The "Prosthetic" Markets of the Digital Economy

When Facebook released ‘Facebook at work’ early last year, we saw one social networking goliath seemingly throw down the gauntlet to its rival, Linked-in, though entering its corner of the market. The space they are challenging for is the segment described as ‘Social Software in the Workplace’, which the well-known industry analyst firm Gartner Inc. recently identified as distinct from the wider social media marketplace. At first glance what this move seems to emphasise is the sheer unstoppable energy of the markets for the future digital economy. Here we are witnessing highly intense processes of competition and innovation that drive the constant proliferation not just of new products but of entire product categories. For example, Gartner has identified several new sub-markets developing around Social Media technologies in the last couple of years. But could the proliferation of new market segments have a different source? Gartner’s role and strategies appears significant here.

For more than 30 years, Gartner has been telling the business world what’s the next big thing in technology. Its analysts work by creating lists of recognised players operating in a new field and depicting them in its (in)famous graphical ranking, the Magic Quadrant. Through identifying the challengers, leaders, niche players and visionaries in a market the Magic Quadrant advises CIOs on what to buy. This tool is central to Gartner’s success and a large part of how it has managed to retain its 30% share of the $4 bn annual industry analyst market. Whilst the Magic Quadrant is described as amongst the most important and influential pieces of business research produced today, it has (at least) one serious flaw.

Having used the figuration for more than three decades, Gartner knows exactly what number of vendors it needs to depict to construct a graphic that decision-makers find useful. Somewhere between 10 and 25 allows them to create what they describe internally as the ‘beautiful picture’. The trouble begins for Gartner when there are hundreds rather than dozens of players in a given segment? How does Gartner map it then? For example, when Gartner set about constructing the Magic Quadrant for Social Software it looked ‘too cluttered’ to be a meaningful analytic tool to help decision makers. The analysts therefore decided they would break this category into smaller pieces, thus creating three new market segments. They were then left with three aesthetically pleasing Magic Quadrants. Since then, two of these segments have gone onto become fully functioning market segments in their own right whilst the third has been ‘retired’.

We want to be clear about what we are saying here. Some of the most important and high profile market segments of the digital economy were created not as a simple result of processes of technological innovation or product differentiation but because analysts wanted to compensate for the limitations of Gartner’s signature research product. Let us call these interventions ‘prosthetic markets’ to distinguish them from more organic forms of markets. We define prosthetic markets as the market categories derived not from clear processes of product differentiation or a sustained relationship between a vendor and adopter community. They are markets which developed out of the distinctive business models and strategies of industry analyst firms.

How should we understand the recent emergence of actors who appear to set the direction of the markets for digital technologies? Remarkably little attention has been given to these questions amongst those with a potential interest in the markets for digital technologies. It was economists who predicted the emergence and growth of ‘intermediaries’ in various markets to ‘lubricate economic exchange’ (Sharma 1997: 762).  However we still know very little about the role of such intermediaries in the marketization of new digital innovations. 

This article is the outcome of an interdisciplinary research project that had substantive and conceptual aims. Firstly, we sought to carry out empirical work on the processes by which IT markets were constructed and maintained by various intermediaries. Our investigation focussed in particular on the role of the ‘industry analyst’ in shaping how the markets surrounding new digital technologies were created and organized. From fieldwork, we saw how the development and operation of IT markets could not be properly understood without taking into account the research outputs of these experts. Some have suggested that today there could hardly be IT markets without the intervention and tools of these kinds of actors. Here we take our cue from the economic sociologist Karpik (2010: 14) who, in a provocative phrase writes, the “market is ’equipped’ or it does not exist”. What he means by this is that without the mechanisms to sort and compare goods, particularly complex products, where qualities cannot be assessed prior to consumption, buyers could not easily make purchase decisions. 

Secondly, we wished to explore whether the exciting new dialogue recently opened up between the disciplines of Science and Technology Studies and Economic Sociology might be extended to include digital technologies. At the heart of this dialogue was the suggestion that certain forms of knowledge output were not simply descriptive of markets but could be seen to be actually ‘doing things’ in the economy. To use the example discussed by Callon (1998), economic theories and models were able to bring into being that which they initially attempted to describe.

This paper attempts to carry forward these two aims. We set out why the market intermediaries described here are important, and how their research has begun to govern and direct the activities of technology vendors and adopters alike. One reason there has been limited interest in the study of actual IT market situations thus far is because markets—presented as entirely ‘abstract spaces’ (Callon & Muniesa 2005), as economists have done—are difficult to study. There is a paucity of frameworks to guide the researcher in this kind of endeavour. We think the performativity programme offers help here. Its advantage is that it puts ‘knowledge’, as well as ‘practices’ and ‘artefacts’ (MacKenzie 2009) at the centre of the analytical lens.