Digital Business & Transformation Summary (Rogers) PDF

Stuvia - Koop en Verkoop de Beste Samenvattingen Summary Digital Business & Transformation Summary of Book (Rogers) and Lectures Including all the chapters for DBT Contents Chapter 1: The five domains of digital transformation ............................................................ 2 Chapter 2...

Stuvia - Koop en Verkoop de Beste Samenvattingen Summary Digital Business & Transformation Summary of Book (Rogers) and Lectures Including all the chapters for DBT Contents Chapter 1: The five domains of digital transformation ............................................................ 2 Chapter 2: Harness Customer Networks................................................................................ 7 Chapter 3: Build Platforms, not just products ....................................................................... 15 Chapter 4: Turning Data into assets .................................................................................... 23 Chapter 5: Innovate by rapid experimentation ..................................................................... 31 Chapter 6: Adapt your value proposition .............................................................................. 40 Chapter 7: Mastering disruptive business models ................................................................ 46 Gedownload door: matsmolenberg | [email protected] Dit document is auteursrechtelijk beschermd, het verspreiden van dit document is strafbaar. ¤ 912 per jaar extra verdienen? Stuvia - Koop en Verkoop de Beste Samenvattingen Chapter 1: The five domains of digital transformation Digital transformation = A change in how a firm employs digital technologies, to develop a new digital business model that helps to create and appropriate more value for the firm (Verhoef et al., 2019, p. 1) The phases of digital transformation: The five domains of strategy are: 1. Customers 2. Competition 3. Data 4. Innovation 5. Value The five domains of strategy are changing: The impact of the digital transformation is enormous, as barriers disappear under which virtually every business domain operates. 1. Customers From Customers as mass market Communications are broadcast to customers Firm is key influencer Marketing to persuade One-way value Economies of scale To (digital) Customers as dynamic network Communications are two-way Customers are the key influencer Marketing to inspire purchase, loyalty, advocacy Reciprocal value flows Economies of customer value - This is forcing businesses to rethink their traditional marketing funnel and reexamine their customers’ path to purchase. - Rather than seeing customers only as targets for selling, businesses Gedownload door: matsmolenberg | [email protected] Dit document is auteursrechtelijk beschermd, het verspreiden van dit document is strafbaar. ¤ 912 per jaar extra verdienen? Stuvia - Koop en Verkoop de Beste Samenvattingen need to recognize that a dynamic, networked customer may just be the best innovation partner they will ever find. 2. Competition From Clear distinctions between partners and rivals Competition is a zero-sum game Key assets are held inside the firm A few dominant competitors per category - To (digital) Blurred distinctions between partners and rivals Competitors cooperate in key areas Key assets reside in outside networks Winner-takes-all due to network effects Zero-sum game = a situation in which an advantage for one party must necessarily result in an equally large disadvantage for one or more other parties Today, we are moving to a world of fluid industry boundaries, one where our biggest challengers may be asymmetric competitors— companies from outside our industry that look nothing like us but that offer competing value to our customers 3. Data From Data is expensive to generate in firm Challenge of data is storing and managing it Data is a tool for optimizing processes - To (digital) Data is continuously generated everywhere Challenge of data is turning it into valuable information Data is a key intangible asset for value creation The current “big data” tools allow firms to make new kinds of predictions, uncover unexpected patterns in business activity, and unlock new sources of value. Data is a vital part of how every business operates, differentiates itself in the market, and generates new value. 4. Innovation From Decisions made based on intuition and seniority Testing ideas is expensive, slow, and difficult Failure is avoided at all cost Focus is on the ‘’finished’’ product - To (digital) Decisions made based on testing and validating Testing ideas is cheap, fast, and easy Failures are learned from, early and cheaply Focus is on minimum viable prototypes and iteration after launch Digital technologies make it easier and faster to test ideas, to can gain market feedback from the very beginning of our innovation process, all the way through to launch, and even afterwards. 5. Value To (digital) Gedownload door: matsmolenberg | [email protected] Dit document is auteursrechtelijk beschermd, het verspreiden van dit document is strafbaar. ¤ 912 per jaar extra verdienen? Stuvia - Koop en Verkoop de Beste Samenvattingen From Value proposition defined by industry Optimize your business model as long as possible Judge change by how it impacts your current business Market success allows for complacency - Value proposition defined by changing customer needs Evolve before you must, to stay ahead of the curve Failures are learned from, early and cheaply ‘’only the paranoid survive’’ The only secure response to a changing business environment is a path of continuous evolution, where each technology is viewed to expand and improve our value proposition to our customers. Rather than waiting to adapt when change becomes a matter of life or death, businesses need to focus on seizing emerging opportunities A playbook for digital transformation To master competition in the digital age, businesses must learn to cope with asymmetric challengers who are reshuffling the roles of competition and cooperation in every industry. They must also understand the increasing importance of strategies to build platforms, not just products. Digital Transformation playbook = the five strategic themes for businesses related to the five domains by uncovering how the limitations of your traditional strategy are changing and how opportunities are emerging to build your business in new ways. Domains Customers Strategic themes Harness customer networks Competition Build platforms, not just products Data Turn data into assets Innovation Innovate by rapid experimentation Value Adapt your value proposition Key concepts - Reinvented marketing funnel Path to purchase Core behaviors of customers networks Platform business models (In)direct network effects (Dis)intermediation Competitive value trains Templates of data value Drivers of big data Data-driven decision-making Divergent experimentation Convergent experimentation Minimum variable prototype Paths to scaling up Concepts of market value Paths out of a declining market Steps to value proposition evolution Gedownload door: matsmolenberg | [email protected] Dit document is auteursrechtelijk beschermd, het verspreiden van dit document is strafbaar. ¤ 912 per jaar extra verdienen? Stuvia - Koop en Verkoop de Beste Samenvattingen Digital innovation and strategy often focus heavily on start-ups. But the challenges of starting a digital business are very different from those of adapting an established business that already has infrastructure, sales channels, employees and an organizational culture to contend with. Rogers (2016) mostly we will look at existing enterprises founded before the Internet and learn how they are adapting. For this, Gedownload door: matsmolenberg | [email protected] Dit document is auteursrechtelijk beschermd, het verspreiden van dit document is strafbaar. ¤ 912 per jaar extra verdienen? Stuvia - Koop en Verkoop de Beste Samenvattingen The book includes a set of nine strategic planning tools: Nine tools for digital transformation 1. Customer network strategy generator (Ch. 2) 2. Platform business model map (Ch. 3) 3. Competitive value train (Ch. 3) 4. Data value generator (Ch. 4) 5. Convergent experimental method (Ch. 5) 6. Divergent experimental method (Ch. 5) 7. Value proposition roadmap (Ch. 6) 8. Disruptive business model map (Ch. 7) 9. Disruptive response planner (Ch. 7) These tools can be categorized as follows: 1. Strategic ideation tools: Tools for generating a new solution to a defined challenge by exploring different facets of a strategic phenomenon ➢ (Customer Network Strategy Generator, Data Value Generator) 2. Strategy maps: Visual tools that can be used to analyze an existing business model or strategy or to assess and explore a new one ➢ (Platform Business Model Map, Competitive Value Train, Disruptive Business Model Map) 3. Strategic decision tools: Tools with criteria for evaluating and deciding among a set of generic options available for a key strategic decision ➢ (Disruptive Response Planner) 4. Strategic planning tools: Step-by-step planning processes or methods that can be used to develop a strategic plan tailored to a specific business context or challenge ➢ (Convergent Experimental Method, Divergent Experimental Method, Value Proposition Roadmap) Gedownload door: matsmolenberg | [email protected] Dit document is auteursrechtelijk beschermd, het verspreiden van dit document is strafbaar. ¤ 912 per jaar extra verdienen? Stuvia - Koop en Verkoop de Beste Samenvattingen Chapter 2: Harness Customer Networks The first domain of the digital transformation playbook that we need to rethink are customers. ➢ Customers in the digital age are not passive consumers but nodes within dynamic networks—interacting and shaping brands, markets, and each other. ➢ Businesses need to recognize this new reality and treat customers accordingly. They need to understand how customer networks are redefining the marketing funnel, reshaping customers’ path to purchase, and open up new ways to co-create value with customers. Customers are no longer passive customers because they interact and shape brands, markets, and each other (dynamic network). The Customer Network Paradigm Before digitalization: The mass-market model= was used in firms with Mass production and Mass communication. - Customers are passive and are considered in aggregate Their only significant role is to either purchase or not purchase Companies seek to identify the product or service that will suit the needs of as many potential customers as possible Success hinges on efficiencies of scale With digitalization: Customer Network model = is used today. In this model, the firm is still a central actor in the creation and promotion of goods and services. But the new roles of customers create a more complex relationship. - Customers don’t have the sole roles of buyers or non-buyers. - Current and potential customers have access to a wide variety of digital platforms that allow them to interact, publish, broadcast, and innovate - Customers are just as likely to influence each other as they are to be influenced by direct communications from a firm. While delivering value outward to customers and communicating to them, the firm also needs to engage with its customer network. It needs to listen in, observe the customers’ networked interactions, and understand their perceptions, responses, and unmet needs. Gedownload door: matsmolenberg | [email protected] Dit document is auteursrechtelijk beschermd, het verspreiden van dit document is strafbaar. ¤ 912 per jaar extra verdienen? Stuvia - Koop en Verkoop de Beste Samenvattingen The marketing funnel and the patch to purchase The marketing funnel (or purchase funnel) = one framework for understanding how customer networks have such great impact on businesses’ relationships to customers. The marketing funnel: The marketing funnel is based on “hierarchy of effects” and maps out the progression of a potential customer: 1. Awareness: (knowledge of product/company) 2. Consideration: (recognition of potential value) 3. Preference: (choice of a referred company/product) 4. Action: purchase of a product, subscription to a service 5. Loyalty: it is more efficient to retain customers than to attempt acquiring new ones. With each step the number of potential customers decreases. In the mass-market area: broadcast marketing tools to reach and influence customers at different stages of the funnel - Awareness: television advertising - Direct mail coupons and promotions to drive customers from choice of brand (preference) to sale (action). - Reward programs (offering incentives) makes customers repeat business (loyalty). In the digital area: Customers are also influenced by customer networks at different stages of the funnel - Advocacy = advocating for the brand and connecting the brand to people in their network. Awareness: search engine results, blogs. Consideration: customer reviews influence the evaluation of different brands. Brand preference: social networks like Facebook or asking friends Action: purchasing from a retail business in store, on website, on mobile device, or even on a mobile device while in a store. Gedownload door: matsmolenberg | [email protected] Dit document is auteursrechtelijk beschermd, het verspreiden van dit document is strafbaar. ¤ 912 per jaar extra verdienen? Stuvia - Koop en Verkoop de Beste Samenvattingen - Loyalty: “friending” via e-mail marketing, FB, Twitter. Whereas the funnel is a macro tool for thinking very broadly about customers’ psychological states, the path to purchase is a lens for looking at customer behaviors much more specifically. Five Customer Network Behaviors There are 5 (core) behaviors that drive adoption of new digital experiences. The book refers to this as the five core behaviors of networked customers: 1. Access = The networked customers seek to access digital data, content, and interactions as quickly, easily, and flexibly as possible. - Any offering that enhances this access is incredibly compelling. - Example: text messaging on early mobile phones, which revolutionized communications with the ability to receive and send messages from anywhere at any time. 2. Engage = networked customers seek to engage with digital content that is sensory, interactive, and relevant to their needs. - The desire to engage with content is a key driver of customer behavior. 3. Customise = Customers seek to customize their experiences by choosing and modifying a wide assortment of information, products, and services. 4. Connect = Customers seek to connect with one another by sharing their experiences, ideas, and opinions through text, images, and social links. 5. Collaborate = customers are naturally drawn to work together: accordingly, they seek to collaborate on projects and goals through open platforms. Access strategy Be faster, more flexible, easier, everywhere, and always be on for your customers. An access strategy may therefore take a variety of approaches, namely: - Mobile commerce: E.g., using QR codes as tickets to board planes and trains; room doors that guests can unlock through swiping on smartphones; etc. Omni-channelled experiences: E.g., Walmart using an app that has different features for when used at home versus while in a Walmart store. Working in the cloud: customers are becoming accustomed to paying for products that reside entirely in the cloud (e.g., Spotify instead of MP3s). On-demand services: services that used to require the customer to be in a specific location are now accessible to customers anywhere at any time (banking) Engage strategy The engage strategy for business is to become a source of valued content for your customers. Businesses today face an increasingly challenging environment in seeking to communicate with their customers. An engage strategy may take a variety approaches, namely: - Product demos: Content (videos) that demonstrate the value proposition of a Gedownload door: matsmolenberg | [email protected] Dit document is auteursrechtelijk beschermd, het verspreiden van dit document is strafbaar. ¤ 912 per jaar extra verdienen? Stuvia - Koop en Verkoop de Beste Samenvattingen - business or product in a compelling and engaging way can be extremely effective. Storytelling: Reach a broader audience by creating an emotionally compelling story that is less product specific. Utility: Brands can effectively engage customers by providing useful content at just the right time. Brands as publishers: Creating value by becoming a publisher of a(n) (online) magazine that tells the stories of designers, fashion models, and craftspeople and of the products themselves. Customise strategy The customize strategy for business is to make your offering adaptable to your customers’ needs, which has become better possible due to e-commerce, automation in inventory, and the accessibility of big data on consumers’ preferences. Find ways to meet demands without overwhelming them with choice or unnerving them with excessively personal messaging. - - - - Recommendation engines: To help viewers find what to watch from its large catalog of streaming • e.g., Netflix using behavioural data and micro-tags that have been applied to all of its content to recommend movie titles. Personalised interfaces: • Lancôme’s magic mirror on its Facebook page allows customers to select one of their Facebook photos and then try out various beauty products Personalised products/services: • e.g., Coca-Cola using customised Coke cans, using the 150 most popular names for young adults in Australia. This increased young adult consumption with 7% in the Australian market. Personalised messages and content: • readers of digital content can be invited to indicate their interests (thumbs up or down; liking), which can be used to promote future content that is of the highest relevance. Connect strategy The connect strategy for business is to become a part of your customers’ conversations. Businesses are expected to be present, responsive, and active in social media conversations. - Social listening: customer conversations can be big sources of market insight for businesses. Social customer service: social media can serve as an effective channel within their customer service mix, alongside call centres and instant chat. If a business can answer questions successfully, it can impress Gedownload door: matsmolenberg | [email protected] Dit document is auteursrechtelijk beschermd, het verspreiden van dit document is strafbaar. ¤ 912 per jaar extra verdienen? Stuvia - Koop en Verkoop de Beste Samenvattingen not only one customer, but a network of others as well. - Joining the conversation: A company can begin engaging in conversations and sharing videos and photos from the workplace around the world, using platforms as Facebook, Instagram, or LinkedIn, which might create engaged following of customers, suppliers, and employees. - Asking for ideas and content: using social media to ask customers for suggestions or content in the form of photos or videos. o This responsiveness can be a way to make customer feel a sense of ownership and contribution to a company’s success. - Hosting a community: businesses sometimes host their own online community around a shared topic of interest. In that way, customers, business partners, employees and others can share insights and discuss questions. Collaborate strategy The collaborate strategy for business is to invite your customers to help build your enterprise. A collaborate strategy is distinct from a connect strategy in that the company invites customers not just to share information but also to work together in a focused way toward a shared goal or objective, using open platforms - Passive contributions: Sometimes collaboration can involve as little as customers’ consent so that actions they are already taking can be used to power a collective project Active contribution: customers are invited to contribute their efforts directly to a cause, taking on a small part of a large project. Crowdfunding: the process of seeking collaborators to contribute to and raise funds for a new project Open competitions: competitions can be used to enlist a diverse group to find the best answer or solution. Collaborative platforms: the business creates a context for collaboration but lets the network of collaborators define the challenges to be addressed Tool: The Customer Network Strategy Generator The Customer Network Strategy Generator is designed to help develop new strategic ideas for engaging and creating value with networked customers. The tool follows a five-step process for generating new strategic ideas, explained below: Gedownload door: matsmolenberg | [email protected] Dit document is auteursrechtelijk beschermd, het verspreiden van dit document is strafbaar. ¤ 912 per jaar extra verdienen? Stuvia - Koop en Verkoop de Beste Samenvattingen Step 1: Objective Setting The first step of this process is to define the objectives you are hoping to achieve for your business with any new customer strategy you develop. It is valuable to define objectives at two levels: direct objectives and higher order objectives. Direct objectives = objectives you are directly responsible for addressing in your project. ➢ For example, if you were leading customer service, you might be seeking to develop new strategies that leverage customers’ digital behaviors to increase the speed of response to customer queries, reduce attrition of dissatisfied customers, or turn customer service into a source of customer insights High-order objectives = overarching objectives that you are not solely responsible for, but that your project should support. Step 2: Customer Selection and Focusing The next step is to get a clear picture of the customers that you are seeking to address. This starts with selecting which customer segments are most relevant to your stated objectives For example, if your key project objective were to reduce customer attrition, you might select customer segments with the highest rates of attrition and high value segments whose losses pose the greatest risk. To understand these customer segments the following three questions needed to be answered: - 1. What is my unique objective for each customer segment? 2. What is my unique value proposition for each customer segment? Gedownload door: matsmolenberg | [email protected] Dit document is auteursrechtelijk beschermd, het verspreiden van dit document is strafbaar. ¤ 912 per jaar extra verdienen? Stuvia - Koop en Verkoop de Beste Samenvattingen 3. What are the unique barriers to success for each customer segment? Step 3: Strategy Selection Look at the 5 core customer network behaviours and their broad strategies that derive from them: - Access: Be faster, be easier, be everywhere, and be always on for your customers. Engage: Become a source of valued content for your customers. Customize: Make your offering adaptable to your customers’ needs. Connect: Become a part of your customers’ conversations. Collaborate: Invite your customers to help build your enterprise. Although all five strategies can be valuable for your business in the abstract, you are now looking to generate ideas for a specific project. Step 4: Concept Generation A concept = a specific, concrete idea for a product, service, communication, experience, or interaction you design for customers - For example, if you are looking at a customise strategy, you may want to consider ideas related to recommendation engines, personalised interfaces, personalised products and services, and personalised messages and content It is important to keep focus on how your ideas can create value for the customer! When pursuing an - access strategy, keep your focus on “How could you make the experience faster, simpler, and easier for customers?”. customize strategy: “Where do your customers’ needs, and interests differ most from each other?”. collaborate strategy: “What skills could your customers bring to bear, and what are the limits in their ability to contribute successfully?”. connect strategy focus on ‘’what conversations are your customers already having that are relevant to your objectives?’’ Gedownload door: matsmolenberg | [email protected] Dit document is auteursrechtelijk beschermd, het verspreiden van dit document is strafbaar. ¤ 912 per jaar extra verdienen? Stuvia - Koop en Verkoop de Beste Samenvattingen Step 5: Defining the impact - If you proceed with the concepts, how will you know if you have achieved the objectives you set? Will the strategy you have developed address the problem/objective? How will you measure the impact? è Make sure benefits are measurable and clarify how you think the strategic concepts you developed will achieve these benefits. There are a few challenges pre-digital firms may face in rethinking customer assumptions: 1. Enabling the network inside: A firm’s internal customer network – its own employees is critical to the digital transformation of a business. 2. Adding new skills and replacing old habits - Businesses must acquire a cloud of new skills in order to leverage customer networks outside the firm. - These skills include social media and community management, journalistic content creation, new media buying and measurement, e-commerce, etc. 3. Bridging silos - Customer networks affect every department of the organisation, which can lead to tensions over who leads customer interactions across digital touchpoints. • For example, Facebook presence: marketing? Communications? Customer service? IT? Should that presence be managed by global HQs or devolved to local business units with their own page? Gedownload door: matsmolenberg | [email protected] Dit document is auteursrechtelijk beschermd, het verspreiden van dit document is strafbaar. ¤ 912 per jaar extra verdienen? Stuvia - Koop en Verkoop de Beste Samenvattingen Chapter 3: Build Platforms, not just products Competition Airbnb is an example of a platform—a class of businesses that are rethinking which competitive assets need to be owned by a firm (e.g., rental properties and trained service staff) and which can be managed through new kinds of external relationships. A platform = a class of businesses that are rethinking which competitive assets need to be owned by a firm (e.g., rental properties and trained service staff) and which can be managed through new kinds of external relationships. The digital revolution is redefining competition and relationships between firms in To (digital) several ways: From Clear distinctions between partners and rivals Competition is a zero-sum game Key assets are held inside the firm A few dominant competitors per category Blurred distinctions between partners and rivals Competitors cooperate in key areas Key assets reside in outside networks Winner-takes-all due to network effects Definition of platforms A platform = a business that creates value by facilitating direct interactions between two or more distinct types of customers. Three key points are included in the definition: 1. Distinct types of customers: To be a platform, the business model must serve two or more distinct sides, or types, of customers. 2. Direct interaction: Platforms must enable these two or more sides to interact directly—that is, with a degree of independence 3. Facilitating: Even though the interactions are not dictated by the platform business, they must take place through it and be facilitated by it. ➢ This is why the definition of platforms does not include a franchise business like McDonald’s or H&R Block Platforms and the Customers they bring together: - Airbnb: Hosts & Renters Uber: Freelance drivers & Riders Paypal: Account holders & Merchants/Banks Youtube: Video viewers & Advertisers & Creators Four types of platforms 1. Exchanges: These types of platforms (or marketplaces) bring together two distinct groups of customers for a direct value exchange, with each group attracted by the number and quality from the other side. 2. Transaction systems: these platforms act as an intermediary between different parties to facilitate payments and financial transactions. Gedownload door: matsmolenberg | [email protected] Dit document is auteursrechtelijk beschermd, het verspreiden van dit document is strafbaar. ¤ 912 per jaar extra verdienen? Stuvia - Koop en Verkoop de Beste Samenvattingen 3. Advertising-supported media: platform plays an additional role of creating (or sourcing) media content that is attractive to consumers. 4. Hardware/software standards: platforms that provide a uniform standard for the design of subsequent products to enable their interoperability and benefit to the ultimate consumer. This list is not exclusive; new platform businesses could well arise that don’t quite fit any of these four types. But these categories provide a useful way of thinking about the differences among current platform businesses. Direct and Indirect Network effects Network effects = the value of platforms increases as more customers use them. Direct network effects = occur when the increasing number of customers or users of a product drives an increase in value or utility for that same type of user (same side network effects). ➢ For example, when the first user made a Facebook account, utility was zero because they had nobody to connect with. But, when the number of users increased, each additional user led to an increase in the number of potential connections that could be made. Indirect network effects = occur when an increase in the number and quality of customers on one side of the platform drives increasing value for customers on the other side of the platform. ➢ Most common type of network effect in platforms. ➢ For example, you don’t sign up for Visa because it has lots of other cardholders like you, but the presence of lots of Visa cardholders makes it more attractive for a merchant to accent Visa (which then creates more value for you again). ➢ Not always reciprocal: in advertising-supported media, the indirect network effects only run one way: as the number of readers increases for a newspaper, its value to advertisers increases as well; but increasing the number of ads does not directly increase the value for readers. How digital impacts platforms Digital technologies are supercharging the growth and power of multisided platforms via the Web, on-demand cloud computing, social media, and mobile computing devices. Together, these digital technologies are driving four key elements of platforms: Gedownload door: matsmolenberg | [email protected] Dit document is auteursrechtelijk beschermd, het verspreiden van dit document is strafbaar. ¤ 912 per jaar extra verdienen? Stuvia - Koop en Verkoop de Beste Samenvattingen 1) Frictionless acquisition: The process of acquiring new customers for platform in increasingly frictionless thanks to the Web and software development kits. 2) Scalable growth: Cloud computing allows any size business to rapidly scale the size of its platform as fast as it can acquire new customers. 3) On-demand access and speed: mobile computing allows every platform to be accessible to all of its customers anywhere at any time. 4) Trust: Anonymity isn’t very helpful for a platform business. The ability to authenticate customers through their Facebook, Google, Twitter, or LinkedIn identities makes is much easier to use a verification system for new customers on a platform.Before the digital age, platform businesses used to be large enterprises because of the resources required to attract sufficient numbers of participating partners. Competition of platforms 1. Light in assets: because platforms give their customers the job of creating much of their value (Facebook doesn’t create its own value; Airbnb owns no real estate), they tend to be light in assets and have few employees for the revenue they generate because their customers do much of the work that employees would normally do. 2. Scaling fast: platform businesses can grow extremely quick due to low operating costs combined with a scalable cloud computing architecture (as described before). - Another factor is that platforms are able to increase revenue with relatively slow employee growth. 3. Winner takes all: once a platform is widely established in its category, it is extremely hard to launch a direct challenger with a similar service – a result of the power of network effects. 4. Economic efficiency: platforms enable the efficient usage of distributed pockets of economic value (labour, assets, skills) that otherwise could not be effectively used. - Results in a profusion of platforms that bring together lone actors and empower them to contribute economically. - Platforms are often mislabelled as a “sharing economy”, while actually only very few platforms have been established to share assets or labour free of charge. Gedownload door: matsmolenberg | [email protected] Dit document is auteursrechtelijk beschermd, het verspreiden van dit document is strafbaar. ¤ 912 per jaar extra verdienen? Stuvia - Koop en Verkoop de Beste Samenvattingen Competition between platforms Platforms can compete on five areas of value: 1. 2. 3. 4. 5. Network-added value: This is the most obvious way that platforms compete. Due to network effects, the platform with the most current customers is often the one most likely to draw future customers. Platform-added value: The platform itself has to develop unique features and benefits to attract customers Open standards: Another important way that a platform competes is by offering more-open and easier-to-use standards than its competitors. Interaction tools: Once a platform has attracted customers, it can compete by providing them with the best tools to find and interact with the right partners Trust enablers: The last way that platforms compete to attract customers is by offering better methods to enable trust among the parties they bring together Tool: the platform business model map The Platform Business Model Map = an analytic and visualization tool designed to identify all the critical parties in a platform and analyse where value creation and exchange take place among the different customers and with the platform business itself. The shapes indicate the parties within the model: - Circle: The platform - Diamonds: The payers (customers that provide revenue to the platform) Rectangle: The sweeteners (customers that provide no revenue but help to attract other valuable customers) - Spikes: The number of other customer types that are attracted (e.g., publishers have one spike because they attract only users, but users have four spikes because they attract publishers, advertisers, app developers, and more users like themselves) - Double-borders: The linchpin (the customer type with the most spikes; the king of network effects) Gedownload door: matsmolenberg | [email protected] Dit document is auteursrechtelijk beschermd, het verspreiden van dit document is strafbaar. ¤ 912 per jaar extra verdienen? Stuvia - Koop en Verkoop de Beste Samenvattingen The shifting landscape of competition Digital technologies are contributing to three major shifts in the competitive landscape: 1. Co-opetition: competition with rivals is changing, becoming less of a direct contest and zero-sum game (where one side wins and the other loses) • A zero-sum game sets up a race to the bottom that nobody can win as it leads to price wars and low profitability). • Effective strategy calls for even direct competitors to find ways to work together cooperatively in certain areas. 2. Fluid industries and asymmetric competitors: - Today, industry boundaries are much less static due to rapid technological change. - Companies can expect to compete with more and more businesses that do not look much like them. • Symmetric competitors offer similar value propositions to customers via similar business models (while carmakers may differ in size, the broad model is the same – manufacturing plants, dealerships, and pricing for sale and lease) • Asymmetric competitors offer similar value propositions to customers, but their business models are not similar. Example: an asymmetric competitor for BMW might include a ride-sharing service like Uber: customers might buy less cars because Uber can fulfil their transit needs. 3. Disintermediation and intermediation: Disintermediation = the removal of an intermediary or middleman from a series of business transactions. Often, a new, digital-first challenger arrived to act as intermediary, letting suppliers sidestep their traditional channel for reaching customers. Companies trying to reach their ultimate consumers may build their own digital channel to sidestep, or disintermediate, their traditional partners. 4. Intermediation = new business manages to insert itself as an intermediary between the customers and a company that used to sell directly to them. This happens when a platform builds such a large customer base and becomes such a viable interface to customers those other businesses cannot afford to skip the opportunity to reach customers through that platform. Gedownload door: matsmolenberg | [email protected] Dit document is auteursrechtelijk beschermd, het verspreiden van dit document is strafbaar. ¤ 912 per jaar extra verdienen? Stuvia - Koop en Verkoop de Beste Samenvattingen Tool: the competitive value train Competitive value train = a tool designed to analyze competition and leverage between a firm and its business partners, rivals, and asymmetric competitors. - - Focuses on competition by looking at the leverage between companies in a supply chain and their potential substitutes and by mapping how a particular product or service reaches a particular group of customers. Allows managers to focus on competitive and cooperative forces at work in delivering a particular stream of value A competitive value train starts with a horizontal train of firms leading to a final consumer on the right. The number of firms drawn will depend on your business model and means of distribution. Following are three broad types commonly seen as you move upstream from the final consumer: 1. Distributor = delivers the product or service to the customer, although it may not manufacture the product or service (e.g., a (e)retailer like Walmart or Amazon) 2. Producer = creates the finished product, service, or offering paid for by the consumer (e.g., insurance company, record label book publisher, laptop manufacturer). 3. Originator = creates unique elements or parts of the offering (e.g., a manufacturer producing operating systems or chips for laptops or a musician creating recordings for a record label) Understanding competition as leverage Gedownload door: matsmolenberg | [email protected] Dit document is auteursrechtelijk beschermd, het verspreiden van dit document is strafbaar. ¤ 912 per jaar extra verdienen? Stuvia - Koop en Verkoop de Beste Samenvattingen A) Facebook, inserting itself between the newspapers and readers, gains competitive power as an intermediary. B) Classified websites have disintermediated the newspapers in the path from advertisers to readers. C) Newspapers may face a threat from reporters who write their articles. Star journalists are able to cultivate brand visibility directly with their audience, especially via social media. The two rules of power in value trains 1. Power to the unique value creator 2. Power to the ends Organisational challenges of competition As businesses adapt to the growing importance of platforms and the shifting landscape of competition and cooperation between firms, many of the challenges that arise are not just strategic challenges but also organizational ones. Gedownload door: matsmolenberg | [email protected] Dit document is auteursrechtelijk beschermd, het verspreiden van dit document is strafbaar. ¤ 912 per jaar extra verdienen? Stuvia - Koop en Verkoop de Beste Samenvattingen 1. Shifting roles midstream ➢ Reshuffling the roles and relationships of a company’s value train can be difficult for an enterprise that has a long-standing business model and relationships with both upstream suppliers and downstream distributors. ➢ Channel conflict is the common term for the situation where a business is balancing both working with a key sales channel and going around it. ➢ Shifting channel strategies is particularly difficult for a business because of its vested interest in existing channels and the risk of cannibalizing its current sales in pursuit of a new opportunity 2. Warfare mentality ➢ Both co-opetition and the search for leverage in value trains require leaders to look at competition as more than a zero-sum contest. ➢ In organizations where the “competition is war” metaphor and mindset run deep, cooperating with rivals, and competing with partners can pose a cultural challenge. 3. Openness ➢ One of the biggest challenges of a platform business model is letting go of some of the value creation process. By their nature, platforms grow by letting their distinct outside parties each bring their own value to the platform and interact with a substantial degree of independence. ➢ This requires a hands-off approach that may not be possible for some leaders or some company cultures. Gedownload door: matsmolenberg | [email protected] Dit document is auteursrechtelijk beschermd, het verspreiden van dit document is strafbaar. ¤ 912 per jaar extra verdienen? Stuvia - Koop en Verkoop de Beste Samenvattingen Chapter 4: Turning Data into assets The role of data for businesses is changing dramatically today. Many companies that have used data as a specific part of their operations for years are now discovering a data revolution: data is coming from new sources, being applied to new problems, and becoming a key driver of innovation. Rethinking data From Data is expensive to generate in firm Challenge of data is storing and managing it Data is a tool for optimizing processes To (digital) Data is continuously generated everywhere Challenge of data is turning it into valuable information Data is a key intangible asset for value creation Data is valuable not just for companies like Google and Facebook. For any business today, data—like intellectual property, patents, or a brand—is a key intangible asset. The relative importance of that asset will vary somewhat based on the nature of the business). But data is an important asset to every business today—and neglected at our peril. Every business needs a data strategy Once you start to treat data as an asset, you need to develop a data strategy in your organization. That includes understanding what data you need as well as how you will apply it. The following five principles should guide any organization in developing its data strategy: 1. Gather diverse data types Gedownload door: matsmolenberg | [email protected] Dit document is auteursrechtelijk beschermd, het verspreiden van dit document is strafbaar. ¤ 912 per jaar extra verdienen? Stuvia - Koop en Verkoop de Beste Samenvattingen 2. Use data as a predictive layer in decision making The worst thing that companies can do with data is gather it and not apply it when making decisions. 3. Apply data to new product innovation Data can power your existing products or services, but it can also be used as a springboard for imagining and testing new product innovations. ➢ For example, TWC’s Hailzone mobile app: TWC using its existing product data (for its TV shows and apps) to build a new service that added value for multiple customers (insurance companies and their insureds) 4. Watch what customers do, not what they say Behavioral data is anything that directly measures actions of your customers. Behavioural data is more valuable than reported opinions or surveys, because we humans are bad at remembering our own behaviour, predicting our future actions, or considering our motivations. 5. Combine data across silos Traditionally, businesses have allowed their data to be generated and reside in separate divisions or departments. One of the most important aspects of data strategy is to look for ways to combine your previously separate sets of data and see how they relate to each other. In putting together, a data strategy, it is also important to understand that many of today’s data sets are very different from the spreadsheets and relational databases that drove the best practices of data-intensive industries in the pre-digital era. Gedownload door: matsmolenberg | [email protected] Dit document is auteursrechtelijk beschermd, het verspreiden van dit document is strafbaar. ¤ 912 per jaar extra verdienen? Stuvia - Koop en Verkoop de Beste Samenvattingen Big data = The entire nature of available data, and how it can be applied and used by business, has undergone a revolution in recent years. The impact of big data The phenomenon of big data is best understood in terms of two interrelated trends: 1. The rapid growth of new types of unstructured data Big data is really unstructured data: Traditionally, a firm’s data processes were based on analysing structured data—the kind of data sets that fill a database with neatly organized rows and columns. But the new big data has been marked by the profusion of new types of unstructured data—information that is recorded but doesn’t fit easily into neat forms. 2. The rapid development of new capabilities for making sense of this kind of data for the first time The second trend shaping big data is the rise of new technological capabilities for handling and making sense of all this unstructured data. If not for this, big data would be simply a giant haystack in which the needle of business insight might well be invisible. Fortunately, a range of technological developments is expanding our abilities to use the unstructured data that technology is producing. Big data on tap from the Cloud An additional trend is shaping the impact of big data: a revolution in the storage and accessibility of both data and data processing. - In the old data paradigm, for a business to manage data, it needed to invest in owned infrastructure to collect and hold all the data as well as any tools to analyze it. This significant capital requirement led to disparities among companies, with many unable to afford the sophisticated use of data. Today, businesses no longer need to store their own data, and even small businesses are increasingly able to access the leading tools for Gedownload door: matsmolenberg | [email protected] Dit document is auteursrechtelijk beschermd, het verspreiden van dit document is strafbaar. ¤ 912 per jaar extra verdienen? Stuvia - Koop en Verkoop de Beste Samenvattingen using unstructured data. The reason is the rise of cloud computing. Three myths of big data: 1. The algorithm will figure it out 2. Correlation is all that matters 3. All good data is big data Where to find the data you need Finding the right additional sources of data is critical to filling in gaps and building your asset over time. Important sources of data from outside your organization include: 1. Customer Value Data Exchange - Invite customers to contribute data as part of interacting with your business or in direct exchange for value you offer them. 2. Lead User Participation - The lead users = The most active, avid, or involved customers. - Their greater needs lead them to have greater interest in interacting with your products or business, and they can often be a unique and powerful source of data. 3. Supply Chain Partners - Business partners can be crucial sources of additional data for building your data asset. - For example, airlines and the online travel agencies share only limited data. As a result, neither the agencies nor the airlines have access to the full picture of customers’ travel behaviors when they want to customize pricing and offers at the point of sale. - Increasingly, data partnerships will be a key element of how businesses negotiate terms of working together. 4. Public data sets - Another important source of new data is publicly accessible data sets. Some of these are in online public forums. 5. Purchase or exchange agreements - There are many opportunities for businesses to purchase or swap legitimate, valuable data with other firms. - Firms should seek out the many reputable services that enable anonymized data comparisons. Turning customer data into business value: four templates As organizations gather more data and develop it into powerful assets, the next challenge is to continuously apply these assets to create new value for themselves. - The following four templates are for creating value from customer data. 1. Insights: revealing the invisible - By revealing previously invisible relationships, patterns, and influences, Gedownload door: matsmolenberg | [email protected] Dit document is auteursrechtelijk beschermd, het verspreiden van dit document is strafbaar. ¤ 912 per jaar extra verdienen? Stuvia - Koop en Verkoop de Beste Samenvattingen - customer data can provide huge value to businesses. Data can provide insights into customer psychology, can reveal patterns in customer behaviour 2. Targeting: narrowing the field - By narrowing the field of possible audiences and identifying who is most relevant to a business, customer data can help drive greater results from every interaction with customers. - Today’s advanced segmentation can be based on much more diverse customer data and can produce dozens of micro-categories (instead of only segmenting based on age, zip code, and product use). - Customer lifetime value should be included as one metric for targeting customers based on their long-term value to the business. - Hot spotting = identifying which of your customers are responsible for the most costs. E.g., 1% of a town’s population is responsible for 30% of the health-care costs of a hospital. By identifying this group via data, these patients can be “spotted”, and their care can be improved to prevent them from going to the hospital as often. 3. Personalisation: tailoring to fit - Once micro-segments of customers are targeted, the next opportunity is to treat them each differently. - By tailoring messaging, offers, pricing, services, and products, businesses can increase the value they deliver. - Keeping track of data generated by each customer allows for advertisement of the right product to the right customer. - One challenge of personalisation has been the proliferation of different devices and platforms where customers interact with a business. - How does a firm know it is communicating with the same individual on a phone, tables, and PC, its own shopping portal, or a display ad being served up by Google on pages all over the internet? 4. Context: providing a reference frame - By providing a frame of reference – and illustrating how one customer’s actions or outcomes stack up against those of a broader population – context can create new value for businesses and customers. - E.g., Nike customers who track their running data don’t just want to know how they did today; they also want to know how today’s performance compares to their own performance over the last week, to the goals they have set, and to the activity of friends in their social network (= context). Gedownload door: matsmolenberg | [email protected] Dit document is auteursrechtelijk beschermd, het verspreiden van dit document is strafbaar. ¤ 912 per jaar extra verdienen? Stuvia - Koop en Verkoop de Beste Samenvattingen Tool: The data value generator The tool follows a five-step process for generating new strategic ideas for data. The data value generator looks at how to apply these concepts to generate new strategic options for data initiatives in your own organization Step 1: Area of impact and key performance indicators - The first step is to define the area of your business you are seeking to impact or improve through a new data initiative Once you have defined the area of impact, you should identify your primary business objectives in that area. Step 2: Value Template Selection Now that you know the domain you are focused on, look back at the four templates for value creation, and identify one or more that may be most relevant to your objectives: - Insight, targeting, personalization and context Step 3: Concept Generation After selecting a (or multiple) value template(s), you will want to use it to ideate specific ways that data could deliver more value to your customers and your business. Step 4: Data Audit - Once you have a strategy in mind, you need to assemble the data that it will require. Starts with surveying what data you already have that could be used to enable or power your strategy (current data). Next, you need to identify what data you still need for the purpose of the strategy (needs gaps). Finally, you need to determine ways to fill the gaps you’ve identified (new sources). Step 5: Execution plan The last step is to plan for the execution of the key pieces in your data plan. Gedownload door: matsmolenberg | [email protected] Dit document is auteursrechtelijk beschermd, het verspreiden van dit document is strafbaar. ¤ 912 per jaar extra verdienen? Stuvia - Koop en Verkoop de Beste Samenvattingen Gedownload door: matsmolenberg | [email protected] Dit document is auteursrechtelijk beschermd, het verspreiden van dit document is strafbaar. ¤ 912 per jaar extra verdienen? Stuvia - Koop en Verkoop de Beste Samenvattingen Organizational challenges of data Often the biggest challenges are organizational, not technical. A number of common organizational challenges that businesses face when they shift to a more data-driven strategy: 1. Embedding data skill sets - The first challenge in the transition to a more data-driven organization is finding people with the right skill sets - Firstly, firms needs data experts, but… - But the data experts cannot be the only people in an organization who understand or think about data. In order to truly build data into a strategic asset, everyone in the business has to adopt a mindset that includes using data, and the questions they pose to it, as a part of their daily process. - The company may need someone who can connect the work of data science with that of the senior managers or the creative types in the marketing department. 2. Bridging Silos - In many organisations, divisions are reinforced by departmental silos and each department’s desire for “ownership” of its data (sales data vs marketing data, etc.). - Internal sharing as an obstacle: “the lack of sharing data in our organisation is an obstacle to measuring the ROI of our marketing”. 3. Sharing data with partners - Data sharing is critical not only within an organization; it is becoming a key element of negotiations with business partners. - Contracts and deals of all kinds are no longer just about who pays what to whom but what data will be shared as well. - This sharing is particularly important for businesses that don’t own the ultimate point of sale for their products. 4. Cybersecurity, privacy and consumer attitudes - As businesses gather and utilize more and more data, particularly customer data, they also bring on additional security risks - A security breach may not only be an IT problem, but also brand reputation issue (customers stay away if they fear their data is at risk of being hacked). - Part of data strategy is developing a legal, risk management, and security plan. Gedownload door: matsmolenberg | [email protected] Dit document is auteursrechtelijk beschermd, het verspreiden van dit document is strafbaar. ¤ 912 per jaar extra verdienen? Stuvia - Koop en Verkoop de Beste Samenvattingen Chapter 5: Innovate by rapid experimentation To (digital) Innovation = any change to a business product, service or process that adds value. - This change can range from an incremental improvement to the creation of something totally new and unprecedented. - For example, For Google, an innovation may be launching a completely new product such as Gmail, Google Maps, or its Chromebook laptop line. - But innovation at Google also includes the continuous process of refining, adding and subtracting features, and evolving the user interface and experience. From Decisions made based on intuition and seniority Testing ideas is expensive, slow, and difficult Failure is avoided at all cost Focus is on the ‘’finished’’ product Decisions made based on testing and validating Testing ideas is cheap, fast, and easy Failures are learned from, early and cheaply Focus is on minimum viable prototypes and iteration after launch The fourth domain of digital transformation is innovation—the process by which new ideas are developed, tested, and brought to the market by businesses Experimentation is learning - The goal of a business experiment is not a product or solution; it is learning about customers, markets, and possible options that will lead you to the right solution. - Don’t try to avoid wrong ideas; rather, aim to test as many quickly and cheaply promising ideas as possible to learn which ones will work. - Don’t have internally debates about ideas before picking a solution and testing it. Put ideas, in rough form, in front of those who have to use the final product. - Experimenting is an iterative process of learning what does and does not work Paradigm shift: from innovation based on analysis and expertise to innovation based on ideation and experimentation for constant learning. Gedownload door: matsmolenberg | [email protected] Dit document is auteursrechtelijk beschermd, het verspreiden van dit document is strafbaar. ¤ 912 per jaar extra verdienen? Stuvia - Koop en Verkoop de Beste Samenvattingen Gedownload door: matsmolenberg | [email protected] Dit document is auteursrechtelijk beschermd, het verspreiden van dit document is strafbaar. ¤ 912 per jaar extra verdienen? Stuvia - Koop en Verkoop de Beste Samenvattingen Two types of experiments 1. Convergent experiments (Formal) = Best suited for learning that eliminates options and converges on a specific answer to a clearly defined question 2. Divergent experiments (Informal) = best suited for learning that explores options, generates insights, asks multiple questions at the same time and when done right: generates new questions to explore in the iterative stage. Convergent experiments - Seeks to provide an answer (confirmatory) - Needs a representative customer sample (test and control groups) - Needs a statistically valid sample - Focused on direct causality - Goal is to test the thing itself - Useful for optimization - Common in late stages of an innovation Divergent experiments - May provide an answer or raise more questions (exploratory) - Needs the right customers (who might not be average customers) - Sample size may vary - Focused on gestalt effects and meaning - Goal is to test as rough a prototype as possible (“good enough?”) - Useful for idea generation Example of convergent experiments: A/B testing, where two sets of customers see the same webpage for instance, with one difference in design and the company measures any difference in customer behavior. Convergent experimentation measures causality. Divergent experimentation: are generally not built around a causal question. - Rather than looking for customer response in terms of numbers, they are looking for qualitative feedback - Common mistakes in divergent testing mostly center on testing too late, as when “product testing” of a new innovation occurs after development is nearly complete You need both