PoEB: The Digital Firm 2024-2025 PDF

PoEB: The Digital Firm 2024-2025 Theories of Digital Business Digital Strategy I Prof. dr. Hans P. Borgman Prof. Dr. Hans Borgman 0 PoEB: The Digital Firm...

PoEB: The Digital Firm 2024-2025 Theories of Digital Business Digital Strategy I Prof. dr. Hans P. Borgman Prof. Dr. Hans Borgman 0 PoEB: The Digital Firm 2024-2025 The Digital Firm Course Outline Setting the Stage I. IT and Strategy II. Winner takes all? Pipelines, Platforms and Beyond III. Artificial Intelligence and the Future of Work IV. What is IT Success? 1 Linking our course outline to the earlier mentioned issues should show how our course agenda is linked to both current concerns as well as to underlying more stable conceptual foundations. Prof. Dr. Hans Borgman 1 Positioning 'Digital Transformation' PoEB: The Digital Firm 2024-2025 Digital Strategy: 1. Value propositions and business models 2. Disappearing boundaries 3. IT and Competitive Forces 3 Today we will explore how IT fuels the disappearance of boundaries and creates a new ‘open’ playing field, transforming industries, companies, supply chains, and the way we work, communicate, socialize, etc. We will look at this from different perspectives and show how different IT strategy alignment frameworks can help companies assess challenges and opportunities. We will illustrate each perspective/framework with specific examples. It is important to note that no perspective or framework is better than another, they merely highlight a different aspect. The central message is that you need to understand how to look at IT innovations in their context from different perspectives and understand how you can identify ways to link and align strategy with IT. Prof. Dr. Hans Borgman 3 PoEB: The Digital Firm 2024-2025 1. Value propositions and business models Software is eating the world. Forget your customers: reinvent yourself source: www.innovationm anagem ent.se 4 Prof. Dr. Hans Borgman 4 PoEB: The Digital Firm 2024-2025 Value propositions... Dropbox: "There are dozens of these..." "Yes, but do you use any of them?" 5 Value propositions increasingly rely on 'digital' capabilities to 'create gain' and 'relieve pain' to help a customer get their job done. This doesn't to be unique: dropbox came to market when there many similar services. Same with Zoom. Both services succeeded by offering a simpler user experience: for Zoom you don't need a separate account, Dropbox 'just works'. For more on the value proposition canvas (and the business model canvas), visit strategyzer.com. Alex Osterwalder started his work on these currently very popular models as part of his PhD work with Yves Pineur in Information Systems at EPFL (Lausanne), which helps to explain the very strong link and easy applicability to anything 'digital'. Prof. Dr. Hans Borgman 5 PoEB: The Digital Firm 2024-2025 Value propositions walkthrough: 1.Today, when [customer profile 0] want to [customer job 1]... 2.They experience [pain 2] 3.For this we will offer [product & services 3] 4.That will bring gains 0 5.And relieve [pains 2] 6 4 through [pain relievers 5] 3 6.And bring [gains 4] 1 through [gain creators 6] 5 6 2 A simple 'walkthrough' of the value proposition Canvas. Try it for Zoom or Dropbox and see if you can explain their success compared to alternative solutions. Prof. Dr. Hans Borgman 6 PoEB: The Digital Firm 2024-2025 7 Positioning the value proposition canvas the larger business model canvas. Prof. Dr. Hans Borgman 7 PoEB: The Digital Firm 2024-2025 Business Model Canvas in action gement Community mana Verified pics, reviews, wid investors Platform dev’t & p la c e s to selection, safe paymen e Travelers looking g re a t t for a different and maintenance Book lo b a ll y Banks, credit sta y g rance, affordable stay cards, paypal PR , lob bying Reviews, insu m et ric s Ma rke ting Rent out extra sp ace safe and without People with photog rap he rs ce s extra Critic al ma ss of pla effort to worldwi de space they want to uTube, blogs Community of audience Web, app, Yo rent out travelers & hosts Web, app Pla tfo rm Bra /re putation nd sta ff % insura nc e pa ym ent travelers: 5-15 Booking fee proc essing Booking fee hosts: 3% site and servers marketing 8 Two different customer segments, with different value propositions and revenue models: travellers and property owners (hosts). Prof. Dr. Hans Borgman 8 PoEB: The Digital Firm 2024-2025 Social Entrepreneurship business social objectives objectives 9 Prof. Dr. Hans Borgman 9 PoEB: The Digital Firm 2024-2025 alessandro's glasses: Seeing, looking and doing good business synergy social top quality, 100% swiss glasses see and be seen you buy one, we donate one cool design support literacy projects a last a lifetime circular design zero hassle, subscription model employ the at-risk 10 Prof. Dr. Hans Borgman 10 PoEB: The Digital Firm 2024-2025 business synergy social Prof. Dr. Hans Borgman 11 PoEB: The Digital Firm 2024-2025 swiss innovations last a lifetime top quality glasses business cool design affluent consumers "hassle" synergy job coaching donations + literacy projects socially concious consumers 3rd world vision + literacy government subsidies social job skills unemployment + poverty trap waste Prof. Dr. Hans Borgman 12 PoEB: The Digital Firm 2024-2025 From value proposition to business model Prof. Dr. Hans Borgman 13 PoEB: The Digital Firm 2024-2025 Business Model 'levers' High-tech focus or high-touch? channel core activity key resource revenue model tailor-made personal advisory people commission we others others we others others we we others we mass digital sales IT subscription 14 Prof. Dr. Hans Borgman 14 PoEB: The Digital Firm 2024-2025 Digital Strategy: 1. Value propositions and business models 2. Disappearing boundaries 3. IT and competitive forces 15 Today we will explore how IT fuels the disappearance of boundaries and creates a new ‘open’ playing field, transforming industries, companies, supply chains, and the way we work, communicate, socialise, etc. We will look at this from different perspectives and show how different IT strategy alignment frameworks can help companies assess challenges and opportunities. We will illustrate each perspective/framework with specific examples. It is important to note that no perspective or framework is better than another, they merely highlight a different aspect. The central message is that you need to understand how to look at IT innovations in their context from different perspectives and understand how you can identify ways to link and align strategy with IT. Prof. Dr. Hans Borgman 15 PoEB: The Digital Firm 2024-2025 2. Disappearing boundaries Need for speed: the left hand knows what the right hand is doing 16 Prof. Dr. Hans Borgman 16 PoEB: The Digital Firm 2024-2025 2. Disappearing boundaries: From Islands to Enterprise Resource Planning Enterprise Resource Planning Islands Local efficiency Integration Functional (‘silo’) Cross-functional (‘end-to-end’) ‘Best of breed’ Standardization Responsiveness 17 Cost reduction(?) Historically, organisations have always looked for "best-of-breed" applications (see pyramid left), where the "best" system for a specific isolated function within a single department was built and used. This came at the expense of integration. Enterprise Resource Planning (ERP) suites changed this, starting from the 1980’s in a development that is still ongoing: the idea being that you customise and install various modules from a single vendor (market leaders are SAP and Oracle) that are more standardised and integrated, thereby increasing responsiveness and (ideally, but unfortunately often not true) reduce costs. Prof. Dr. Hans Borgman 17 PoEB: The Digital Firm 2024-2025 Disappearing boundaries (a): Enterprise Value Chain firm infrastructure activities Support human resource management technology development procurement inbound operations outbound marketing service logistics logistics and sales primary activities 18 To conceptualize the opening up of departmental borders within an organisation, we use Michael Porter’s well-known Enterprise Value Chain framework. Looking at an organisation in terms of its core process and its supporting processes helps us focus our attention on the important parts. It also helps us to see similarities between different organisations, allowing us to copy ideas from, say, a manufacturing organisation to a service organisation. Basically, we look at the various parts of the value chain and ask where and how ICT can contribute to either add value or reduce costs. In addition, we can also look at activities others do better or cheaper, and consider to outsource these activities, resulting in 'virtual' value chains. Prof. Dr. Hans Borgman 18 PoEB: The Digital Firm 2024-2025 2. Value Chain: where do you add your value? inbound outbound marketing and logistics operations logistics sales service procurement technological development human resources infrastructure 19 Prof. Dr. Hans Borgman 19 PoEB: The Digital Firm 2024-2025 Cisco & Value Chain:Challenges and Solutions 20 This is Cisco's value chain, showing areas where they have implemented IT solutions to cut costs (in the supporting processes) or added value (in sales and support) and sometimes both at the same time. Various examples were discussed in class. The value chain diagram can be found at http://www.va1ue- chain.com/1/CISCO-SYSTEMS-VALUE-CHAIN/ Prof. Dr. Hans Borgman 20 PoEB: The Digital Firm 2024-2025 Open departments (b): 'embrace and extend' E-procurement High Employee Directory Expense Reporting Executive Decision Support Distance Learning Cultural & Compensation Review Communications Economic Recruiting & Hiring Impact Information “Push” Benefits Enrollment Employee Stock Reports Low Training Registration Hard Easy 21 Ease of Implementation Another framework, also shown here as applied to Cisco, is the "embrace and extend" framework where we just show a map of current IT applications in use by Cisco, indicating how easy it was to build and deploy them (the X-axis) and how much impact it had. The 'winners' are at the top right, and organizations looking for easy targets might benefit from 'embracing and extending' these applications if they also fit with their needs. Prof. Dr. Hans Borgman 21 PoEB: The Digital Firm 2024-2025 2. open supply chains: know what is ahead and behind you 22 Prof. Dr. Hans Borgman 22 PoEB: The Digital Firm 2024-2025 2. (c) open supply chains know what is ahead and behind you 23 To find out more about the ‘beer game’ visit http://supplychain.mit.edu/supply-chain-games/beer-game/ Prof. Dr. Hans Borgman 23 PoEB: The Digital Firm 2024-2025 Supply chain framework: industry value chain 24 The framework we use is the industry supply chain, focusing on the link between all partners in a supply chain. Each part of the chain is seen as a black box (with its own value chain), so we only focus on what happens in the links. This example shows the coffee value chain, (per kg coffee: so $300 per kilogram paid by the consumer to the café means 100 cups of 10 grams of coffee sold at $3 each). Using IT to integrate/skip steps of the value chain through direct sales to consumers via the Internet could greatly benefit the farmers. Using IT to manage supplies across the value chain could be another option, greatly reducing costs for all involved. Prof. Dr. Hans Borgman 24 PoEB: The Digital Firm 2024-2025 Example: South Korea music industry value chain changes 25 This chart illustrates the use of the value chain model to help understand changes in the (South Korean) music value chain. The value chain model forces you to think about primary and support activities, of adding value and/or reducing costs and provides a structured way to think about applications with a 'big picture' mindset. Value chains are typically drawn to represent an overall organisational view, but it is also possible to model the value chain of a department. For Human Resources, for example, the value chain would go from recruiting and on-boarding to training, performance appraisal and off- boarding/outplacement, with administration and other activities as 'support processes'. (picture source:https://www.strategyand.pwc.com/reports/content-democratization) Prof. Dr. Hans Borgman 25 PoEB: The Digital Firm 2024-2025 Open supply Chains: 26 Note: Benetton’s advertising strategy has significantly changed over the last decade and the politically charged campaigns it was known for in the past are currently replaced by campaigns that are “never shocking” (http://www.thedrum.com/news/2016/07/27/ how-benetton-moved-shockvertising-be- never-shocking) Prof. Dr. Hans Borgman 26 PoEB: The Digital Firm 2024-2025 2. (c.) Open supply Chains: fast fashion information i n f oo rr m d ea rt i o n customers goods in infg fo oo ods rm er rm atio n ord a or t i o 6000 de r n stores e r ord 80 agents Customer Knowledge Market Knowledge 27 This ‘open supply chain’ example deals with fast fashion, using Benetton as example, where we start with a simple example of using open global supply chains to enable fast fashion, while simultaneously exposing brands to (perceived) liability across the supply chain, such as in the case of the 2012 Bangladesh factory collapse or the blockage of the Suez Canal by the container ship Ever Given in 2021. We then continue to discuss how direct sales through e-business would lead to both channel conflicts as well as a loss of knowledge about markets and customers. Prof. Dr. Hans Borgman 27 PoEB: The Digital Firm 2024-2025 2. Open supply chains: compete with yourself 28 Prof. Dr. Hans Borgman 28 PoEB: The Digital Firm 2024-2025 2. Open supply chains: disrupting industries 29 Prof. Dr. Hans Borgman 29 PoEB: The Digital Firm 2024-2025 IT and Strategy: 1. Value propositions and business models 2. Disappearing boundaries 3. IT and competitive forces 30 Prof. Dr. Hans Borgman 30 PoEB: The Digital Firm 2024-2025 Porter's competitive framework (external view) Industry perspective: using IT to positively influence any of the 'five forces' Competitive advantage Sustainable advantage? 31 "New technologies can create jarring shocks in an industry. Consider how the rise of the Internet has impacted the five forces for music retailers. Traditional music retailers like Tower and Virgin found that customers were seeking music online. These firms scrambled to invest in new e-commerce channels out of what was perceived to be a necessity. Their intensity of rivalry increased because they not only competed based on the geography of where brick-and- mortar stores are physically located, they began to compete online as well. Investments online are expensive and uncertain, prompting some firms to partner with new entrants such as Amazon. Free from brick-and-mortar stores, Amazon, the dominant new entrant, has a highly scalable cost structure while the old brick-and-mortar guys were left straddling both online and offline models, unable to gain the efficiency of the singularly focused Amazon that ran lean, free of retail stores. Add to this the fact that in many ways the online buying experience is superior to what customers saw in stores. Customers can hear samples of almost all tracks, selection is seemingly limitless (the long tail phenomenon—think 'Spotify'— and data is leveraged using collaborative filtering software to make product recommendations and assist in music discovery. Tough competition, but it gets worse because CD sales aren’t the only way to consume music. The process of buying a plastic disc now faces substitutes as digital music files become available on commercial music sites. Who needs the physical atoms of a CD filled with ones and zeros when you can buy the bits one song at a time? Or don’t buy anything and subscribe to a limitless library instead. From a sound quality perspective, the substitute good of digital tracks purchased online (mp3) is almost always inferior to their uncompressed CD counterparts (WAV). To transfer songs quickly and hold more songs on a digital music player, tracks are encoded in a smaller file size than what you’d get on a CD, and this smaller file contains lower playback fidelity. But the additional tech-based market shock brought on by digital music players (particularly the iPod) has changed listening habits. The convenience of carrying thousands of songs trumps what most consider just a slight quality degradation. iTunes sales rose to make Apple the number one reseller of music, online or off. But Apple itself was hit by a substitute product—music streaming. Spotify started outside the United States, where licensing schemes were often more favorable and easier to obtain. To be clear, Apple Music is a giant, but it’s still the number two service Prof. Dr. Hans Borgman 31 PoEB: The Digital Firm 2024-2025 behind early mover Spotify, despite all of Apple’s advantages. All this choice gives consumers (buyers) bargaining power. They demand cheaper prices and greater convenience." (From: Gallaugher, 2024, section 3.4) Prof. Dr. Hans Borgman 31 PoEB: The Digital Firm 2024-2025 The Digital Firm Course Outline Setting the Stage I. IT and Strategy II. Winner takes all? Pipelines, Platforms and Beyond III. Artificial Intelligence and the Future of Work IV. What is IT Success? 32 Prof. Dr. Hans Borgman 32