The Fidelity Swap


I'm working on a book that I need to turn in to Doubleday at the end of 2008. The concept bubbled up out of interviews with people such as Reed Hastings of Netflix, Trip Hawkins of Digital Chocolate and Bob Pittman, the guy who started MTV and was president of AOL for years. What I describe is basically the way they all think.

I welcome any and all suggestions about the concept of The Fidelity Swap and how it plays out in real business life. Please e-mail me at kmaney@gmail.com.

The Fidelity Swap helps explain life and business in this networked age. It is one of those concepts – like The Innovator’s Dilemma, The Tipping Point or The Wisdom of Crowds – that makes intuitive sense, but only after someone lays it out in a focused, simple way.

Put most simply, The Fidelity Swap is an ongoing, ever-changing trade-off that everyone makes between “fidelity” and “convenience.”

By fidelity, I’m referring to the total experience of something. For instance, a U2 concert is super-high fidelity compared with watching a DVD of a U2 concert, which in turn is higher fidelity than listening to a U2 song on an iPod. The fidelity of the concert is more than just the sound of the music – it’s the light show, Bono’s stage presence, the crowd and everything else that goes with a concert.

Convenience is about how easy it is to get something. That includes how much something costs and how much of a pain it is to buy or do. So while a U2 concert is high fidelity, it's not at all convenient. Tickets cost a lot, and you have to drive there, park and feel guilty when Bono says you aren't doing enough for poor countries.

By comparison, hearing a song on an iPod is comparatively low fidelity – but it’s very convenient.

As some of the smartest strategists have figured out, consumers are willing to trade fidelity for convenience and vice versa -- but only when it makes sense to them. It’s a slippery scale. People make different trade-offs at different times, depending on the circumstances.

For example, when you’re commuting to work on a train, the convenience of music on an iPod in your pocket trumps the iPod’s lesser fidelity. So you gladly make that trade. When you get home, where you have a nice stereo system, the iPod’s convenience isn’t as powerful. You might then decide to opt for the higher fidelity of the stereo.

At the bottom is a chart that helps explain The Fidelity Swap – and a linked concept I call The Fidelity Bubble.

Here’s what the chart can tell you:

The best places for a product or service is outside the bubble. For instance, very high fidelity wins even if it’s inconvenient. One example: a Cirque du Soleil show. Hard to get there, costs a lot – but it’s hard to experience anything like it anywhere else. So the shows sell out.

Very high convenience wins even if it’s not great fidelity. MP3 music has 10 times less fidelity than a CD, but it’s popular because MP3 files are so easy to carry anywhere on a personal player.

High fidelity AND high convenience has the greatest appeal – but it might not be the best business model. An extreme example would be a U2 concert (high fidelity) in your family room (high convenience). Not sustainable in the long run.

There’s a sure-fire losing formula: fall inside The Fidelity Bubble. Anything that is relatively low fidelity and low convenience will get abandoned by consumers. This is what happened to movie theaters and film cameras.

There’s a catch. Notice the arrows on the chart. Technology is constantly improving fidelity and improving convenience.

And that means that the boundaries of the bubble continuously expand outward. Standing still is not an option. Movie theaters face this problem. The fidelity and convenience of movie theaters hasn’t changed much in decades. Now, with home theaters, DVDs and high-definition movies-on-demand, The Fidelity Bubble is moving past theaters, and people are finding fewer reasons to go. Theater ticket sales have been dropping the past few years.

I've been writing about The Fidelity Swap for some time now. Links below to some of those pieces.

Again, hope to hear from you about other applications. Thanks.

Kevin


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Copyright 2007 Kevin Maney