TECHNOLOGICAL COMPETITION IN THE E-BOOK READERS’ MARKET

By Elisa Salvador and Pierre-Jean Benghozi

ereading_devices.jpg

The e-book revolution impacted all the phases of the traditional value chain of the book publishing sector, characterized by a secular business model. A comparative analysis of the technological characteristics – through an analytical and methodical codification – of all the versions of 6 well-known e-readers enabled to highlight that there is an attitude towards standardization linked to some specific minor specialization choices.

The arrival of the e-book revolutionized the low growth business of a traditional cultural industry like the book publishing. It altered all the phases of the value chain of the book publishing sector, characterized by a secular business model impacted by few innovations, mostly incremental rather than radical (Benghozi, Salvador, 2016). New tools – notably e-book readers – appeared and new actors, like technology suppliers, are now active on the market. As a consequence, in recent years a fierce competition among enterprises producing e-book readers has emerged. Since the first versions of Sony and Kindle e-readers appeared in 2006 and 2007 on the market, several other actors engaged in e-reader functionalities’ rivalry. R&D and innovation technologies appear to be at the core of the competition process: leading-edge technologies about ink, display, screen, light, quality image, battery life, sound, and ergonomy are some key aspects of this uninterrupted revolution.

The importance of technological rivalry, platforms and articulation between disruptive, incremental and repeated innovations is a trendy topic of research on innovation in the digital era. While the competition among platforms is well documented in the literature, its effective operationalization in the management of digital technologies remains unexplored. The e-book introduction is, from this point of view, a good example of how ICTs are transforming the competitive structure of an industrial sector.

The market for e-book readers, in particular, is a market that initially developed rapidly under the impetus of Amazon. However, after a few years, two important observations must be made. On the one hand, contrary to what some observers and economic actors might have feared or hoped for, depending on the case, e-books have not succeeded in significantly replacing the printed book market, but they nevertheless remain a significant area of business. On the other hand, the e-book readers market has been deeply affected by the major trends in the Smartphones sector: the phablet segment has gradually disappeared, the average size of Smartphones has increased and their functionalities have been extended. From this perspective, the market for e-book readers remains smaller than expected at the beginning, but it has not disappeared because it remains a significant segment targeting a particular readers population (heavy readers, reading in mobility and transport…). These observations do not therefore call into question the relevance of the analysis, which sheds light both on the particular evolution of publishing in the face of technology and, more generally, on the dynamics of technological competition in the field of terminals.

Our argument  is that technology suppliers, digital platforms and publishers have been involved in a process of technological rivalry supported by repeated innovation contributing to consolidate and reinforce legacy systems (Hatchuel, Le Masson, 2006), coopetition to develop or adapt disruptive standards (Brandenburger, Nalebuff, 1996), coevolution of the development taking place in the various technological layers (Sotarauta, Srinivas, 2005), and imitation to compensate the lack of investment and strategic vision (Aldrich, Ruef, 2006).

Microeconomic strategic behaviors contribute in the long term to draw momentous technological trajectories and structures of the market configurations. Technological innovations in e-readers reflect competitive positioning strategies that help to define the long-term trajectories of technological convergence or differentiation.

Characterizing the comparative technical trajectories helps to understand the components on which economic actors invest and differ, the differentiated evolution of each rhythm, and the whole dynamic that is built.

The identification of the e-reader producers now leading the market and the analysis of the characteristics of all the versions of their devices enabled us to reconstruct the path of the technological evolution followed by these actors and to discover the strategy of growth through dynamic moves of various types: repeated innovation, coopetition, coevolution, and imitation.   It highlights how technological trajectories foster movements of convergence or differentiation which illustrate a positioning of standardization or specialization, and they are therefore the reflection of competitive positions on the market.

The e-readers market is a good example of technology competition in the digital age: a key example of the issues at stake, in technological rivalry, between technology suppliers, digital platforms and publishers. It shows that the alternative between specialization and standardization is built within different technological development paths opposed by the deepening of proprietary standards (thanks to consecutive repeated innovations) and of convergent innovations elaborated around commoditized supports.

In order to investigate the e-readers market we adopted an original methodology[1]. An analytical codification of the main technological characteristics of all the versions of 6 well-known e-readers has been undertaken. Actually, Kindle, the most known and cited e-reader, is most often compared with Nook, Kobo and Sony as its main rivals[2]. Furthermore, we added Bookeen, the best known French e-reader, in order to compare the large international suppliers with a dominant player in a national market. We also retained Pocketbook, a rising East-European e-reader, to compare the incumbents with emerging actors.

The specific variables on which the different e-reader producers compete and differentiate themselves (weight, autonomy, Internet connectivity, screen size and memory capacity) reflect the technological evolution of the e-readers along the years and the strategic and technical trajectories. Our analysis demonstrated that the attitude towards standardization is supported by specific but minor specialization choices.

As an example, the trend regarding weight highlighted an evolution from diversification to convergence. In other words, a similar evolution has been observed among all the e-readers: while the first versions were heavier, there has been a convergence towards a weight of about 200 grams (between 2011 and 2013) as shown in Figure 1.

 

Figure 1: Weight (grams), 2006-2013

Benghozi Fig1

The same trend towards convergence (in six inches) can be observed in the evolution of screen size. And about autonomy, from the initial convergence to thirty days, a simultaneous parallel evolution towards a capacity of sixty days of autonomy has been observed. Similarly, the analysis of price evolution revealed a price lowering dynamic along the years, hardly counterbalanced by the technological innovation giving space to new devices at higher price. Competition is in reality more through new functionalities than through prices (cf. high-tech mobile sector).

We can thus emphasize a general preference for introducing imitative innovations and adopting a standardization attitude. Such convergence on several components results from a mimetic behavior as an answer to concurrent innovations, strategies upmarket to fill a trend of fall in prices, repeated innovations around platforms development.

Yet, we observed a process of technological rivalry involving a repeated innovation strategy, as well as coopetition and coevolution and we discovered that the imitation processes adopted by the e-reader producers enabled them to introduce innovative advancements for reciprocal advantage.

Among the various e-readers analyzed, no leader can be identified. Rather, we can observe the emergence of an ecosystem of companies where constant technological improvements are strictly linked to the aim of catching and retaining as many consumers as possible. The similarities we observed among the various e-readers imply that buying one e-reader or another is basically the same thing. The difference lies in consumers’ use of their e-readers. This explains the convergence in the variables (i.e., weight, screen size, autonomy, Internet connectivity, and memory capacity) and the focus on minor but continual technological improvements for capturing and retaining consumers.

This reflects an imitative-coopetitive strategy in order to not lose market shares and try to gain some minor productivity advantages. It may be interpreted spontaneously in terms of coopetition but one may ask whether this is really coopetition in the strict sense or rather a parallel development starting from the same technical basis proposed by suppliers. Rather than actual coopetition, some competitors collaborate strategically and in parallel with the same third-party.

As e-readers cannot differentiate themselves on the basis of price, they are forced to choose a differentiation strategy focused on technological improvements. They are therefore caught in “a paradox”: they are obliged to invest in technological advancements in order to differentiate themselves from competitors, but a standardization process takes over rapidly. Finally, producers cannot really differentiate themselves in terms of either technologies or prices. The way out of this paradoxical situation is that it becomes important to be among “the first movers” on the market in order to gain at least a temporary monopoly.

[1] For further details, please see the full article.

[2] A free search on Google with the keywords “best known” or “best sold” e-readers confirms that Kindle, Nook, Kobo and Sony are the most cited e-readers and usually associated and compared by the shopbots in the price comparison sites.

References

Aldrich, H.E., and Ruef, M. (2006), Organizations Evolving, Sage, London.

Benghozi P.-J., Salvador E. (2016) “Investment strategies in the value chain of the book publishing sector: how and where the R&D someway matter in creative industries?”, Technology Analysis&Strategic Management (CNRS 3), vol. 28, n. 5, pp. 568-582.

Brandenburger A. M., Nalebuff B. J. (1996), “Co-opetition”, Currency Doubleday, New York.

Hatchuel, A., Le Masson, P. (2006), “Growth of the firm by repeated innovation : towards a new microeconomics based on design functions”, paper presented at the 11th International Schumpeterian Society, Nice-Sophia-Antipolis, 21st-24th June, France, 18p.

Sotarauta M., Srinivas S. (2005), “The Co-Evolution of Policy and Economic Development: A Discussion on Innovative Regions”, MIT IPC Local Innovation Systems Working Paper, MIT-IPC-LIS-05-001, 48p.

 

The article is based on:

Benghozi P.-J., Salvador E. (2015) “Technological competition: a path towards commoditization or differentiation? Some evidence from a comparison of e-book readers“, Systèmes d’Information et Management (SIM), vol. 20, n. 3, pp. 97-135

About the authors:

Elisa Salvador is Assistant Professor at ESSCA School of Management, Paris, France

Pierre-Jean Benghozi is Research Director CNRS and Professor at the Ecole Polytechnique, Paris, France, (I3-CRG, Ecole Polytechnique, CNRS, Université Paris-Saclay) and at GSEM (Geneva University);

Image source: Per Palmkvist Knudsen (2012) ‘E-Reading devices‘ (CC BY SA 3.0)

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