An Innovation Model for the Media Business / by Cristian Mitreanu

Few business areas, if any, have been more affected by the Internet than the media. And by media I mean businesses whose activity consists of processing, managing, and distributing information (i.e., text, photo, video, music). This broader definition includes all of the traditional media and many web-based businesses. So, I thought that it would be appropriate to start my take on the business big picture by introducing an innovation model for the media business.

As you know, most media companies are businesses whose offerings are commoditized, or become commoditized very fast. And here is a way to prove this. Technology plays a major role in these companies' operations, which is a clear indication that a significant part of the operating processes are standardized. This occurs only when most of a company's offerings are delivered through the same, limited number of processes. Further, this means that these businesses thrive through the volume of transactions, as opposed to diversity. In other words, they sell or provide high volumes of only a few types of offerings, which indicates commoditized offerings (I will discuss commoditization in more detail in a future post).

Because, in media, it is rather impossible to innovate at the offering level, companies must innovate at the whole-offering level. And by whole-offering I mean all of a company's offerings plus the mechanism with which they are managed and delivered to the customers. (Although, in many cases, it is the main revenue generator, the advertising side of the media business is fully dependent on the information side of the business. More so, it addresses a different set of customers. Therefore, the whole-offering does not include advertising offerings; just information offerings.) Most media companies have just one whole-offering. In these cases, the whole-offering can be identified with the business. Some examples of whole-offerings include book distribution (, search engine (Google), encyclopedia (Wikipedia), video distribution (YouTube), and photo distribution (Flickr).

The logic behind the innovation model is relatively simple. On one side, there are the customers, who need information to better their existence. Fundamentally, humans follow three steps when employing information: search through the available information, gather relevant information, and then aggregate the relevant information according to a particular knowledge or algorithm in order to address an issue (i.e., entertainment, education). On the other side, there is the media business, which needs to process high quantities of a few types of information offerings, and then deliver them through one or more mechanisms (one type of offering may require a unique mechanism) to the customers. All I had to do was find a way to bring these two sides together. So, here's the result:


Whole-Offering = all of a media company's information offerings (i.e., text, photo, video, music) plus the mechanism (i.e., web-based application) used to process, manage, and distribute them to the customers.

Whole-Offering Functionality = a whole-offering's hierarchical levels of functionality (range >>> range+relevance >>> range+relevance+recipe), determined by the fundamental way in which customers employ information. Note: This hierarchy is a unique characteristic of the media business.

Range = the amount of information offerings that the whole-offering is capable of reaching.

Relevance = the actual relevance (to the customer) of the relevant information generated by the whole-offering.

Recipe = the degree to which the whole-offering's algorithm for aggregating the relevant information comes close to the algorithm that the customer would use in order to generate a solution to one of its issues (i.e., entertainment, education).

Whole-Offering Value = the level of importance of the customer issue that the whole-offering addresses.

Whole-Offering Innovation = an improvement of the whole-offering's value, achieved through the improvement of its functionality along the hierarchy mentioned above. Note: While small, incremental improvements may occur with a higher frequency, more significant improvements tend to move slowly up the functionality hierarchy following the advancement of the major technological era that unfolds at the time (see the Internet era examples below).

Operational Efficiency = a media company's capacity to generate and deliver its whole-offering(s) in the best possible manner with the least waste of resources. Note: While the lack of innovation endangers a business over time, the lack of operational efficiency poses an immediate threat. Therefore, operational efficiency must be a constant effort for any company (I will discuss this subject in more detail in a future post).

So, what is this model telling us?

Well, for primers, it explains the past. Of course, we can go back to various major technological eras like the printing press and the telegraph. However, as I mentioned above, it is useful to focus on one era and see how the innovation cycle gradually advances up the functionality hierarchy. So, if we look at the Internet-dominated recent past, it is clear that since its introduction, the Internet has rapidly increased the range of the (existent and new) whole-offerings to incredible levels. This explains the meteoric rise of companies like and Google.

The model also explains the present. Recent technological developments have allowed media businesses to significantly increase the relevance of their services (in addition to their range). The success of Wikipedia, MySpace, and other "web 2.0" whole-offerings/businesses is a result of these advancements.

And, finally, the model also indicates what will probably happen in the future. In this Internet era, the innovation cycle gradually advances to reach the recipe level. This suggests that the future is bright for the specialized communities, which can reach the recipe level with enough range and relevance that will ensure the critical mass of customers necessary for success. However, that's not to say that the successful whole-offerings of today will disappear. They will most likely find a way to thrive in the new environment. For example, Google will probably continue to excel at the range and relevance level. The acquisition of YouTube and other initiatives, like book-scanning, point in that direction. And, if nothing else, this can make Google a strong platform candidate for other whole-offerings. may run into difficulties because they sell mainly packaged information (i.e., books, CDs, DVDs), and customers most often want to access the pieces of information inside those packages. As a result, must, at a minimum, keep the pace with other companies' "un-packaging" initiatives (i.e., Google’s book scanning, Apple’s iTunes digital music store). Wikipedia too may have troubles advancing their whole-offering/business at the recipe level because of the heavy reliance on unpaid volunteers.

UPDATE 5/22/2007: Also read "How to Innovate Your Online Venture."

UPDATE 12/21/2009: See a refined framework "The Value of an Internet Business."