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Many books have been written about competitive strategy, but we have yet to see one that deals specifically with information businesses. Our work with clients over the years has led us to believe that information businesses require their own competitive framework because of their special characteristics. First, information is an intangible product whose value varies in different circumstances. Second, information products are typically (and increasingly) a complex package of content, applications, functionality, and delivery. Third, despite being intangible, information purchases outside of the consumer market are seldom discretionary because information is a "fuel" that drives many industries. Finally, information businesses typically focus narrowly on serving niches, not broad markets.
We believe that competitive strategy for information companies boils down to four critical elements:
Content Quality: Quality encompasses such characteristics as the breadth, accuracy, completeness, and timeliness of content. The importance of each of these characteristics varies across different markets or types of users. Wall Street traders need information that is extremely high on all of these dimensions; real estate brokers can typically operate with information that is less so.
Accessibility: Because information increasingly is used within a workflow, the degree to which content is readily available when needed and in the forms required strongly affects its value. Making information accessible may entail providing a user-friendly search capability or other methods through which a user can find the specific information required for a given task. Another approach for increasing accessibility is to provide information in a feed or other "raw" form that enables customers to use it directly within their own applications. In addition to these physical or technical characteristics, commercial policies, such as pricing, can also play a large role in accessibility. For example, pricing policies that restrict the number of users or how the information can be used can have a direct impact on accessibility. In our market research on behalf of clients, we frequently hear customers complain that a vendor's restrictive commercial policies drive them to seek alternative solutions from suppliers whose underlying product may be inferior, but whose policies are more accommodating.
Substitutability: Whether a customer can replace one vendor's information with another's depends on content and accessibility, but often depends on other factors, too. In some cases a vendor achieves the status as the industry standard on which all parties depend to transact business. Sometimes, too, the information provider offers other capabilities that are as important as its information content. Bloomberg's success is due as much to its use as an industry-wide communication system as to the financial content it carries.
Price: We list price last because it often is the least important element of competitive strategy. Outside of the consumer market, most information purchases are essential to a customer's operations. Therefore, a vendor with inferior content, accessibility, or substitutability can rarely compensate with lower prices. Conversely, while information vendors with superior offerings may be able extract a premium, demanding too high a premium for must-have information drives customers to encourage lesser vendors who may eventually become viable competitors.
Like all frameworks, ours is designed to simplify a complex situation into a manageable set of analyses. As such, we encourage executives to use it within the context of their specific businesses. Please let us know what you think.
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