Article 6.pdf

Stuvia - Koop en Verkoop de Beste Samenvattingen Week 6: The Problem with Legacy Ecosystems (Wessel, Levie & Siegel, 2016) Why is it that so few of the powerhouses of the 20th century are leaders in the new data-driven world? Because all companies’ internal systems are set up to support their exis...

Stuvia - Koop en Verkoop de Beste Samenvattingen Week 6: The Problem with Legacy Ecosystems (Wessel, Levie & Siegel, 2016) Why is it that so few of the powerhouses of the 20th century are leaders in the new data-driven world? Because all companies’ internal systems are set up to support their exisng business models. These systems are well established and extremely diRcult to change, and they oLen conict with the needs of digital business models. Incumbent (already exisng) Irms struggle to take advantage of the opportunity to extend their relaonships with customers, because they are constrained by their exisng value chains. Software transforms customer relationships The success of successful companies is built on an ability to reach further into a customer’s world than competors do. - Tesla equips its cars with sensors and soLware to understand how customers drive and to oFer them autopilot funcons The ability to connect more personally with customers creates a huge opportunity for companies to capture data about the market, supply new products/services and build extremely defensible network eFects and feedback loops. However, transforming a customer relaonship is not simple; it requires doing things diFerently up and down the value chain. Disrupting partnerships Most corporate strategists fail to grasp that soLware alone will not transform their business model. Not only soLware needs to change but also how products are distributed and serviced. - when companies use digital technologies to form new relaonships with customers, soLware development is only part of the process. Somemes this is because companies seek to change customers’ behavior at various points in the customer journey. Somemes it is because delivering value involves using the data collected to supplant former partners. In either situa on, business models and channel strategies must change in unison— requiring tough decisions that can upset long-standing partners. The need for interdependence - With a new product, investors do not have to have a deep understanding of how to opmise the diFerent components of an innovaon relave to another. For example, the Irst automobile manufacturers needed to maintain ght control over research, design, and manufacturing. Changes to one part of the car oLen meant changes throughout the automobile. For that reason, product development required an interdependent network of partners. 21 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 - As the innovaon’s technology becomes more mature, a broad scope for in dependent partner acvity becomes more typical. - However, the more dramac the innovaon, the more interdependence may be required Building a new ecosystem When advances in compung and communicaon allows businesses to extend their relaonships with customers, and that taking advantage of these digital technologies requires companies to create a more interdependent architecture for the innovaon. The implicaon becomes: - Companies of all variees will need to reshape their value chains. And somemes this change will impact long-me partners in unfavourable ways. For example, NeAlix, monitors everything its customers do and uses that informaon to power decisions ranging from content recommendaons to content sourcing. But to do this eFecvely, it needed new ecosystem partners with compable goals. PlaAorm partners that would enable the instrumentaon of applicaons (like Apple and Google), or content owners that are willing to lease the right to broadcast their content (like the BBC). Somemes, exisng partners are eager to reinvent themselves, but just as oLen they have business models that are too diRcult to change. - One should not be waing hopefully for partners to catch up as this can jeopardise the longterm viability of a business. The best way to manage the transi on from one business model to another: 1. Establish what you must do. - Reasonable people may argue about what the world will look like in the near term—or even the medium term. Fortunately, most raonal execuves can agree on the macro trends that will aFect their industries over an extended period. - From this, it is possible to make a predicon about how customers will consume products in the future. - Agreeing on the long-term predicons for the industry, the role the company can play under those scenarios, and the likely role of your partners is the way to begin making the necessary changes to take advantage of digital. - As business leaders everywhere start to deal with the pressures that digital change can bring, establishing some type of polestar is invaluable: If you know the direcon in which you must move, it’s much easier to decide when it’s crical to disrupt your partners’ legacy ways of doing business 2. Develop be.er metrics - For many of the world’s most successful businesses, the gauges of success have been in place for decades. OLen these metrics focus on proItability or top-line revenue. - Such output-based metrics are wonderful for mature businesses but less relevant in situaons of digital innovaon. 22 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 key factor in managing digital transformaon is changing performance metrics to beEer highlight the failures of status quo operaons and to support risk taking and experimentaon Example: Ford has moved away from assessing execuve performance largely on the basis of units sold annually; the company now also factors in the miles that are driven in Ford vehicles. When metrics change signiIcantly, they can highlight and reinforce behaviour that supports a company’s digital strategy. Example: Kaiser Permanente nowadays pays less aEenon to common metrics like hospital and doctor ulisaon; instead, it’s focusing on maximising “healthy life years” for paents. o Helps the organisaon to priorise partnerships with wellness and technology companies over the hiring and opmal deployment of medical personnel. 3. Create commercial opportuni es for partners There is no way to avoid negave impacts on some of your ecosystem partners.  Example: HBO might have to go around a cable company’s set-top box and deliver apps directly to consumers. Where possible, it is vital for Irms to create new opportunies for both themselves and their partners. As the overall economic pie gets bigger, Irms can oFer more pieces to others in the value chain.  For example, GE Digital’s CTO, regularly speaks with stakeholders about what the company is focused on and where it hopes partners like Accenture and A.T. Kearney can create applicaons.  Or: Visa is oFering fraud-detecon algorithms to aRliated developers. Whatever your business, creang commercial opportunity for your partners is a powerful tool in helping them embrace your vision. Conclusion: establishing a polestar Changing performance metrics and creang opportunies for partners can make it easier for industrial-era companies to manage the change to new, digital-enabled business models. Transformaons will not be straighAorward or pain-free. Companies will have to make tough decisions that leave members of their legacy ecosystems behind. Some partners will necessarily turn into competors. Others may simply become obsolete. But if business leaders can acknowledge that digital requires changes beyond soLware—and oLen beyond the direct control of their business—the opportunies are enormous. - 23 Gedownload door: matsmolenberg | [email protected] Dit document is auteursrechtelijk beschermd, het verspreiden van dit document is strafbaar. ¤ 912 per jaar extra verdienen?