M&O in the Digital Economy PDF

M&O in the Digital Economy (1) LESSON 1 — INTRODUCTION The digitalisation process or generally speaking the digital age allowed us to reduce the amount of objects we carry with us as more tasks can be done and completed with just a smartphone. Becoming digital allowed us to interact with an intelligence system which works through us, as humans, as a remote control. Digital disruption Disruptions displaces an existing market, industry, or technology and produces something new and more eﬃcient and worthwhile. It is at once destructive and creative. The concept of convergence between the physical and digital world is fundamental and the smartphone is the embodiment of the convergence. Key enablers of our digital life: Mobile Phone Apps Wi-Fi —> internet is the common thread (without internet all of this would be impossible —> This is the idea that we are converging from an Analog world to one that works on the Digital system). From Analog to Digital - The diﬀerence between analog and digital technologies is that in analog technology, information is translated into electric pulses of varying amplitude. In digital technology, translation of information is into binary format (zero or one) where each bit is representative of two distinct amplitudes. - The similarity is that both are used to transmit information, usually through electric signals. Digital CS Analog CS Advantages Inexpensive Smaller bandwidth Privacy Preserved (encrypted data) Synchronizaiton problem is relatively easy Merge diﬀerent data Error correction Disadvantages Larger bandwidth Expensive Synchronization problem is relatively diﬃcult No privacy preserved Cannot merge diﬀerent data No error correction capability Analog Digital Product centricity Client centricity Electricity Big Data Hierarchical organization Open organization Activities by functions Platforms Supply chain Value Chain Ecosystems Services Culture NB digital is not a social media, not the use of mobile and apps, not the bloggers. Is a game changer, a disruptive innovation, a business enabler and the new electricity which is pervasive and transparent. Unicorns and start-ups enter the market thanks to digital A start-up is a human institution designed to create a new product or service under conditions of extreme uncertainty. They entered the market thanks to the digital. A startup is a company typically in the early stages of its development. These entrepreneurial ventures are typically started by 1-3 founders who focus on capitalising upon a perceived market demand by developing a viable product, service, or platform. “A startup is the living embodiment of a founder’s dream” Unicorn is the term used in the venture capital industry to describe a startup company with a value of over $1 billion. Examples include Airbnb and Uber. - Digital Economy: a disruptive wave which is reshaping markets, companies, ways to do business, organizations, and job roles. - Digital Transformation: is not a matter of technology but a radical change in the mindset. “It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change” — Charles Darwin | English Naturalist and Geologist Page 1 of 39 LESSON 2 — TECHNOLOGY INNOVATION — a key driver of digital transformation Technology is the enabler of digital transformation, it is a key but not suﬃcient to transform an economy, business… society etc… Technology innovation is becoming faster day by day, we need to adapt to it in a strong way. FIRST ROUTE OF DIGITAL TECHNOLOGY The computer is one of the pillars upon which “digital’’ is based. The computer is made of diﬀerent components (hardware, software, design, interface) but, in order to have this ﬁnal product, several inventions over the years have been needed: abacus (1100bc) , mechanical calculator (1642), ENIAC (1947- a computer that occupied an entire room – invented by US gov during WW2), analog computer (1927), transistor (1947 – disrupted the computer innovation bringing smaller components), Grace Hopper was the ﬁrst lady inventing software and programming language called Cobol (1959), microprocessor (1971). COMPUTERS are the ﬁrst pillar of digital development. The main discoveries have been done during the two world wars, new scientists approach was the best way to ﬁght enemies (ex. Transistors or Eniac to understand bullet trajectories). - The ﬁrst mouse by Douglas Engelbart, 1964 - The ﬁrst computer like ENIAC occupied an entire room (180 sqm) - 1959 — Cobol the ﬁrst programming language —> Grace Hopper, La First Lady del software - The first computer with a graphic interface: From Douglas Engelbart idea. Xerox was the ﬁrst in 1974 no Apple, Microsoft and IBM August 12, 1981: The IBM Personal Compute January 24, 1984: The Apple Macintosh is released, the ﬁrst successful mass-produced personal computer featuring a graphical user interface and a mouse. - Computer went through several eras 1. CENTRALIZED ERA —> data center 2. DECENTRALIZED ERA —> cloud service 3. DISTRIBUTED ERA—> not yet started —> blockchain and automation INTERNET is the second pillar of digital. We have 2 names - Internet —> it is hardware, software, infrastructure and connectivity processors used to connect a huge net of computers. Infrastructure to support the contents - World wide web—> hyperlink database, a type of big framework with a lot of contents. The digital world started with Internet: Internet grammatically changed our world The Internet history is the intersection of several elements and the contribution of a lot of people The WWII and Cold War had been a great push for the creation of the internet, the US defend department wanted to create something useful to protect themselves against the Russian. —> ARPA was created (advanced research projects agency). Internet in a snapshot - ARPANET —> Forefather of internet - Internet —> Network of computers - Basic services —> e-mails, FTP, Telnet, Usenet news - Uses of internet —> communication, sharing, exchanging, informing, feedback and support One of the characteristics of internet is that it is hard to deﬁne and create boundaries. It is pretty ﬂexible and able to adapt and become diﬀerent from its original shape. Faces of the internet 1st email and bulletin boards 2nd www —> WorldWideWeb, which is a hyperlink database that functions as an infrastructure for the contents. 3rd commercial web —> eBay etc 4th dotcom bust —> The expansion of Internet had an incredible acceleration so much to became a bubble that collapsed during 2000-2002 —> The real reason was that their business model was not appropriate. The only company which survived was Amazon. It was able to understand the real capability of the net hence was able to survive. 5th interactive web—> sharing contents — wikipedia, youtube, google maps — the era of contents 6th social networks —> Internet is hardware, software, infrastructure and connectivity protocols used to interconnect a huge net of computers (so is a computer network) and it is diﬀerent from WorldWideWeb —> The Internet history is always in evolution Page 2 of 39 The four forces of “nexus of forces” — Gartner Gartner uses the term “Nexus of Forces” to describe the convergence and mutual reinforcement of social, mobility, cloud, and information patterns that drive new business scenarios. Gartner says that, although these forces are innovative and disruptive on their own, together they are revolutionising business and society, disrupting old business models and creating new leaders. Gartner sees the Nexus as the basis of the technology platform of the future. MOBILE —> (from 1973) Motorola, Nokia, bleckberry, apple —> smart phone: connected to internet, ubiquity, pervasive access, many functions/multiple use, convergence. —> Mobile is reinventing enterprise strategy —> “mobile ﬁrst’’ is a strategy by which the manager must re-imagining businesses around constantly connected employees and customers to capture new value. —> It is accelerating the coherent integration of cloud, social, and analytics Three drivers of success in mobility strategy (aim of “mobile ﬁrst strategy’’): 1. Use mobility for a new way to work 2. Use mobility as a new way to engage customers 3. Use mobility as a new way forward SOCIAL —> Social networks the “new reality”, an ampliﬁer of our voices —> def: software tolls that allow groups to generate content and engage in peer-to-peer conversations and exchange of content. Basically, are a category of sites that is based on user participation and user-generated content, they include social networking sites (fb), social bookmarking sites, social news sites and other sites that are centred on user-interaction. Social media time line —> linkedin (2002 – the ﬁrst born), fb (2004), yt (2005), twitter (2006), insta (2010). CLOUD —> Very important for SME, which can rent data protection, storage, innovation services instead of buying it. Cloud is more than simple storage capability: it describes a new supplement, consumption and delivery VALUE FOR CO: SCALABILITY model for IT services based on internet and it typically involves the provision of dynamically scalable and often FLEXIBILITY virtualised resources as a service over the Internet. IT COST REDUCTION The cloud services allow for faster and more eﬃcient collaboration. It is a theoretical safer way to store QUALITY OF SERVICES information. This does not require any speciﬁc investment in hardware, software and connectivity disks. SPACE SAVINGS Cloud computing is the delivery of diﬀerent services through the internet. The cloud enables anyone with an BUSINESS CONTINUITY intent connection to access information technology resources on demand. DELIVERY OF SERVICES TRHOUGH THE INTERNET —> ENABLES ANYONE WITH INTERNET CONNECTION TO ACCESS IT RESOURCES ON DEMAND ANYWHERE—> NODATA HIGH INVESTMENT NEEDED TO TRANSFORM —> Data: 90% of the data have been created in the last 2 yrs and they continue to grow exponentially. One question for large enterprises is determining who should own big-data initiatives that aﬀect the entire organization. We are not ready today to extract all the info from these data. The Four V’s of big data: 1. Volume —> data at rest 2. Velocity —> data in motion 3. Variety —> diﬀerentiated data —> —> 6 data types, 9 data sources 4. Veracity —> data in doubt (issue about artiﬁcial intelligence) These exist 6 types of data: 1. internal (generated inside the co), 2. external (data from co’s interactions), 3. structured (traditional, they reside in a ﬁxed ﬁled within a record or ﬁle, like employee anagraphics), 4. unstructured (don’t have a pre-deﬁned data model), 5. no APIs (have no standard web service and requires alternative method of integration), 6. APIs (data that has a standard web service – mostly used by startups) 9 sources of data: archives, docs, media, data storage, business apps, public web, social media, machine log data, sensor data. Nexus of Forces meets the IoT: convergence btw digital and physical world INTERNET OF THINGS —> It is a convergence between physical and digital world Wi-Fi (Wireless Fidelity) —> allows a PC, laptop, mobile phone, or tablet device to connect at high speed to the internet without the need for a physical wired connection. Wi-Fi term coined by a branding company in 1999 as a name which would be easily recalled, due to its similarity to the then well-known term “hi-ﬁ”. The technology uses radio signals to transmit information between your Wi- Fi enabled devices and the internet, allowing the device to receive information from the web in the same way that a radio or mobile phone receives sound. Page 3 of 39 The major waves of technology 1. Backoﬀ computing 2. Client-server, PC 3. www and e-business 4. Conﬂuence of cloud big data, mobile The Global Technology Outlook (GTO) is IBM Research’s vision of the future for information technology and its implications on industries. The GTO is a key strategy activity that involves people throughout the technical and business community worldwide and drives company-wide action plans. In particular, the GTO identiﬁes technologies that may be disruptive to an existing business, have the potential to create new opportunity, and can provide new business value to our customers. —> The conﬂuence of the technology drivers (social, mobile, cloud, big data/analytics) best characterise the future for Information Technology - Growth Scale/lower barrier of entry —> users, transactions, computations, data - Increasing complexity, yet more consumable —> data management, workloads, discovering insights, interaction - Fast pace —> evolving business ecosystem, dynamic scalability, minimize time-to-value, keeping pace with technology and globalisation - Contextual overload —> proliferation of sensors and devices, demand for personalisation, just in time —> An overview of technology trends Summary Page 4 of 39 LESSON 3 — FROM PRODUCT TO CUSTOMER —> Digital was born before 2000 —> Digital it’s a matter of strategy —> not about technology, it is about transforming business models and processes. It needs an holistic view which includes company, suppliers, partners and mainly the customers Digital strategy is based on ﬁve domains 1. Customers 2. Data 3. Value 4. Competition 5. Innovation —> When a company faces digital transformation the strategy needs to touch each of these points. The paradigm is completely changed —> product to customers —> Clients proﬁling and understanding is the main focus and products are created on the basis of the needs. Product centricity vs customer centricity - Product-centric competition (i.e., how many customers are reached with same customer need) —> Product goal: increase as much as possible the market share without any distinction about the customers needs. Functional/vertical organization: production and Supply Chain Management (SCM) Focus on control and workers have low-medium skill —> VERTICAL career KSF: Standardization, mass customer base, marketing Challenges: Customer retention, competition, voice of the client, new markets - Customer-centric competition (i.e., ability to stay into the clients and try to satisfy as much as possible their needs: meeting a customer’s individual needs and increase that customers across all the company’s divisions and business units, and through time). —> customers goal: satisfy a speciﬁc target of clients, stay into the clients and try to cover as much as possible their needs and increase wallet share. Horizontal organization: design and Customer Relationship Management (CRM). Focus on integration and workers have high degrees of specialization —> CROSS-FUNCTIONAL career KSF: Data gathering and analysis, client interaction, client network engagement. Challenges: Privacy, competitive prices, skill, ecosystem management Customer centricity doesn’t actually conﬂict with product centricity, because they aren’t opposite in direction but orthogonal, so they have little or no eﬀect on each other. Customer centricity as a whole PHILIP KOTLER talks more about human-centric marketing since the publication of Marketing 3.0. —> customer centricity, marketing activities should be centred around the clients as well, we need to have a human engagement of the clients. —> Customer centricity intersects customer experience, customer life cycle, customer value. The reason of the increase in relevance of customer centricity is digital. There is not an average customer (everyone has speciﬁc features) —> focus on your best customers. Customer centricity is - Focusing on average customers - Using customer data to better understand and segment your - Retaining low quality customers costumers. - Underspending on acquiring high-quality customers - Identifying the best customers - Focusing on products and services for the best customers - Using customers lifetime value (CLV) to segment them It is not Re-focus the company on «customer centricity» means to build a new company culture - From organization centric culture to customer centric culture. - From a supply chain to a value chain: a traditional supply chain starts from the suppliers and ends with the customer. The value chain, instead, starts from the customers needs and ends with the suppliers that try to satisfy that need. Supply chain —> ( supplier —> customer ) —> client center Value chain —> ( product product center Client empowered by the digital technologies —> Increasingly digital customer, increasing expectations, the fact people want consistent experiences. Page 5 of 39 MASS PRODUCTION VS MASS CUSTOMISATION TYPES OF MASS CUSTOMISATION – Gilmore and Pine’s 4 quadrants: Based on the ability to change or not the product and/or the packaging representation. 1. Collaborative customization: conduct a dialogue with individual customers to help them articulate their needs, to identify the precise oﬀering that fulﬁls those needs, and to make customized products for them. Ex: Nike shoes —> product changeable , representation changeable 2. Adaptive customization: oﬀer one standard, but customisable, product that is designed so that users can alter it themselves (few customisation options). Ex: light with selected eﬀects; coca cola touch.—> product ﬁxed, representation ﬁxed 3. Cosmetic customization: standard product presented diﬀerently to diﬀerent users (package, delivery are diﬀerent). Ex. m&ms, Nutella name on jar, perfume bottle 3D—> a standard product presented diﬀerent to diﬀerent users —> product ﬁxed , representation changeable 4. Transparent customization: provide individual customers with unique goods or services without letting them know explicitly that those products and services have been customized for them (digital play key role). Ex. amazon or Netﬂix —> “based on customers’ past behaviour — no direct customer input’’ —> product changeable, representation ﬁxed Many companies combine two or more approached in order to meet individual customers’ speciﬁc needs. —> necessary to create customer-unique value. —> Internet is fundamental —> Automated-manufacturing-machinery incorporated with an order-taking structure is important for mass-customised production lines. Numerous mass producing companies combine the order-taking structures with an internet-based client interface. —> If we have a high market turbulence it is more important to adapt the mass customisation Page 6 of 39 Transition from mass production to mass customization: 5 phases 1. Customise services - Customise services around standardised products - Higher value than MP but added value typically allows a premium Notes: - Requires minimal change(s) within organisation (i.e., service debt) - Realise that customer are buying service, not technology - Customised service does have to add value to product - Be open to integrating services with other services and products as well Warning: the competitive advantage through customised device is not sustainable, anyone can do it, and you must be ready to adapt/move. 2. Embed Customisability - MP goods or services that people adapt to their individual needs Notes: - Requires minimal changes within organisation, but creativity and innovation on designer’s part - Starts pushing company into MC since designers must embed customisability Warning: can over-design a product, and it becomes diﬃcult to charge a premium since someone else can provide precisely what user wants for less cost 3. Create Point-Of-Delivery Customisation - Customise product at point of sale Notes: - Requires small changes within organisation Marketing: must focus on personalisation and convenience Designers: creative and innovative solutions Delivery: must have capability to perform last MC operations Production: not aﬀected, still MP - Sustainability of competitive advantage depends on degree of successful transformation within organisation Warning: 1. Production and delivery must be integrated and well coordinated, and designer must consider impact of point-of- delivery on product 2. Requires lots of IT to spend response and know/understand customers 4. Provide Quick Response - Provide instant response to changing customers demand, a.k.a. time-based competition. It must shorten product development process and the order-to-deliver cycle. Notes: - Must shorten product development process - Reduce tool set-up times in manufacturing - Shorten order-to-delivery cycle - Sustainability of competitive advantage depends on degree of successful transformation within organization Warning: - Lots of organisation changes are required for success - Large capital investments for Computer Aided Manufacturing (CAM), Flexible Manufacturing Systems (FMS), Agile Manufacturing Systems (AMS), or Reconﬁgurable Manufacturing Systems (RMS) - Large inventories needed in order to response quickly - Requires lots of IT to speed response and know/understand customers 5. Modularize - Design modular components that can be conﬁgured into a wide variety end products and services. Notes: - Economies of scale is maintained at component level - Economies pf scope at module level since thy are used over and over again in diﬀerent products. - Organisation changes: Marketing must ﬁgure out how to sell products without overwhelming customers with choices. Designers must modularise designs. Production must provide low cost manufacturing. Warnings: - Modular products are much easier to reverse engineer - Product is not optimised since competitor can lower cost by reducing modularity; however, this is only for a singe product or service - Modular designs can lead to less innovative solutions over time Customisation vs Personalisation —> Personalisation is the process of using personal data to provide tailored experiences to shoppers of products in a retail environment. Every path to purchase is diﬀerent Changed in strategic assumptions from the Analog to the Digital Age FROM TO CUSTOMER - Customer as a mass market - Customer as dynamic network - Economies of scale - Economies of (customer) value Page 7 of 39 LESSON 4 — CUSTOMER NETWORKS STRATEGY Rethinking customer —> who is a digital customer ? Digital customers use digital channels — Web, mobile and social — to consume content, engage with brands and complete a transaction. Customer is passing from being a passive and unknown consumer (physical shop) to a key constituency of the organization. Nowadays the clients are active trough the social, in fact customer in the digital arena become a prosumer and a “node’’ of a network. Prosumer in the sense that it does not only receives the content, but it also helps creating new contents trough mobile devices and social channels and thus inﬂuencing others. —> Mass market model (customer is passive and unknown) VS customer network model (costumer is a prosumer a node of a network — each point of the net must be identify as clients). Network is the customer —> 5 customer network strategies Today, the network is the client and thus strategies of companies must be designed on this basis. —> Company become glass companies due to the exposure brought by hyper-connection (hyper-connected world able to “amplify” and “expose” everything) 1. ACCESS STRATEGY —> BE FASTER, BE EASIER, BE EVERYWHERE, BE ALWAYS ON: client must be able to access content (the internet) at any time. —> Customers may, at diﬀerent times, choose to buy a product online or in a store depending on which method dives them greater convenience. The convenience depends on the context: do I need the item right now? Is something heavy? So the strategy must give the possibility to access the company anytime: - Mobile commerce (QR codes, mobile payment systems, in-store targeting) - Omni-channel experience (stores vs home experience) - On demand services (banking services, education s.a. cursera) - Working in the cloud (product like Spotify that exists entirely on the cloud) —> Create a synergy between digital and physical shops. Ubiquity is the main objective. Access: - Communicate at point-of-purchase - Always-on connectivity - On demand brands Ex: Tesco virtually created a supermarket at the bus stop —QR code (way of permitting time-saving). 2. ENGAGE STRATEGY—> BECOME A SOURCE OF VALUED CONTENT: engage clients, sharing more contents. In the era of social, advertisement must be transformed and businesses must expand their approach beyond interruption advertisement — messages that customers see only because they piggyback on or interrupt content that customers are genuinely interested in. Business need to adopt a diﬀerent mindset and learn to create their own content that is relevant enough for customers to seek it out, consume it, and even share it within their networks. At the same time, this content must add value to businesses by enhancing their customer relationships. How? - Product demos (demonstrate value proposition, involve celebrities - Storytelling (emotionally compelling stories linked to the product) - Utility (useful content at the right time) - Brands as publishers. —> The key to an engaged strategy is to think like a media company, focused every day on earning the attention of your audience. Engage: - A hub of information - Oﬀer utility - B2B game for lead generation Ex: Engaging strategy by l’Oreal —> Product demos ex. L’oreal with Zombie boy 3. CUSTOMISE STRATEGY —> MAKE YOUR OFFERING ADAPTABLE TO YOUR CUSTOMERS’ NEEDS: shape/oﬀer solution and services following the clients needs understanding the customer proﬁle —> The keys strategies are to identify the areas where customer’s needs and behaviour diverse and ﬁnding the right tools to either personalise on their behalf or empower them to personalise their own experience. How? - Recommendation Engines (micro-genres, behavioural data + tagging, impact is measured by how infrequently customers bother to use search functions) - Personalised interfaces (Lancome magic mirrors) - Personalised products and services (coca cola personalised cans with names, 3D printing makes it easy) - Personalised messages and contents (The most appropriate content for each customer, Thumbs up or down → Invite readers to indicate interests) Customise: - E-tail that is tailored just to you - Personalise your products Ex: Netﬂix, Feedspot today Page 8 of 39 4. CONNECT STRATEGY —> BECOME A PART OF YOUR CUSTOMERS’ CONVERSATIONS: companies is not an autonomous entity but it is also a network able to connect people, clients, other companies —> Company must be able to demonstrate their capability to solve problems and reply to consumers. They are expected to be present, responsive and active in social media conversations (social listening, customer services; joining the conversation, asking for ideas and content, hosting a community). How? - Social listening (insights from customer conversations) - Social customer service (social media as channel for support services in addition to call centres, successful support to impress networks rather than just one customer) - Joining the conversation (contributing to social groups of interest trough fb or yt) - Asking for ideas and content (suggestions for product features) - Hosting a community Connect: - Join the conversation - Provide a forum (for customer buzz) - Ask for (new product) ideas Ex: IKEA launched the “co-create ikea’’ where they asked for ideas in order to encourage customers to develop new products. This is a way of paying attention to customers that have the perception of being at the centre of the company. 5. COLLABORATE STRATEGY —> INVITE YOUR CUSTOMERS TO HELP BUILD YOUR ENTERPRISE: clients want to collaborate, exchanging comments, feedbacks, judgments…—> Mass collaboration happen with careful attention to creating the right context and the right motivations for participants to take action and to feel they are being fairly treated. How? - Passive contribution (Waze collection of traﬃc conditions, Duolinguo use homework assignments to power its web translation tools) - Active contribution (CNN’s iReport allows anyone to contribute video, photos, etc) - Crowdfunding - Open competitions (ﬁnd the best answer to a solution) - Collaborative platforms (don’t try to deﬁne what the next corp of projects should be, but focus on providing a structure on which others can build). Collaborate: - Tap into open innovation - Make your business an open platform Ex: Wikipedia – encyclopaedia where everyone can contribute with its own knowledge. Ex: Lay’s – launched a contest to create the best ﬂavour of chips. Ex: PepsiCo — Crowdsourcing —> suggestion for chips —> Customer in digital net likes to interact and contribute to shape the brand Customer network strategy can achieve many goals: brand building, product trial, customer service, market entry, website sales conversion, service diﬀerentiation, product innovation, business development, lead generation. Of course, this strategy execution requires a variety of skills, both traditional (marketing, IT, communication, innovation, HR department, customer service) and new (ability of managing social media, new media production, open innovation process, data analysis, user experience design, services design, design thinking). All this strategy help involve and retain clients. Nowadays, what makes the diﬀerence in interconnected space is customer ‘experience’. EXPERIENCE makes the diﬀerence, competitive advantage can be brought by the type of experience that we deliver to our customers User Experience - UX: ensures a good experience in terms of app/website (mainly based on design) —> What makes the diﬀerence: usability, information architecture, interaction design, visual design, content strategy, user research. Customer Experience – CX: ensures a good experience at every touch point of service. Thus UX is part of CX. —> What makes the diﬀerence: customer service, advertising, brand reputation, sales process, pricing fairness, product delivery, UX. Customers, competition, data , Innovation, value are the ﬁve domains. Experience is something new. The challenges in this, are security and data privacy. Customers seek value in exchange for their data. Company values can make (or break) customer relationships. Customer perception is one of the most valuable aspects of a company. Managing that perception in all its forms should be a top priority and is the reusability of every single person in the organization. The concept of customer experience in the creation of competitive advantage is putting customers ﬁrst and managing their journeys. It simply deﬁnes how customers perceive their interactions with the company. Page 9 of 39 CUSTOMER NETWORK STRATEGY GENERATOR — Framework on how to deﬁne a digital strategy I. OBJECTIVE SETTING—> what I would like to achieve in terms of quality (customer satisfaction, number of customers…) or in terms of scope, proﬁt, costs improvement o, innovation… direct objective aspects speciﬁcally the company or higher order objective linked to a vision. II. CUSTOMER SELECTION AND FOCUSING—> which are the clients, try to deﬁne a clear proﬁle of them and segment the markets. After this deﬁne the value proposition, how to satisfy clients and understand the competition and the competitive advantage. III. STRATEGY SELECTION—> access, engage, customise, connect, collaborate IV. CONCEPT GENERATION—> design the concept in terms of products or services. A concept is a speciﬁc concrete idea for a product, service, communication experience or interaction, that the company designs for the client. V. DEFINE IMPACT—> the level of customers involvement and how to measure it. MARKETING —> FUNNEL It plays a key role in customers engagement. The funnel of marketing represents the way through which a company captures the client from a simple interest to the brand of the company to the purchase of the producer. It is important to follow this process to reach a real transaction—> shift from a paradigm of individual customers to one of customer networks. The “Funnel” evolution in a communication network scenarios 1. Awareness —> NEW: Search results, then, including content on non-traditional media like blogs, are now critical in the ﬁrst stage of the funnel where awareness is created. OLD: TV, radio, out-of-door. 2. Consideration —> NEW: As customers actively consider a purchase, they increasingly take an active role in researching it online and product reviews by strangers are among the most trusted sources of product information. OLD: Direct mail, brochure 3. Preference —> NEW: Before making a choice of a speciﬁc brand, customers often turn to their friends online as well. Brand attachments are increasingly formed, and shared, in social media platforms like YouTube, Facebook and Twitter. Local search (whether via Google, or Yelp or Urbanspoon) is inﬂuential too, as customers seek not just what is desirable, but what is nearest by. OLD: Product test, comparison 4. Action —> NEW: When purchase does happen, it may not just be in a store, but done online via PC, smartphone or tablet (as e-tailers rush to create ever more enticing catalog apps for the iPad and others). Purchase may also be driven by social action, thanks to social discount services like Groupon. OLD: In-store purchase. 5. Loyalty —> NEW: “friending” (FB, Twitter, email, customised up-selling)…Once a customer is won, social media allows far more options than just loyalty cards for keeping in touchwith them and driving repeat purchase. Today’s customer relationship management (CRM) spans database-driven emails, Facebook fans, Twitter followers, and private online communities for premium customers. Digital media also allow for much more customised interactions, communications, and oﬀers to drive add-on selling and loyalty. OLD: Reward points. 6. Sixth stage … “The Advocacy” —> biggest change to marketing funnel —> NEW: Today, the most ardent and engaged of your customers not only make repeat purchases (loyalty), they take on the role of brand advocates and spread their own positive messages and testimony about your business online. This advocacy, in turn, feeds back into the customer network eﬀects from the very top down through each stage of the funnel—showing up in search results, product reviews, Facebook “likes,” links , retweets, and social buzz. NO OLD - EXPERIENCE —> exceed customer expectations - LOYALTY —> Incentives customers to return often - ADVOCACY —> Customers promote brand to friends/family (Example of advocacy on social net —> reviews on trip advisory) —> “If you make customers unhappy in the physical world, they might each tell 6 friends. If you make customers unhappy on the Internet, they can each tell 6,000 friends” — Jeﬀ Bezos Three stages of digital marketing metrics —> All the work done by the company in terms of strategy must be measured: 1. Activity metrics, 2. Engagement metrics, 3. Business metrics. Changes in Strategic Assumptions from the Analog to the Digital Age FROM TO CUSTOMER - customer as a mass market - Customer as dynamic network - Economies of scale - Economies of (customer) value - Communications are broadcast - Communications are two-way to customers - Customers are the key - Firm is the key inﬂuencer inﬂuencers - Marketing to persuade purchase - Marketing to inspire purchase, - one—way value ﬂow loyalty, advocacy - Reciprocal value ﬂows Page 10 of 39 LESSON 5 — BUILD PLATFORMS, NOT JUST PRODUCTS The diﬀerence btw Digitization, Digitalization and Digital Transformation - Digitization: the conversion of products to digital formats and the resulting changes, e.g., on workﬂows, communication or interlinks of organizational units. —> from internet of content — distribution/access (yt) to internet of service — participation/trade (amazon), to internet of people — collaboration/share (fb), to internet of things — integration/control (ﬁtbit, Uber). - Digitalization: the innovation of business models and processes that open up digital opportunities - Digital transformation: the fundamental change of economies, institutions and societies caused by comprehensive application of digital technologies and disruptive digital business models. Technology Adaption (mobile phone — ubiquity) Increases Consumer Inﬂuence which demand more tailored experience “Disruptive technologies could change the fundamentals of our business” We see business models changing as a result of the creative use of new technologies. We see that in this world things are changing because of this ﬂexible technology. We learned that the cloud and the use of the cloud oﬀers this type of ﬂexibility. Three main fundamental changes due to technologies: 1. Fragmentation of traditional value chains: New technologies create more transparent value chains that are easier to decompose functionally. This more ﬂexible and simple value chain allows for more collaboration among the functions. 2. Convergence of Traditional Industries: new competitors are driving industry convergence, it feels like boundaries btw industries are blurring (ex. Philips – with some wearable devices it provides healthcare assistance – convergence btw tech and healthcare industries). 3. Emergence of new Ecosystems: New types of ecosystems emerge, displacing traditional industries and underpin evolution of seamless sophisticated customer experiences. Five trends that are upsetting the industry scenario 1. Increasing interconnectivity 2. Industry convergence 3. Merging markets (from geo point of view, ex. India – from other point of view ex. platform economy) 4. Empowered end users 5. 3D printing (is disrupting manufacturing) New Permutations Emerging out of “old” industrie - Disruptors —> new disruptors own NO ASSETS!! Uber: The world’s largest transportation company —> owns no vehicles Facebook: The worlds biggest media company —> creates no content Alibaba.com: The worlds largest retailer —> has no inventory. Airbnb: The worlds largest accommodation provider —> owns no real estate Xiaomi: The worlds fastest growing smartphone maker —> owns no retail stores The disruptors are todays competitors. They are disruptors as they are relatively new and thanks to the digital leverage these companies created a new business model and, without owning any asset, were able to disrupt the market. NB apple is not a disruptor company —> xiaomi is NB “disruptor’’ companies have in common the fact of not possessing assets or / use a platform Alphabet —> Alphabet is a group that works as a multitude of companies combined without physically owning any assets. Competition with platforms —> COOPETITION (competition + cooperation) Competition without borders. Digitalization is breaking down traditional ideologies. In the digital age, the boundaries between industries are blurring, and so is the distinction between partners and competitors. Every relationship between ﬁrms today is a constantly shifting mix of competition and cooperation. If we work in an open platform and with collaborative technology it is hard to distinguish competitors. Companies therefore decide to work with competitors rather than against to better understand the markets and their customers. Page 11 of 39 PLATFORMS The core role of a platform is comparable to an orchestrator. Bringing diﬀerent stakeholders together to allow the exchange of values. —> A business that operates a physical or virtual place to help town or more diﬀerent groups to ﬁnd, co-create, interact with each other and exchange value. In a platform there is not a single point of view, there is a type of peer to peer relationship because each entity and partner receives value. DIFFERENCE BTW LINEAR BUSINESS AND PLATFORM BUSINESS - A linear business generally sells products to a consumer and owns one side of the transaction. It has a one way direction and the products have inherent value and so the value comes from the direct use of the product. —> I deliver value from my use of a product - A platform business facilitates a transaction between multiple parties. It owns infrastructure that facilitates these transactions and platforms add network value and so the value comes from the network and other users. —> I deliver value from other people use of the platform The platform stakeholders - Consumers: Consuming and utilising the core value from the platform ecosystem. This can transform into the role of a prosumer when acting as consumer and producer at the same time. An example of this is Facebook as it delivers content that they receive from users. - Producers: Provide the core value to the platform ecosystem, looking to enlarge their customer base and lowering the eﬀorts for marketing. For instance Airbnb hosts provide the house service, UBER, Youtube… - Partners: Are additional service providers looking for a better and broader market access. The biggest diﬀerence compared to the producers are that they are only indirectly involved into the exchange of the core values. Example: WordPress them developers Salesforce Forge developers, Payment providers, Advertisers - Owner: Owns the vision of the platform and its ecosystem. They are responsible to lower the friction of the core platform processes and enhance the experiences of the platform for all stakeholders. Example: Apple as the app-store owner; Google as the Android owner. Deﬁnitions vary, but in general platforms are: - Software-based digital environments with open infrastructures - Orchestrators of ecosystems extending across sectors without borders - Harnessers of network eﬀects - Matchmakers linking people, organisations, and resources - Reducers of marginal costs to near zero - Foundations for combinatorial innovation Besides huge market caps, Alibaba, Alphabet (Google), Amazon, Apple, Facebook, Microsoft, and Tencent all have another thing in common, heavily populated platform business models. What deﬁnes a Platform? A platform is a business that creates value by facilitating direct interactions between two or more distinct types of customers. The Rise of Platform Businesses Platforms represent a fundamental shift in how businesses relate to each other—from linear to more networked business models. Platform businesses can often be very light in assets but generate large revenues. Instead of building features and seeking to get customers to use their own products, they build ecosystems by getting customers to interact with each other. Retail: Taobao, eBay, Amazon Marketplace Media: YouTube, forbes.com Advertising: Google, Baidu, Craigslist Finance: PayPal, Kickstarter, Alipay Gaming: Xbox, PlayStation Mobile computing: iOS, Android, Xiaomi Business software: SAP, Salesforce Home appliances: Philips, Nest Hospitality: Airbnb,TripAdvisor Transportation: Uber, Didi Kuaidi Education: Coursera, Udemy Recruiting and job search: LinkedIn, Glassdoor Freelance work: Upwork, Amazon Mechanical Turk Philanthropy: Kiva, DonorsChoose Page 12 of 39 Properties of Platforms - Distinct type of customers: For example, buyer and sellers. Skype, for instance, is not a platform since the customers are of the same type. - Direct interaction: In a platform such as Airbnb or eBay, the two parties are free to create their own proﬁles, set and negotiate pricing, and decide how they want to present their services or products. This is a critical distinction between a platform and a reseller or sales channel. - Facilitating: The interactions takes place and are facilitated by the platform business. Four broad types of Platform Businesses Exchanges: they bring together two distinct group of customers for a direct value exchange —> product (ebay)/ service market place (Airbnb/Uber) Transaction Systems: they act as an intermediary between diﬀerent parties to facilitate payments and ﬁnancial transactions. To succeed (e.g. PayPal or Apple Pay), these platform must get suﬃcient numbers on board from each party. —> bitcoin and digital payment systems Advertised-supported media: as the platform attracts more people, its value to advertisers increases. The advertisers, in turn, provide value to the audience by reducing or eliminating the cost of content for them. —> social networks and websites with adds Hardware/software standards: they provide a uniform standard for the design of subsequent products to enable their interoperability and beneﬁt the ultimate consumer. —> video gam consoles, mobile operating systems Network Eﬀects - Direct Network Eﬀects (Same-side) —> more users and more value - Indirect Network Eﬀects (Cross-side) —> 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. For example, the more Visa cardholders there are, the more attractive is for a merchant to accept Visa. NB: Indirect network eﬀects are not always reciprocal: In advertising-supported media, the indirect network eﬀects usually run only one way, as the number of readers increases for a newspaper, its value to advertisers increases as well, but increasing the number of ads in each issue does not directly increase the value for readers. How Digital Impacts Platforms - Four Key Elements - Frictionless acquisition: The process of acquiring new customers is frictionless thanks to the Web, APIs, SDKs, and so on. - Scalable growth: Cloud computing allows any size business to rapidly scale the size of its platform as fast as it can acquire new customers. - On-demand access and speed: Mobile computing means that every platform now can be accessible to all of its customers any time. - Trust: The ability to authenticate customers through their Facebook, Google, Twitter, or Linked-in identities make it much easier for even a small start-up to use a veriﬁcation system for new customers on its platform. Platforms Against Each Other Platforms don’t compete just with traditional businesses (Uber vs. a traditional car service). They also compete against other platforms. They attempt to diﬀerentiate themselves in the following categories: - Network-added value: more participants (network eﬀects), Quality of goods and services from participants, Data shared by participants. - Platform-added value: Unique features and beneﬁts, Free content - Open standards: Web or app interfaces, SDKs and APIs, Platform control points - Interaction tools: Targeting and matchmaking tools, Transaction enablers - Trust enablers: Identiﬁcation systems, Reputation systems, Financial safeguards, Noncompetitive assurances The Platform Business Model Map The Model Map to answer these important questions: Whom do you need to bring on board to make your platform work? How will you monetise? Who are your most important customers? (These are likely both the primary payer and the linchpin.) Is your business model in balance? Does each party receive enough value to attract its participation? Does each party contribute enough value to justify its inclusion? Analyzing another ﬁrm’s platform will help you to answer these important questions: Who are the platform’s key customers? What is the role, or value contribution, of each customer type? What draws each party to the platform How does the platform monetise? What value do you provide if you are a customer of the platform? How could you extract or leverage more value from the platform? Page 13 of 39 Platform oﬀers a fundamentally diﬀerent model for how businesses relate to each other — not a suppliers, distributors, and rivals — but as networked partners. The Co-opetition The term co-opetition was coined by Novell founder Ray Noorda and popularised by Adam Brandenburger and Barry Nalebuﬀ in a book of the same name. The right strategy for rival businesses is often a mix of competition and cooperation on diﬀerent fronts. The reason for all this cooperation is clear: the power of platforms. The power of Google in search, Amazon in media distribution, Facebook in social networks, and Apple and Android in mobile operating systems means that none of these businesses can aﬀord to cut oﬀ their competitors from their own customers. Fluid Industries and Asymmetric Competitors Companies can expect to compete with more and more businesses that do not look much like them. We can think of this as a shift from symmetric to asymmetric competitors: - Symmetric competitors —> oﬀer similar value proposition to customers ex. BMW and Mercedes - Asymmetric competitors —> are quite diﬀerent and oﬀer similar value preposition to customers but their business models are not the same ex. BMW and Uber Ex: If HBO’s symmetric competitors are Showtime and AMC (oﬀering programs to consumers through the same cable bundles), then its asymmetric competitors would include Hulu and Netﬂix, which provide viewing options and original content through digital devices and outside of the cable intermediary. Disintermediation or Intermediation ? Disintermediation This disruption and reconﬁguration of business relationships is mostly talked about in terms of disintermediation — the removal of an intermediary or middleman from a series of business transactions. Newspapers were disinter-mediated by classiﬁed websites like Craigslist or monster.com. Retail bookstore chains like Barnes & Noble and Borders Books were disinter-mediated by the arrival of Amazon.com, which for the ﬁrst time oﬀered publishers another path by which to sell books to consumers (Borders eventually ﬁled for bankruptcy). In these cases, a new, digital-ﬁrst challenger arrived to act as intermediary, letting the supplier sidestep its traditional channel for reaching customers. Newer insurance companies, such as Geico, have entered the market that are selling directly to consumers online. Allstate Insurance has maintained its insurance agents while at the same time acquiring Esurance, which sells directly to consumers like Geico does. Allstate is, in essence, maintaining and disintermediating its sales partners at the same time. Intermediation when a platform builds such a large customer base and becomes such a valuable interface to customers that other businesses cannot aﬀord to skip the opportunity to reach customers through that platform. The beneﬁt to the new intermediary is that it inevitably extracts a toll or platform beneﬁt, often capturing a great deal of value. Facebook Apple Pay Google The competitive Value Train It focuses on competition by looking at the leverage between the companies in a supply chain and their potential substitutes and by mapping how a particular product or service reaches a particular group of customer The overriding competitive goal is to gain more leverage in the value train Principles to Maintain the Focus on Value to Client and Proﬁt - Power to the unique value creator: Unique value can come from a variety of sources: intellectual property, brand equity, network eﬀects, anything that creates additional value for the ﬁnal customer in the value train. - Power to the ends: Power in value trains is moving to the ends, where there is less opportunity to be skipped over by business partners. In a value train, the ﬁrst creator and the ﬁnal distributor to the end consumer each have additional inﬂuence by virtue of their positions. By contrast, the parties in the middle tend to be boxed in and loose inﬂuence relative to the creators and end distributors. —> This power imbalance was described in manufacturing by Acer founder Stan Shih’s “smiling curve”: proﬁts are inevitably captured by the companies that originate key patents and those that brand and distribute products, but the fabricators and manufacturers in between them have low leverage and proﬁtability. Almost all digital platforms—whether Airbnb, Facebook, Google, or Apple Pay—seek to secure a position as the ﬁnal interface to the end consumer because of the competitive leverage that it confers. Page 14 of 39 Digital Business Model and Platform Economy Imbalance of platform economy —> more in USA, then China, some in Europe, none in Africa The business model of Google and Facebook in a nutshell: Extract, Customised, Data Platformization or Platform Thinking Platformization is the strategy used by the companies that grew the most over the last decade. Platform-based businesses have brought disruption and opportunities in almost every segment. Every company exists within a business ecosystem, composed of known or unknown agents, such as customers, partners, suppliers, and regulators. Platform thinking focuses on the value of the ecosystem, seeking to facilitate and expand integration, orchestrate resources, compose services, and encourage co-creation among the diﬀerent agents. It changes the focus of the business strategy: To provide resources for the orchestration of resources; From internal optimisation to external interaction; From the client’s value to the value of the ecosystem as a whole. The Digital Platform Canvas is based on multiple sides Rethinking Competition From To - Competition within deﬁned industries - Competition across ﬂuid industries - Clear distinctions between partners and rivals - Blurried distinctions between partner and rivals - Competition is a zero-sum game - Competitors cooperate in a key areas - Key assets are held inside the ﬁrm - Key assets reside in outside networks - Products with unique features and beneﬁts - Platforms with partners who exchange value - A few dominant competitors per category - Winner takes all due to the network eﬀect Airbnb: a platform that disrupted not only the accommodation segment but also the hospitality industry Airbnb is an online community marketplace that connects people looking to rent their homes with people who are looking for accommodation —> it oﬀers peer-to-peer accommodations thanks to the explotation of web 2.0. They were one of the ﬁrst Unicorns. —> They made a growth hack trough Craiglist (Platform Integration): Airbnb knew through both market research and their own experience that Craigslist was the place where people who wanted something other than the standard hotel experience looked for listings— in other words, Airbnb’s target market. In order to tap into this market, Airbnb oﬀered users who listed properties on Airbnb the opportunity to post them to Craigslist as well— despite the fact that there was no sanctioned way from Craigslist to do so (Craigslist had one thing that Airbnb did not —a massive user base). Airbnb have built a hugely successful business oﬀ the back of understanding what their customers want/need, and then providing products that match them. - By positioning themselves as a way to experience travel, rather than as an accommodation booking engine, they were able to connect with a segment of the travel market who felt their options were fairly limited. - By oﬀering a guarantee on insurance they took away the biggest fear that their hosts (and potential hosts) have, ensuring that they feel comfortable renting out their property. Once they had built a solid base of customers and reputation, they expanded their oﬀering. 1. They created an up-sell opportunity by providing a higher tier property that had been manually vetted to ensure the highest possible quality. 2. They began oﬀering their customers ways to speciﬁcally experience life as a local, as well as sleep like one. Key strategies of Airbnb —> ELIMINATE: big name hotels: RAISE: visual design, reviews of other guests, variety of room types, social network inﬂuence; REDUCE: price, quantity of services, safety; CREATE: homestay accommodation, interaction btw hosts and guests, connect with local culture, sense of belonging. Page 15 of 39 LESSON 6 — New Paradigms in the Digital Economy Collaborative Consumption Collaborative consumption can be split in three types based on the problem and the solution. Product Service Systems The Problem: Half of US households own power drills, but most of them are used for only 6 to 13 minutes during their lifetime. The Solution: zilok.com oﬀers peer-to-peer daily rental of tools, camcorders, and other goods. Redistribution Markets The Problem: Americans discard 7 million tons of cardboard annually The Solution: usedcardboardboxes.com rescues and resells boxes to movers. Collaborative Lifestyle The Problem: Millions of houses and spare rooms around the world are sitting empty and have idling capacity The Solution: airbnb.com allows anyone from private residents to commercial property owners to rent out their extra space. The 4 Principles of Collaborative Consumption 1) A critical mass of users 2) Idling or excess capacity of used goods 3) Belief in the common good 4) Social trust The fundamental diﬀerence is that the new collaborative consumption concept born during the digital age makes use of a digital platforms aids such collaboration —> Global community. NOwners - sharing This concept refers to mobile and connected people (dot.com generation)—> These people decide to access an asset but do not actually own it. —> Participation is rather a choice than a necessity. “Homo cooperans” and not “Homo economicus”; they cooperate for their emancipation, autonomy, social justice, knowledge sharing and open production. Sharing Economy Model: economic model deﬁned as a peer-to-peer (P2P) based activity of acquiring, providing, or sharing access to goods and services that is often facilitated by a community-based on-line platform. The model is a paradigm shift. Before you buy and would then own a certain asset but ﬁnancial constraints create more incentives for lending or sharing. Now you buy and own but only for a limited amount of time. Some challenges include increasing consumer conﬁdence, building a database of consumers and suppliers, distinguishing the P2P business, and reducing transaction costs. Sharing Belk (2007) deﬁnition of sharing: Sharing is the voluntary lending, pooling and allocation of resources, and authorised use of public property, but not contractual renting, leasing, or unauthorised use of property by theft or trespass. The sharing economy is not true sharing because it illustrates aspects of: Presence of proﬁt motives Absence of feelings of community Expectations of reciprocity Sharing is a phenomenon as old as humankind, while collaborative consumption and the sharing economy are phenomena born of the Internet age. (but also before digital) The pillars and the paradigms of the sharing economy are: 1. Access: Rental, outsourcing, or leasing services oﬀer the beneﬁts of ownership, but without ownership. —> The paradigm shift from ownership and acquisition models to an access-based consumption Firms oﬀer access-based services to customers (B2C market mediated exchanges) Product utilisation is increased (customers sequentially accessing the same product over its lifetime) Temporal solutions to customer needs (cheap, on-demand, self-service, eco-friendly alternatives without long-term commitment). For instance, Zip-car oﬀers access to a ﬂeet of electric cars; members can reserve a conveniently located car via an app which they return to the same location after rental duration. 2. Peer-to-Peer/Consumer-to-Consumer: Technology has enabled people to get what they need form each other, rather than from traditional companies selling goods and services. —> The paradigm is the shift from B2C to P2P/C2C. Online platforms enable private individuals to organize P2P exchanges of their under-utilised resources, thereby disrupting industry incumbents. For instance, Airbnb hosts oﬀer accommodation rental to guests via the website. Page 16 of 39 Platform Cooperativisim — Who are the “produSER”? Sharing platforms that facilitate P2P service exchange should adopt a cooperative business structure with a multi-stakeholder model that could include providers, customers, founders, investors, geographic communities, and nature. “Prod ‘user’ — owned platforms” are platforms where users are the producers. The rationale is that most P2P platforms rely on the supply side of the network for their revenue stream, so these users/providers should own and control the platforms. PROS OF SHARING ECONOMY - Reduce the negative environmental impacts by decreasing the production of goods needed - Reduce the industrial pollution - Community strengthening - Low cost of borrowing and recycling products - Access to goods to people who can’t aﬀord to buy - Increase independence, ﬂexibility, self-reliance by decentralisation - Participatory democracy will increase - Sustainable consumption accelerated and production patterns in cities around the globe - Increase the quality of service by rating systems - It lessens the number of unemployed Americans and oﬀers a platform for sellers - It is a form of recycling, reuse and repurposes - It empowers citizens and makes them more productive - It also opens new business ideas CONS OF SHARING ECONOMY - it is unfair to people who earn through this system and takes away proﬁt from businesses - It results in the loss of government revenues - It can lead to fraud and scams - It is simply a new form of capitalism A collaborative economy is an economy that is built on decentralized networks and marketplaces that unlock the value of underused assets by matching needs and haves, in ways that bypass traditional middlemen and disrupt centralized institutions. Collaborative Consumption: Maximum assets utilisation through models of redistribution and shared access → Sharing economy Collaborative Production: Design, production, and distribution of goods through collaborative networks Collaborative Finance: P2P banking and crowd-driven investment models that decentralise ﬁnance Collaborative Education: Open education and person-to-person learning models that democratise education. Sharing Economy Platform Types Platform Economy Only platforms which bring together vast numbers of providers and consumers oﬀer massive and increasing returns on investment. The providers, from Uber drivers and hotel chains to Spotify artist and resellers, risk getting squeezed. They face massive competition on the platforms, pay a proportion of their revenue to the platform owners and are obliged to give access to their data. —> Whoever controls the platform in the industry will dominate the industry. There is a high risk that Ecosystem Giants win the Consumer Experience Battle... because they own the Customer relationship. Recap sharing economy: Car sharing (enjoy, sharing go) do not represent a REAL sharing economy since they ask a payment for the access to the asset. - Collaborative consumption is based on use and sharing of assets without any payment. - New Sharing economy is another business model, based on payment. They gather money based on the asset and not on the ownership. It leverages on a platform. NEW SHARING ECONOMY (bc existed also before but now with digitalisation is diﬀerent bc of platform) 1. Based on the use of a digital platform 2. Behind the platform and usage we have an economic and ﬁnancial business model 3. The core is based on access and not owning the asset (thanks to the platform) Page 17 of 39 LESSON 7 — Turn DATA into ASSET THE WEATHER COMPANY Ex: IBM bought a weather company, weather impacts every business (aviation, media and entertainment, retail, insurance, transportation, agriculture, Oil and Gas, utilities, ﬁnancial services…). The weather company is the only company that completely embraced the complexity of big data — processing more weather-based info than any other company. First company in the world that has a high level of accuracy of forecasting. It has 26B individual forecast, processes over 20TB every day and has 2.2B locations mapped. The weather is the secret to understanding how consumers feel and deep engagement has never been more elusive, especially between consumers and companies. Furthermore, peoples lifestyles changes a lot based on the weather. This thus impacts our daily habits and interactions. Weather oﬀers a unique opportunity because it predicts emotion and behaviour. It works to deliver the right message in terms of promotion and creativity in the right message at the right time in the right screen. —> If we are able to anticipate it as a company we can exploit it and take the right decisions about daily activities (Actionable intelligence —> Better outcomes —> Brighter decisions). TWC changed from a simple company to a big one which work with the big data that it creates and try to tailor experiences, in the meantime it work with brand advertisers. Companies must know their audience and how they physically and emotively react to changes in the weather. If we are able to understand customers and put in action more inputs, you help companies take more appropriate and precise decision. This is a matter of having more data and turning data into a value. This data can be turned into something usable in order to increase revenue and improve performance. DATA MONETARIZATION (create value) If able to understand customers (more data and info), companies can reach better outcomes and take the right decisions. MORE DATA and the ABILITY TO TURN DATA INTO VALUE, is something that can be used to increase its revenues and own performance. How TWC monetise data? - TWC’s data scientists work with major retailers to identify when they should predict a spike or slump in their sales so they can adjust their advertising spend (to commit more resources or to hold them back) as well as their merchandising. - The company also works directly with brand advertisers —in categories like allergy medication, ﬂeece jackets, and snow tires—to predict the best time for them to spend on ad placements. - With digital advertisements (inserted on websites or in apps like TWC’s own), brands now have the opportunity to adjust and target their message on the ﬂy, choosing which image to show speciﬁc viewers based on the weather where they are standing. - TWC is even using its data to create new products and services for industries like the insurance sector. For instance, it has built an app called Hailzone for insurers like State Farm and Travelers to oﬀer their auto insurance customers. Whenever a hailstorm is about to hit, Hailzone sends out a text message alert to those customers, warning them to move their cars inside. That saves a tremendous headache for the drivers and costly hail damage bills for the insurer. The crowdsourcing of data A community of 25.000 self-described “weather junkies” - Paying to subscribe to a service “weather underground” - Buying their own weather equipment - Sharing and discussing the ﬁndings with their followers - Uploading either measurements at their location every 2.5 sec —> Their input help the company greatly improve the quality of its own data sets. In fact, thanks to this, TWC has evolved from a media company (1980) that simply produces data as part of running its core operation to a company that is treating data as a source of innovation, new revenue and strategic advantage. —> Data is the new petroleum of our age, we are living in a data world where each of us can create them. (Companies can deﬁne our proﬁle and our behaviour) Where does the data come from? - Google gets over 3.5 billion searches daily - WhatsApp users exchange up to 65 billion messages daily. Some deﬁnitions of BIG DATA - Data of a very large size, typically to the extent that its manipulation and management present signiﬁcant logistical challenges. - The broad range of new and massive data types that have appeared over last decade or so. - Datasets whose size is beyond the ability of typical database software tools to capture, store, manage, and analyse. - A new attitude by businesses, non-proﬁts, government agencies, and individuals that combining data from multiple sources could lead to better decisions. Big data challenges—> they include capturing data, data storage, data analysis, search, sharing, transfer, visualisation, querying, information privacy and data source. Page 18 of 39 FIVE PRINCIPLES FOR DATA STRATEGY (fundamental to process the concept of big data) 1. Gather diverse data types—> serve diﬀerent purposes 2. Use data as predictive layer in decision making—> plan and optimise the use of our resources. - Operations data can be used in statistical modelling to plan for and optimize the use of your resources. Customer data can be used to predict which changes in your services or communications may yield improved results. - With detailed data from its MagicBands, Disney can make better-informed decisions on which merchandise to feature near diﬀerent rides and how to manage variable demand and foot traﬃc. 3. Apply data to new product innovation—> thanks to the data we can enlarge products or services portfolio - TWC’s Hailzone mobile app is a perfect case of a company 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 and not only what they say —> behavioural data - Behavioural data is anything that directly measures actions of your customers. It can include things like transactions, online searches (a powerful measure of your customers’ intentions), clickstream data (which pages they visited, where they clicked, and what they left in their shopping carts), and direct measures of engagement data (which articles in your newsletter they clicked to read). - Behavioural data is always the best customer data 5. Combine data across silos —> sharing the data beyond a speciﬁc function KEY DATA TYPES FOR BUSINESS STRATEGY BUSINESS PROCESS DATA —> examples: inventory and supply chain, sales, billing, HR —> utility: manage and optimise business operations, reduce, risks, provide external reporting PRODUCT OR SERVICE DATA—> examples: maids data, business data, wather data —> utility: deliver the core value proposition of the business’s product or service CUSTOMER DATA —> examples: purchases, behavioural and interactions, comments and reviews, demographic, survey responses —> utility: provide a complete picture of the customer and allow for more relevant and valuable interactions Big data —> Storage, accessibility, data processing —> cloud computing THREE MYTHS OF BIG DATA 1. The algorithm will ﬁgure it out—> making sense of big data still requires a lot of involvement by skilled human analysts. Biases can also exist in the algorithms used to look at the data, based on the assumptions of those who program them. 2. Correlation is all that matters—> it is critically important that managers understand the diﬀerence between simple correlation and causation, and know when this diﬀerence matters and when it doesn’t. 3. All the good data is big data —> data doesn’t always need to be big ( we can have unstructured data) powerful insights can be derived from the analysis and application of traditional, more structured data such as customer clickstream behaviour. The point is to generate strategy, sometimes it involves big data other time it doesn’t. COOKIE Def: information stored on a user’s computer by a web site so preferences are remembered on future requests. Information: Cookies are passed from a Web server through a Web browser to the user’s hard drive. This information is essential for many of the features taken for granted on the Web, such as shopping carts and personalised portals. Privacy advocates have raised concerns over the role of cookies in online advertisements. They fear that large companies could piece together information which could be used against individuals, especially if oﬄine information is merged with online information. Cookies are not universally used. Estimates vary, but some percentage of the Web population browses with cookies turned oﬀ. Cookies can be blocked completely via the browser, or selectively via a cookie manager. Where to ﬁnd the data you need (Big Data) - Customer Value data exchange 1. One of the best ways to generate additional data is to invite customers to contribute data as part of interacting with your business or in direct exchange for value you oﬀer them. Ex: Waze 2. Four key factors: the type of value or rewards oﬀered, the presence of a trusted relationship with the business, the type of data being requested, and the industry of the business. - Lead user participation Lead users are your most active, avid, or involved customers —> By engaging lead users, brands can solicit input and feedback from much more selective and important communities. - Supply chain partners - Public data sets «Open data» policy for Government - Purchase or exchange agreements 1. Anonymised data lets a company learn things like the conversion rate of oﬀers (the portion of customers accepting the oﬀer sent). Page 19 of 39 Process of turning data into assets / business value 1. INSIGHTS: Revealing the Invisible A. Customer psychology (How are my brands or products perceived in the marketplace? What motivates and inﬂuences customer decisions? Can I predict and measure customer word of mouth?). B. Customer behaviour (How are buying habits shifting? How are customers using my product? Where is fraud or abuse taking place?). C. Impact of speciﬁc actions on customers’ psychology and behaviour (What is the result of my change in messaging, marketing spending, product mix, or distribution channels?). 2. TARGETING: Narrowing the Field A. Today, advanced segmentation schemes can be based on much more diverse customer data and can produce dozens or even hundreds of micro-categories. B. How a customer is targeted can change in real time as well, as they are assigned to one segment or another based on behavioural data such as which e-mails they clicked on, rewards they redeemed, or content they shared. C. Ideally, customer lifetime value should be included as one metric for targeting customers based on their long- term value to the business. 3. PERSONALIZATION: Tailoring to Fit A. Once businesses are targeting micro-segments of customers, the next opportunity is to treat them each diﬀerently, in ways that are most relevant and valuable to them. 4. CONTEXT: Providing a Reference Frame A. How one customer’s actions or outcomes stack up against those of a broader population B. Putting data in context is at the heart of the “quantiﬁed self” movement—evidenced by customers’ rising interest in measuring their diet, exercise, heart rates, sleep patterns, and other biological markers.) DATA VALUE GENERATOR — A tool to manage the data 1 — Area of Impact and Key Performance Indicators —> what is your primary business objective? Deﬁne the area of your business you are seeking to impact or improve through a new data initiative. For example: develop better product recommendations, to improve outbound communications to existing customers, to improve the customer call center, or to develop a new app to drive customer engagement. What goals are you hoping to support? In addition to broad goals, what are your established key performance indicators (KPIs) that are being used to measure performance?What are the highly measurable outcomes? 2 — Value Template Selection —> insight, targeting, personalisation, context Identify one or more that may be most relevant to your objectives —> Insight; Targeting; Personalisation; Context Whereas targeting eﬀorts are sometimes focused only on identifying the right audience, eﬀective personalisation requires that you have some system of targeted segmenting in place. 3 — Concept Generation —> what are your speciﬁc ideas for putting the data to work in your business? Ideate speciﬁc ways that data could deliver more value to your customers and your business. Concept generation should aim for this level of concrete application so you can really deﬁne the possible data strategy. At the concept generation stage, you want to produce speciﬁc ideas for putting the data to work in your business. 4 — Data Audit —> current data, need gaps, new sources Assemble the required data for the selected strategy. That starts with surveying what data you already have that could be used to enable or power your strategy. You may have a large, established data set based on your core product or service (like TWC). Next you should identify what data you still need: - more records or rows - more types of data - more historical data 5 — Execution Plan —> technical solution, business process, proof of concept You must put that strategy to use in the work of your organization. What technical issues need to be worked out? This may include data warehousing, latency, or how quickly the data needs to be updated. What business processes will need to change? How can you test out your strategy and build internal support? Turn data into value: datiﬁcation of the world —> four v of data —> analysing data —> value BIG DATA USE CASES 1. Acquire, grow and retain consumers —> personalisation, proﬁtability, retentions and acquisition 2. Optimise operations and reduce fraud —> global operations, infrastructure and asset eﬃciency, fraud, security 3. Maximise insights and improve economics —> harness and analyse all data, gore all data, optimise analytics workloads, spectrum or analytics 4. Transform business performance —> ﬁnancial and operational performance, ﬁnancial risk, operational risk and compliance 5. Create new business models —> data driven products and services, non-traditional partnership, mass experimentation Page 20 of 39 Big data can have a substantial impact along all key business levers 1. Service operations —> call/visit reduction is about 20% 2. Retention / cross up selling —> cross selling increased by 10-20% while churn decreased. 3. Customer experience —> journeys are 30-40% more predictive of CE than any touch point. This reduced costs. CHALLENGES 1) Organization and processes: The company must be up to date and it cannot be linked to “old-school” ideologies as these create barriers. 2) Data skills: It is impossible with a traditional set of skills to approach a Big Data strategy 3) Bridging Silos: This is strongly linked to the organizational structure of the company. 4) Cybersecurity and Privacy: If a company increases data and stores this online, they need to protect this data. 5) Sharing data with Partners: Companies are now an ecosystem and work together with many partners. 6) Consumer Attitudes: How much can consumer attitude help the company in terms of ability to require more data and consumers to be open to such data? Most companies face challenges with how best extract real value out of Big Data: 1) Harnessing Bid Data: challenges are massive volumes, multiple sources and systems, data quality, knowing which data will drive impact. 2) Driving to actionable insights rapidly: challenges are staying focused on priority busienss opportunity, ‘’analysis paralysis’’. 3) Real-time execution: long wait and analytical eﬀort is required, driving change across organizational silos and building the right capabilities infrastructure are challenges. NETFLIX EXAMPLE —> Clear example of big data processor in an invisible way but based on a clear interaction with the client. Simple but winning business model, simple formula on demand use based on a basic, standard or premium subscription. It created a customer based company through which it can better retain customer information DATA ECONOMY = DIGITAL ECONOMY —> Focus on the individual, data centricity, hybrid service oﬀerings, converging/industries ecosystems, cloud platforms, new business models. MCKinsey’s core beliefs on Big Data 1. Big data is not about technology, but about the real time use of data in the front line execution. Data without execution does not bring any value. 2. The most important success factor is the man-machine interface and the decisions made by humans based on analytic insights. 3. Any big data solution has to be “business ﬁrst”, hypothesis driven, rather than trying to gather all the data available. 4. No matter how incomplete your data is right now, you can nevertheless use it better to create business value through the use of big data tools, no “apollo” project is needed to get going. Rethinking Data Examples FROM TO Data is expensive to generate in firm Data is continuously generated everywhere Challenge of data is storing and managing it.. is turning it into valuable info Firms make only of structured data Unstructured data is increasingly usable and valuable Data is managed in operational silos Value of data is in connecting it across silos Data is a tool for optimizing processes Data is a key intangible asset for value creation - SCREENING paid for with ATTENTION - INTERACTING paid for with ACTION - SHARING paid for with REPUTATION - FLOWING paid for with DONATION - ACCESSING paid for with INFORMATION - GENERATING paid for with CONTENT CREATION “if you’re not paying for it, you’re not the customer, you’re the product being sold” Page 21 of 39 LESSON 8 — Adapting Value proposition on line Digital technology changes how companies connect and create value with the customers. Three value propositions of recorded music over the years - Riaa—> ﬁrst to oﬀer music - Napster—> oﬀered a peer to peer service for swapping MP3 music ﬁles over the internet with no payment to the copyright holders. It created the market in 1999, it is the disruptor - iTunes—> the ﬁrst mass market platform for legal digital music sales. Three routes to improve / change the value to the clients 1. Increase market share: Look for new customers with which can enjoy and use the same value proposition. (new customers) 2. Maintain market share, same number of customers but increase the opportunity of business within the same clients. Increase the wallet share. (new value prop) 3. Increase in both way, deeply into the clients organization. (new value prop and new customers) —> best condition given digitalisation. VALUE PROPOSITION—> broadly used by marketing and consulting companies. It is a concept that deﬁnes the beneﬁts received by a customer from a company’s oﬀering. (product diﬀerentiation…) A value proposition is a clear statement about the tangible results a customer will realise from using a company products or services. Delivering value requires understanding clients needs/issues. What is important is to deliver the message in terms of our audience understands. - Who do we work with - What do they want - What makes us uniquely diﬀerent What generated a distinctive value proposition —> 10 characteristics of a great value proposition 1. Is embedded in a great business model 2. Focuses on what matters most to the customers 3. Focuses on unresolved pains 4. Target few jobs, pains, and gains but extremest well 5. Goes beyond functional jobs and address emotional & social jobs 6. Align with how customers measure success 7. Focuses on jobs pains and gains that people will pay a lot of money for 8. Diﬀerentiate from competition 9. Outperform competition substantially on at least one dimension 10. It is diﬃcult to copy How value proposition can evolve: Coca Cola: The history of coca cola is very interesting because they have mainly based their success over the years on a secret formula that others can only imitate. This is a key diﬀerentiator. Over the years, coca cola has not only been a symbolic piece, but it has introduced over 500 brands. Now a day coca cola is producing 3500 products. This means that any way, over the years, it is perceived that clients always ask for something more and something diﬀerent. This gives a move both in the vertical and horizontal sense. It try’s to enlarge customer base by targeting also other people. McDonalds: Their value proposition was written by its founder Ken Croc → McDonalds stands for friendliness, cleanliness, consistency, ad convenience. The value prep is the convince, speed and the fact that you always know what you are going to get. Originally they only made burgers and other similar, unhealthy products, over time, to attract more clients they introduced healthier options and gourmet choices. METROPOLITAN MUSEUM OF ART EXAMPLE —> In order to survive on the market it has understood that the market has changed, a new capability that can contribute to spread its name across the world (digital approach). More and more visits every year. How they can retain the visitors of the website (30 mln). Reinvented itself with new, 3d, digital visits. Traditional and innovative value proportion through which they can target new market segments. FIVE CONCEPTS OF MARKET VALUE (pros and cons) 1. Product — leads to strategic myopia but ignores customer and value to them 2. Customer — helps identify whom to focus on but does not focus on the value 3. Use case — helps with better segmentation but obscures that customer may have multiple use cases 4. Job to be done — helps to identify non traditional competitors but lacks concrete speciﬁcs 5. Value proposition — helps assessing threats and ideate new innovation outside of existing products Page 22 of 39 HOW TO ASSESS AND ADAPT VALUE PROPOSITION —> VALUE PROPOSITION ROAD MAP About the market 1. Identify key customer types by value received—> segment the market 2. Deﬁne current value for each customers—> deﬁne value elements against overall proposition 3. Identify emerging threats —> everything that can create doubts about the value proposition (ex. New technologies, changing needs and competitors and substitutes) Deep analysis inside the company 4. Assess the strength of current value elements —> if any 5. Generate new potential value elements —> based on new tech, emotional/socio-cultural and business trends and unmet needs 6. Synthesise a new forward looking value proposition —> after understanding the clients and the values they are receiving right now them build on core elements, understand weak elements, create new elements which bring value (4-tiered elements, overall val prop and areas for innovation) Core elements-to build on Weakened elements to bolster Disrupted elects to deprioritise New element to create “The challenge though, is often not in ﬁnding the right costumers to listen to, but in keeping our ears open” —> This means that it is fundamental for a company to not only start by listening to the customer and understanding what they want, but to keep this going throughout the life of the company constantly changing and adapting on the basis of the customer’s needs. NB: DO I NEED TO READAPT OR REINVENT? It depends on the market, the clients, competition and potential threats. MULTISIDED VALUE PROPOSITION APPLE MULTISIDED VALUE PROPOSITION EXAMPLE Apples value proposition is based on three pillars that are interconnected: 1. THINK DIFFERENT —> This arose when Apple decided to attack competitor brands and to give the message that whoever has Apple devices, they will be diﬀerent and more in a niche than other customers that buy from all other brands. —> The ad itself was a response to IBM’s slogan: “Think. —> Apple was selling something else: A signal that if you were using Apple products, you were part of the cool kids. This is why every advertising agency had to have an Apple computer. It was a signal they were sending to their clients (we’re creatives and have cool ideas) as well as their employees (here’s a cool place for work). In many cases, it’s also interesting to deﬁne your audience by who you aren’t targeting. In the case of Apple, they weren’t interested in the laggards. At this time you would never see an Apple product in an investment bank or a law ﬁrm. These people stand for serious and old-fashion. IBM was perfect for them. 2. TECH THAT WORKS —> It was Apple’s adaption method. They decided to go beyond the style, design, and so on, but focused more on the heart of technology to create improved and higher quality products. Apple’s goal was to tell customers that Apple tech works, and that it works well. Their goal was to make customers understand that they were not only an aesthetic based tech brand, but that they also create high quality and high tech products. They gave life to the concept of the platform that allowed to synchronise all our devices. —> By choosing Apple, you chose less customisation. But what you were saying about yourself was that you didn’t care about the freedom to set up your phone or laptop. You just wanted something that worked. 3. YOUR PRIVACY IS SAFE WITH US —> (today) Finally Apple worked a lot to introduce the concept and idea of Privacy and Safety. So today, Apple’s most recent value proposition seemed to be geared towards privacy protection and being part of a safe ecosystem. AMAZON MULTISIDED VALUE PROPOSITION EXAMPLE A company like Amazon has multiple value propositions, as it serves several target customers in diﬀerent markets. With its mission “to be Earth’s most customer-centric company, where customers can ﬁnd and discover anything they might want to buy online and endeavors to oﬀer its customers the lowest possible prices,” Marketplace—> sell better sell more Kindle—> easy to read on the go Music and more—> more value proposition Prime—> anything you want, quickly delivered Page 23 of 39 Changes in strategic assumptions from the analog to the digital age. FROM TO Value proposition deﬁned by industry Value proposition deﬁned by changes in customer needs Execute your current value proposition Uncover the next opportunity for customer value Optimise your business model as long as possible Evolve before you must, to stay ahead of the curve Judge change by how it impact your current Judge change by how it could create your next business business Market success allows for complacency “only the paranoid survive” QUESTION Which is the ﬁrst step to develop a winning value proposition? - adapting to industry dynamics (is a traditional approach) - understanding customers needs —> right answer - observing competition moves (is not the ﬁrst step) RECAP FROM ALL PRECEDENTS LESSONS - New digital technologies are pushing and accelerating the companies transformation - Key technologies are mobile, cloud, social, data and analytics (called Nexus of Forces) and IoT - The digitation are shaping “a new savvy client” (client empowerment) - Disruptors “digital native companies” are the challengers to the incumbents - There is the need to anticipate the competitors, market and clients needs & wants - Product concept is now overcome: the platform economy is emerging - The battleground is becoming huge and it urges to look at adjacent markets - The industries boundaries are blurring - Company alone doesn’t survive they need to work into new ecosystem —> Enterprise needs to reinvent itself and core will be the ability to deﬁne a new business model able to exploit the digital capabilities Page 24 of 39 LESSON 9 — Business Models in digital economy Enterprise needs to reinvent itself and core will be the ability to deﬁne a new business model able to exploit the digital capabilities. Business mo

M&O in the Digital Economy PDF

Document Details

Tags

Related

Summary

Full Transcript

Upgrade to continue