Sunday, November 30, 2014

Some thoughts on old power vs new power

An article that caught my eye recently was this one, written by Jeremy Heimans and Henry Timms for the December 2014 issue of the Harvard Business Review (HBR). The title is “Understanding New Power" and it provides as good an overview as I’ve seen anywhere on the distinction between ‘old power’ and ‘new power’. This tension between the conventional wisdoms of ‘that’s how we’ve always done things', and the at first seemingly radical but also potentially hugely successful ‘we’ve never done it that way before', is a central feature of many facets of today’s economy.

This push and pull is what underlies the transformations we see brought on by digital networked technologies in fields ranging from the media to health care, manufacturing, retailing, technology, education, and beyond. And yet, given enough time, any type of power has a tendency to concentrate, and we are seeing this play out in the digital world too, where companies such as Amazon, Spotify, Facebook, and YouTube wield a disproportionate amount of power...just as physical world counterparts such as Walmart and broadcasting networks do.

So, you ask, is it just a case of same story, different players? This is a big part of what I’ve been working on in this blog, having spent coming up on 2 years and about 75,000 words looking at specific instances of old vs new power, looking for patterns and principles that can hopefully provide helpful ways of thinking about these changes. My focus here has been on the creative and media industries: radio,TV, film, music, publishing, and the like — even though many of these very words now have new meanings.

For example, what is “TV” in an environment of YouTube and on-demand programming? What is “radio” in a world of streaming music services and podcasts made in bedrooms and garages getting millions of downloads per month? So it’s not just the old ways of thinking about these things, but the terminology itself that doesn’t quite serve us the way it once did. 

Furthermore, what starts in the media industries often extends toward other sectors, and that’s why I think it’s worth our while to take more of a thematic approach here, with a closer look at these distinct types of power — the old and the new — and consider how and to what extent hierarchical, top down power is being taken to task by power that originates from the traditionally un-powerful places found downstream.

Some basic definitions to get us started:

Old Power 

It’s the power of established groups and companies, organized around top down authority, fairly rigid hierarchies, usually high barriers to entry, and an end consumer or user or audience member who generally receives but does not feed back, comment, or create. Think General Electric, Procter & Gamble, banks, the phone company.

New Power

The new locus of value found in no one particular place and not corralled by any one source or leader. Think Wikipedia, Craigslist, Twitter.

This type of new power is not actually new, but its mechanism is. Before the advent of widespread and affordable networked technologies such as mobile phones and personal computers this type of power found its expression in places such as grassroots organizing, community participation, or soft power.

Quoting philosopher Bertrand Russell in the HBR article: ‘Power is about the production of intended effects’. Old Power did this with power obtained from ownership and control. Collecting and protecting. New power gets its power from the powers of global distribution, networks that increase in value as user bases grow, and augmentation and reshaping by users. 

Platform businesses, built around a marketplace that increases in value as it grows, are a hallmark of this kind of new power. If you want a sense of how to quantify new power, look no further than businesses such as Uber.  It owns exactly zero vehicles, and as of Fall 2014 has a valuation in excess of $17 billion. Show me a cab company that can make a similar claim. Similarly, AirBnB owns no real estate yet has a valuation and/or revenues that approach if not exceed the old power titans of the lodging industry such as Hyatt and HIlton. And AirBnB got there in just a handful of years. What's more: both businesses seemed like crackpot ideas at first, if not borderline illegal. But that’s another characteristic of new power. It can redefine everything from categories to regulatory environments. New power is, then, about creating spaces where audiences and/or consumers can interact and transact, and often on their own terms. As the authors put it in the HBR article: new power “uploads power from a source that is diffuse but enormous.”

Old power was measured largely in fortress-like production on the company side and obedient consumption on the user side. Some companies went so far as trying to implement ‘consumer-centric’ approaches -- claiming to put the customer/user at the heart of the experience -- but comparing these efforts to the centrality of the consumer/audience member now is, well, almost laughable. 

Now the norm is on-demand products and services, at low to no cost to the user (via freemium or ad-supported models), the ability to ‘talk back’ to brands and companies in real time using tools like Twitter and sites like TripAdvisor, unbundling of products and services, and customization of products and services. 

Putting this into the context of media, consider, for example, the endless array of choices available on music services like Pandora, Rdio, and Spotify and compare them the you-eat-what-you-are-served approach of radio. In a phrase, from a few producers of mass media to millions of consumers of customized streams. What you are hearing is different from what anyone else is hearing at any given moment. You are an audience of one. Just as you are when you're viewing Netflix or watching videos on YouTube. Old power could never afford to serve an audience of one. New power is predicated on it.

Old power draws strength from obstacles: high barriers to entry, formats that are more or less carved in stone, and schedules that work first for them, and later for consumers. New power is characterized by and rewards elasticity and agility. When audiences or consumers make their preferences known, either in words or actions, new power knows it has no choice but to listen. 

For more on Old vs. New Power click here for the full article by Jeremy Heimans and Henry Timms, appearing in the December 2014 issue of the Harvard Business Review. 

Related Posts: The creative economy: Is the (3rd) party over?