Session 5 Differentiation Strategy - SKEMA Business School

Session 5 Differentiation strategies and competition in the sharing economy Digital Business Two-year Msc Course coordinator: Nabila BOUKEF Ph.D Associate Professor in information Systems and digital transformation...

Session 5 Differentiation strategies and competition in the sharing economy Digital Business Two-year Msc Course coordinator: Nabila BOUKEF Ph.D Associate Professor in information Systems and digital transformation SKEMA Business School Course schedule  Session 1: Rethinking strategy in the digital era  Session 2: Digital strategy formulation  Session 3: Strategy approaches and ambidexterity strategy  Session 4: Digital platforms strategies  Session 5: Differentiation strategies and competition in the sharing economy  Session 6:Digital strategy and Business process transformation  Session 7: Building digital capabilities and creating digital leadership  Session 8: Digital strategy execution in practice: Fostering innovation in the digital era Digital journey How should we 5- The disrupting effect of define our the platforms and the extent to which incumbent digital strategy companies should adapt given the new 4- To remain competitive, rules of the companies should think about their digital growth game? 3- There are different strategy approaches depending on the constraints of the environment 2- There are Different ways to create a competitive advantage with digital technologies 1- There are new rules of the game in the digital era Part 2 Why Drivers of digital transformation ? Analyzing the new rules of the games and opportunities enabled by the digital technologies Create a competitive Strategy approach Digital growth advantage Focus on Creating a What Creating a Adapting digital competitive strategy with sustainable platforms advantage with the constraints competitive strategie s ? digital technologies of the environment advantage Transform business with digital technologies How Transforming the processes ? Digital capabilities Digital leadership Investing in digital technologies Transforming the organization Managing the ecosystem Digital platforms strategies Network effect Session 4 Governanc e Differentiati on Session 5 Question addressed during this session  How do companies define their digital strategy given the new rules of the game? Focus on the specific case of the sharing economy. Session outline 1- Audi case study : Coping with the threat of the sharing mobility services 2- Differentiation strategies 3- Zimiride Case study: Graded assignment (10% of the total grade) 1- Audi case study : Coping with the threat of the sharing mobility services  Audi case study (Part 1) 1. Analyze the drivers of the digital transformation (Please refer to the D. Rogers framework and stick to the information provided in the text). (Session 1) 2. How did Audi create a competitive advantage (Pick one and explain: Enhance customer intimacy, Operational excellence, New Business model)? (Session 2) 3. What is the strategy approach of Audi? (please explain) How did the company ensure its digital growth? How did Audi achieve it (Pick one and explain: Integration, Separation, Ecosystem)? (Session 3) 4. Analyze how did Audi manage the risk of the sharing mobility platforms (Pick one and explain: Strengthen business as usual, Invest learn-act, Step-out and partner, Hybrid , Expand-and-compete)? (Session 4) 5. Fill the framework The drivers of digital transformation Drivers of the digital Details transformation Customers Customers have new expectations and new behaviors (smart and Connected cars and sharing mobility services). Competition See next slides Value A shift in priority: importance given to mobility over ownership. Data Not explicitly addressed in the text Digital platforms are the main threat for the incumbent car- manufacturing. Data is obviously a main strategic asset that should be tackled in the digital transformation journey of Audi. Speed of innovation Not Explicitly addressed in the text Competition Competition that incumbent companies face Competition that AUDI faces Competition that the incumbent companies (Audi, BMW, Daimler) face  Competition from technology companies (Tesla, Apple, Google) that provide new type of products (example self driving cars).  Competition from the sharing mobility services (risk of substitution from owning a car). => Incumbent companies need to adapt by investing in smart connected cars and sharing mobility services. Competition that AUDI faces (focus on the sharing mobility services)  Competition from the incumbent companies (direct competitors of Audi: specifically BMW and Daimler)  Both have already invested in the sharing mobility services  Use of their entry model  Unsegmented market  Competition from pure players (Uber and Zipcar) Challenges for AUDI: => Late in the market of the sharing mobility services compared to its competitors (BMW and Daimler) => The need to create a competitive advantage compared to both incumbent companies and the pure players How did Audi create a competitive advantage (Pick one and explain: Enhance customer intimacy, Operational excellence, New Business model)?  Audi created a competitive advantage by reinventing its business model. The car-manufacturer invested in the mobility sharing services by creating a new digital business (Audi business innovation)  Audi leveraged its existing capabilities (premium cars) to create a competitive advantage.  Differentiation from other competitors (Both incumbent companies and pure players).  What is the strategy approach of Audi? (please explain) (Session 3)  The industry is highly disrupted (sharing mobility services, technology companies).  The ability of Audi to change the industry is limited (late investment in the sharing mobility services) => Need to experimentation. It’s an adaptive strategy How did the company ensure its digital growth? How did Audi achieve it (Pick one and explain: Integration, Separation, Ecosystem)? (Session 3)  Ambidexterity refers to the balance between exploitation and exploration in order to ensure a digital growth.  Exploitation: refers in this case to car-manufacturing  Exploration: refers to the investment in the sharing mobility services. Audi created a separate business unit that focuses on the new mobility services. Þ Ambidexterity is then achieved through separation  In order to create a competitive advantage, Audi built partnership with luxury residents. => Ambidexterity is also achieved through ecosystem (partnership) Analyze how did Audi manage the risk of the sharing mobility platforms (Pick one and explain: Strengthen business as usual, Invest learn-act, Step-out and partner, Hybrid , Expand-and-compete)? (Session 4)  in addition to its initial business model (manufacturing and selling cars), Audi invested in sharing mobility services. => This refers to hybrid strategic response. Why Customers Value Drivers of digital disruption ? Data Innovation Competition (sharing economy pure players and competitors) Create a Strategy approach Digital growth competitive advantage a Create Creating a What competitive advantage through Adaptive approach separate company (separation) ? new BM) Leverage existing Partnership capabilities with luxury (premium cars) residents and differentiation from the competitors How (incumbent pure players) and ? 2- Differentiation strategies The need for a differentiation strategy  High failure in the sharing economy  The need to identify suitable strategies for competing in the sharing economy.  While the sharing economy is based on digital platforms, technology is not necessarily used as a competitive feature.  Competing in the sharing economy 1- Create a network 2- Control access and 3- Differentiation strategy effect governance mechanisms Develop both sides of  Control access ? the platform  Set up governance (provider and mechanisms consumer). (standards, incentives…) Audi case study (Part 2) 1. Analyze the differentiation strategy of AUDI 2. Explain how this differentiation strategy enables AUDI to create a competitive advantage compared to the competitors Audi case study (Part 2) 1. Analyze the differentiation strategy of AUDI 2. Explain how this differentiation strategy enables AUDI to create a competitive advantage compared to the competitors Audi’s sharing mobility services Competition Competition Audi Differentiation strategy strategy Car2go (Daimler) Use of the entry Positioning in the premium car segment model Different mobility services (Audi select, DriveNow (BMW) Audi on demand, Audi at home, Audi shared feet). Zipcar Different models Digital Key (Hardly copied by the Theft issues on the competitors) luxury models Adapted services to different Segment of The car sharing users based on their needs (Partnership market is either with luxury residents to offer a shared unsegmented or pool for Audi cars) segmented based on price and service Differentiation strategy of Audi (Audi Business innovation) Technolog y ( Digital key) Added-value for their Differentiati users compared to on strategy Partnershi the competition Main focus: User p experience (Luxury (premium cars, residences users ) segmentation) Three differentiation strategies  Technology  User experience  Partnership Technology as a differentiation strategy  Increase the efficiency of the mediation of the platforms: Provide more efficient service compared to its competitors (example: the power of algorithms used for Uber)  Provide technological features in the platform that foster trust and improve the mediation (Example: Airbnb with the super host criteria that can be used as a filter).  Use technology to provide added-value services: (example the Digital key for Audi (ABI)).  Uber: use of algorithms that improve the efficiency  of the platform “The system recognizes, when you are arriving … and takes this calculation into account in advance … to patch that with the next ride [of that driver]. … Through this technology you will get a car which is closer to you. … [But] implementing [that] technology is hard to achieve.” General Manager, Uber  “Technology is a principal point to compete in mature markets. … If you want to decrease the waiting time … a huge amount of engineering work is necessary to reduce it [by just] 15 seconds. At some point the system is so efficient, that you have to invest a lot of effort [to improve it further].” General Manager, Uber  “At the end of the day, the robustness and deep intelligence of the platform are our unique selling point.” Head of Public Affairs, Uber Frey, A., Trenz, M., & Veit, D. (2019). Three Differentiation Strategies for Competing in the Sharing Economy. MIS Quarterly Executive, 18(2). User experience as a differentiation strategy  The experience is generated through social interaction, such as meeting new people (Exemple Blablacar)  The experience is enabled by having fun or enjoying the use of the resource itself (Example Audi with the premium cars).  Blablacar: create opportunities for social interactions  “We know that for a lot of drivers the social [dimension] is very Technolog important. If you drive 600 kilometers every week, people get y bored sometime.” Head of Marketing, BlaBlaCar (features in the platform) User experienc  “[By using BlaBlaCar] people [get to] meet younger people e [whom] they normally wouldn’t have met. They have a nice (social conversation, [and] the time [during the ride seems to go faster]. Differentai interactio ns) That’s very central [to our offering]. Our marketing is focused on on that aspect.” Head of Marketing, BlaBlaCar strategy  While the main focus is on user experience, this strategy is complemented by the technology (features in the platforms).  The platform provides technological features that inform users about the personality profiles of both drivers and passengers as well as preferences in user profiles. Frey, A., Trenz, M., & Veit, D. (2019). Three Differentiation Strategies for Competing in the Sharing Economy. MIS Quarterly Executive, 18(2). Partnership as a differentiation strategy  Partnership in order to create added-value services for users through (exclusive) access to resources and infrastructure (example: partnership with municipalities to get access to parking space for SWA carsharing; partnership with luxury residents for Audi (ABI)).  SWA carsharing Partnership with municipalities:  “If you try to find a parking space in the historic [Augsburg] city center, you won’t find one. That’s the challenge. Therefore, municipalities are an important partner for us.” General Manager, SWA Carsharing Partnership with other car sharing providers:  “Our users can book nationwide vehicles [of other car sharing providers]. Vice versa, their users can use our vehicles.” Head of Sales, SWA Carsharing Frey, A., Trenz, M., & Veit, D. (2019). Three Differentiation Strategies for Competing in the Sharing Economy. MIS Quarterly Executive, 18(2). These three strategies complement each other  Each strategy (technology, user experience, partnership) should be seen as the main focus and should be complemented by some aspects of the other two strategies (example Audi (ABI)).  Competing Sharing platforms following the same differentiation strategy have different options for positioning themselves within that strategy (Example Uber and Lyft). Differentiation strategy: Uber VS. Lyft  Both Uber and Lyft focus on reducing the waiting time and the efficiency of the mediation enabled by the platform.  While they use technology as a focus for their differentiation strategy, they use different features:  Uber: passengers are able to visualize their waiting time as well as an estimated arrival time even before booking a ride.  Lyft: Passengers can easily identify their assigned drivers in crowded places and night. Conclusion  Takeaways  To effectively compete in the sharing economy, platforms need to focus on : Network  How to create a network effect? effect  How to control access and insure the governance of the platform? Governanc e  How to differentiate from the other sharing platforms and create a competitive advantage Differentiati (there are three differentiation strategies that on complement each other: user experience, technology, partnership).  Competing in the sharing economy 1- Create a network 2- Control access and 3- Differentiation strategy effect governance mechanisms  Control access Develop both sides of Technolo the platform  Set up governance gy (provider and mechanisms consumer). (standardization of the service, Differentiati incentives to on strategy Consider starting comply with the with the provider policy of the User experien Partnersh ip side. platform …) ce Illustration: Udemy case study (Session 4) The differentiation strategy of Udemy The differentiation strategy of Udemy focuses on the quality of the course provided (quality of the resource shared) as well as the social interactions between the learners (they do not only buy a course content). They have the opportunity to interact with other learners as well as the instructors. Þ The Differentiation strategy is then focused on User experience. However, this strategy is complemented by: Differentiation through technology: providing features that enable interactions between learners. Differentiation through partnership: Udemy used partnership to attract more instructors.  Competing in the sharing economy: application to the Udemy case study (Peer- to-Peer sharing business model) 1- Create a network 2- Control access and 3- Differentiation strategy effect governance Technolog mechanisms y (add feature that fosters interaction Develop the learning Set up guidelines s) content and the (detailed design network of experts guidelines and a Differentiati first. design platform) on strategy User experience Partnership (quality of the (with other course and online social platforms) interactions) Consultancy project (Graded Teamwork) case study: Zimride platform https://zimride.com/  Assignment please see the rubric before you start working Your answer should be provided in ppt format You are a team of consultants in digital strategy, your mission is to advice a group of entrepreneurs who wants to launch a similar business to Zimride platform (USA) in France. The new platform is called Ride&Meet During the first part, you Analyze Zimride platform (Question 1 and 2). Questions 3, 4 and 5 deal with the new platform. 1. Analyze the competitive advantage of Zimride platform compared to other sharing mobility platforms like Uber (3 pts) 2. Analyze the main problems the Zimride Platform are facing (6 pts) 3. What would be the strategy approach to adopt for the new platform Ride&Meet? (You need to refer to the strategy Palette of BCG and justify your answer) (3 pts) 4. What would be the differentiation strategy of the new Platform Ride&Meet (you need to justify your answer) (3pts) 5. Given the previous analysis, propose a set of recommendations that enable the new platform Ride&Meet to remain competitive (you need to provide concrete actions …). (5 pts)  Rubric Exceeds Meets Needs Poor Not expectations expectations improvements acceptable or not done Analyze the competitive advantage of 3 2,5 2 1 0 Zimride: you are expected to explain the extent to which Zimride is different from other sharing mobility services and how this will create value for users. Analyze the main problems Zimride are 6 5,5 4 2 0 facing: you are expected to explain the problems and how they can impede the success of the platform Analyze the strategy approach to adopt: you 3 2,5 2 1 0 need to clearly identify the strategy approach to adopt and justify your choice. The differentiation strategy of the new 3 2,5 2 1 0 platform: you need to explain which strategy is the most relevant in this case and why. Recommendations: you are expected to 5 4,5 3 2 0 clearly explain the actions that you are advising to implement and justify the extent to which these actions enable the platform to handle the problems highlighted and create a sustainable advantage to the platform. What is next? What’s coming up next  Session 1: Rethinking strategy in the digital era  Session 2: Digital strategy formulation  Session 3: Strategy approaches and ambidexterity strategy  Session 4: Digital platforms strategies  Session 5: Differentiation strategies and competition in the sharing economy  Session 6:Digital strategy and Business process transformation  Session 7: Building digital capabilities and creating digital leadership  Session 8: Digital strategy execution in practice: Fostering innovation in the digital era AT HOME WORLDWIDE* * Chez vous, partout dans le monde