you want to buy a new laptop. First, you usually determine your needs and then you try to find a product that matches these needs. Trying to find a perfect match, you can address to multiple different sources and product descriptions offered both by companies and experts. This process, is greatly facilitated by the evolution of information technology. However, information technology also facilitates the spread of another type of product information which stems from a different source, but it is as influencing (or even more) than the information provided by conventional sources. This type of information are the user generated content.
User generated content is a very broad term that does not refer only to products. It can also exist for entertainment purposes such as videos or even for journalistic purposes. User product reviews are usually different methods that customers use to express their personal opinions and experiences about a certain product. They can take the form of a text or the form of a quantifiable scale usually from 1 to 5. Many retailers have adopted these review methods to help their customer in their decisions, while star ratings are one of the most prevalent review methods. Star ratings are characterized by 3 Vs, namely Volume, Valence and Variance. Volume refers to the number of reviews, valence to the degree of positive or negative sentiment (Mudambi, Schuff, Zhang, 2014) and variance to the distribution of the ratings within the scale. Sun, 2012 identifies a research gap regarding the variance characteristic and focuses her research on answering how consumers perceive different types of variance, how it affects subsequent demand and whether variance is interrelated with average rating (valence). The methods and the findings are discussed in the next paragraph, while the last paragraph focuses on practical implications.
The author recognizes that none of the three aforementioned Vs can deliver meaningful information about how customers interpret ratings when the product and consumer attributes are ignored. Consequently, an econometric model is developed that incorporates the notions of perceived quality and mismatch. The latter describes the level in which the attributes of a product allow customers to be satisfied, therefore, products with high mismatch are more likely to be niche products. The theoretical model suggests that the higher the product quality, the higher the average rating will also be, since every consumer will enjoy a high quality product more, irrespective of their preference match. Hence high average rating is perceived as result of high quality by consumers. Furthermore, the author suggests that when the average rating is low, consumers may not perceive the product as low in quality, if the variance, hence mismatch, is relatively high. The interesting explanation that the author provides is that high variance is perceived as the main factor of the low average rating, something that does not signal low quality, since the existence of bad reviews dramatically deteriorates the average score. The second finding of the model, which is the main proposition of the paper, is confirmed empirically. The effect was also reflected on sales which increased when both the conditions (high variance, low average) were met.
The research of Sun, 2012 is fruitful for different parties. Retailers that sell products with low ratings but with high variance, can exploit the opportunity of the well-matched consumers by increasing the price. For example, the Motorola in the image below has an average rating of 3 stars, however it also has a high rating deviation. Therefore, Amazon in this case could increase the price in order to exploit the group of people who still prefer an “old school” cell phone by expressing their opinion through high ratings. Finally, managers can use variance to make predictions about future demand, product life-cycle and make better portfolio decisions.
Mudambi, S. M., Schuff, D., & Zhang, Z. (2014). Why Aren’t the Stars Aligned? An Analysis of Online Review Content and Star Ratings. In System Sciences (HICSS), 2014 47th Hawaii International Conference, 3139-3147
Sun, M. (2012). How does the variance of product ratings matter? Management Science, 58(4), 696-707.
http://www.amazon.com/Motorola-K1-Unlocked-Slot-International-Warranty/dp/B000JL4Y3Y/ref=pd_rhf_gw_s_cp_2_12Z5?ie=UTF8&refRID=0CFVB2S6H2494MEHE02R (Retrieved 24/4/2015)
A MORE EFFICIENT WAY OF LEARNING
April 4, 2015 419424ss 2 Comments
Customers hold knowledge about their own needs. Companies want to benefit by offering products or services that match these needs. Value co-creation tries to bridge this information asymmetry gap by engaging customers into the creation of value. The internet facilitates companies’ turn towards this direction by enabling the evolution of existing business models that traditionally excluded customer engagement, or by allowing the creation of new ones.
Skillshare, a company lunched in 2011, is classified in the second category. Numerous business posts do not hesitate to describe the company as a game changer in the education sector. Skillshare’s co-founder, Michael Karnjanaprakorn states: “The problem of education today is that is no longer about learning”. “All I’m doing in college is drinking, eating and memorizing things for exams that have nothing to do with real life.” As a graduate student himself, Karnjanaprakorn knows firsthand what it means to enter the job market without practical skills.
The missing link between education and learning is what initially motivated Karnjanaprakorn to create the company. Skillshare is an online platform for learning anything from anyone. Doers from all over the world introduce themselves and share their skills with anyone who is interested in them. Skillshare brings world’s diversity into a single platform resulting to dozens of different categories of online courses such as design, entrepreneurship, programming, culinary and the list goes on. Unlike other massive open online courses (MOOCs), Skillshare focuses on learning by doing. Thus, learning is not only about watching prerecorded videos. Interaction is a major part of the learning process and it is carried out by the completion of specific projects. Furthermore, PhDs are not a criterion for joining instructors’ community. The team believes that the best teachers are among people with no formal education at all.
Until 2014, instructors were able to set their own price for each course and a 12% fee was charged by the company. The average price that could be found was $20. In 2014 the revenue model altered to monthly subscription. “Hardcore” students were happy to see such a change, since they can save more than $75 per month according to company’s research.
But let’s return to the disruption. Do Skillshare and other types of MOOCs threaten traditional universities? According to Laseter (2012), universities do not provide their students with the necessary accoutrements for improving their chances when they apply for a skill demanding position. Education applicants will realize more and more this weakness of the conventional university and will focus on education that meets their expectations and guarantees future recruitment. Given the disruptive potential of the online learning, which Christensen (2011) also underlines in his book The Innovative University, in combination with the continuously increase of the tuition fees in traditional universities, it is expected that online educators will attract more and more students through MOOCs. Universities that consolidate rather than change the situation will lose large proportion of their market share in the future. What is your opinion?
Christensen, C., Eyring, H. (2011). The Innovative University: Changing the DNA of Higher Education from the Inside Out. John Wiley & sons
Laseter, T. (2012). The university’s dilemma. Booz & Co
http://www.inc.com/abigail-tracy/35-under-35-skillshare-online-education-platform.html
http://www.skillshare.com
http://venturebeat.com/2014/03/19/skillshare-debuts-new-spotify-like-membership-model-for-online-education-exclusive/
co-creationeducation