AFM 241 Final Exam Cheat Sheet - Final Version, Cheat Sheet of Business Ethics

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AFM 241 Final Exam Cheat Sheet - Final Version Week 1 – IT Business Value What is IT - A set of interrelated components that collect (or retrieve), process, store, and distribute data or information to support decision making and control in an organization - Is a purposefully designed system that brings data, computers(hardware and software), procedures and people together to manage information important to an organization’s mission IT - Information Technology (IT) is created by combining: hardware, software, data - In the context of organizations: people, processes and procedures, policies - To: o Provide information processing capabilities to handle and process information o Provide information for managerial decision making o Solve problems, reduce inefficiencies, increase competitiveness 4 main IT values - Achieving Operational Excellence o Operational Elements for Excellence ▪ Daily Routine ▪ Business Processes ▪ Value Activities o Supply chain: supplier, distributors, retailors, customers - Achieving Customer Intimacy o Know your customers better o Segment and target markets precisely and then tailor offerings to match exactly the demands of those niches o Fit an increasingly fine defined customers (fine-grained customers) as per detailed customer knowledge and operational flexibility o Practices of Customer Intimacy ▪ Customer loyalty programs: IT can automatically send emails and reminders ▪ CRM systems ▪ Call/help centers: AI assistant ▪ Customization: Recommendation systems ▪ Customer-centric/oriented production: DIY (Threadless), 3-D print - Managing Knowledge o Knowledge is a firm asset ▪ Intangible ▪ Creation of knowledge from data, information, requires organizational resources ▪ As it is shared, experiences network effects o Knowledge has different forms ▪ May be explicit (documented) or tacit (residing in minds) ▪ Know-how, craft, skill, how to follow procedure ▪ Knowing why things happen (causality) o Knowledge has a location ▪ Cognitive event ▪ Both social and individual ▪ Sticky (hard to move), situated (enmeshed in firm’s culture), contextual (works only in certain situations) o Porter’s Five Forces Model o Porter’s generic strategies o Value chains Resource Based View (RBV) - The premise of RBV is that firms possess different resources and capabilities - Competitive advantage when resources are valuable, rare, costly to imitate, and non-substitutable - Examples: Tim Hortons, West Jet - Isolating mechanisms (Protect competitive advantage) o Causal Ambiguity -Difficult to understand the firm’s activities and how they are coordinated across organizational lines -Unclear about what resources work for performance and which resources to imitate -Patents, business secrets, recipe o Path Dependence -What is the optimal capability development trajectory? What is the path leading to final offerings? (Role of history) o Unique historical conditions (role of history) -Choices made in the past influence the options a company has now and in the future o Time compression diseconomies -The quicker a firm develops the resource, the higher the development cost Relative Competitive Performance Porter’s Five Forces Model - An external analysis of industry forces impacting on the organization - IT collects, processes and reports Environmental Scan information - IT provides the technology to support strategies to limit the threat of the forces 1. Buyer Power - The ability of buyers to affect the price of an item - Generated for the buyer when it accounts for the largest percentage of a business’s profit - Switching cost o Benefits (monetary or non-monetary) a consumer must give up to go to another buyer - Loyalty program o Rewards customers based on amount of business they do with a particular organization o Increase the switching costs for buyers 2. Supplier Power - The ability of suppliers to set prices and terms 3. Substitute Product or Service - Alternatives to a product or service - Loyalty programs increase Switching Costs and reduce this threat 4. New Entrants - The ease of which new competitors can enter a market - Entry barrier o A feature of a product or service that customers have come to expect and entering competitors must offer the same for survival 5. Rivalry Among Competitors - The amount of direct conflict between businesses in a specific industry - Product differentiation o Unique differences in the features of products or services that influence demand Information system strategies for dealing with competitive forces - Five strategies for dealing with competitive forces, enabled by using I T: o Generic Strategy ▪ Low-cost leadership ▪ Product differentiation ▪ Focus on market niche o Specialized Strategy ▪ Strengthen customer and supplier intimacy ▪ Innovation Generic strategies - Low-cost leadership o Produce products and services at a lower price than competitors o Example: Walmart’s efficient customer response system - Product differentiation o Enable new products or services, greatly change customer convenience and experience o Example: Google, Nike, Apple o Mass customization - Focus on market niche o Use information systems to enable a focused strategy on a single market niche; specialize o Example: Hilton Hotels’ O n Q system Specialized strategies - Strengthen customer and supplier intimacy o Use IT to develop strong ties and loyalty with customers and suppliers o Increase switching costs o Examples: Chrysler, Amazon, Starbucks - Innovation o Use IT to constantly destruct existing offerings with creativity (Creative destruction by Schumpeterian competition) o Increasing product differentiation and customer intimacy o Examples: iPhone, Google Three generic strategies - Using a single generic strategy makes efficient use of resources - First Selection is Broad or Narrow focus ▪ Or cloud computing Factors to consider outsourcing: ▪ Development is not one of the core competencies of the client ▪ Company does not have the ‘ability’ to run a development project ▪ They do not desire to add additional workforce ▪ Company has limited resource constraints ▪ Development requires high capital startup costs Purchasing unmodified software package systems: Advantages ➔ Ready to use system, Plug and Use ➔ Vendors provide better support and compatible future modifications ➔ Proven reliability and performance benchmarks ➔ Requires less technical development staff Disadvantages ➔ The package may not completely meet the requirements ➔ They don’t provide any unique competitive advantage to companies Purchasing Modified software package systems: Advantages ➔ Buy the package and make your own modifications, if this is permissible under the terms of the software license ➔ Sometimes you can negotiate directly with the software vendor to make enhancements to meet your needs by paying for the changes Disadvantages ➔ Modification/customization usually incurs a huge upfront cost ➔ Companies have to incur a maintenance cost every time the vendor upgrades the original package ➔ Very little or no support from the vendor Cloud services: Advantages ➔ Plug and use ➔ Pay by use ➔ Scalable Disadvantages ➔ Data security ➔ Constrained by Internet connection Week 4 – IT Alignment Business-IT alignment: A process of using fit/ suitable IT to achieve business strategies and objectives - Only 37% of executives believe in alignment with their businesses - Alignment can increase competitive advantage, business performance, quality improvement, cost reduction and revenue growth - Strategic alignment: align IT strategy with business strategy - Process alignment: align IT designs with business processes and requirements - Social alignment: align IT staffs with business professionals Strategic alignment- Mcfarlan’s strategic grid (Plan IT for specific business strategy) Operational focus: ▪ IT projects and investments aim to reduce operation costs and to enhance effectiveness of business operation ▪ Focusing on quality, speed, flexibility, and time to market ▪ Aligned with factory mode in McFarlan’s strategic grid Strategic positioning focus: ▪ Variety-based positioning: Producing particular products/services using distinctive sets of activities. i.e. FedEx overnight delivery ▪ Needs-based positioning: Targeting needs of a specific group of customers ▪ Access based positioning: Having a unique set of activities to serve the needs of geographically distinct group of customers. ▪ Similar to turnaround mode in McFarlan’s strategic grid Dual focus ▪ IT can be used for both operational effectiveness and for improving strategic positioning. ▪ i.e. revenue growth and efficiency (cost containment) ▪ Aligned with strategic mode in McFarlan’s strategic grid No focus ▪ The lack of strategic priorities is likely to be reflected in similar no focus on IT priorities. ▪ Aligned with support mode in McFarlan’s strategic grid ▪ Not competitive and viable. How to address misalignment: ➔ Factory vs dual focus ➔ Factory vs strategic positioning ➔ Strategic vs operation focus ➔ Strategic vs Strategic positioning Process Alignment: - Align IT designs with businesses processes and requirements - Use case modelling - Design IT to change business processes by Automating & digitizing Model functional system requirement - Reduce complexity by abstraction - Standardised modelling language - Different aspects of system/software design ➔ Structure ➔ Behaviour ➔ Interaction • survey responses (poor, average, good, very good, excellent) Types of data analytics - Descriptive analytics o uses data to understand past and present ▪ depict past data ▪ pivotal table to tabulate relationships ▪ identify abnormal data: e.g., fraud detection - Predictive analytics o analyzes past performance ▪ make predictions - Prescriptive analytics o uses optimization techniques ▪ identify optimal solutions Data Analytics Purposes - Find patterns in the data: sales/production associations - Find out outliers from the huge data e.g. fraud detection - Prediction: Identify relationships within the key data variables for further prediction o e.g. next likely purchase from the Customer - Provide insights as to what will happen next o e.g. which of the Customers are leaving us - Generate strategies based on data o An evidence-based approach to measure the outcome of an strategy o Support decision making under uncertainty - Enhance competitive advantage Analytics for technology adoption Innovators: - Prepared to take high risk (uncertainty) - Technology may not have been fully developed yet - Possible benefits may not be clear - Innovators are in strong financial position can afford potential losses Early adopters - Not as risk seeking, still have to deal with relatively high level of uncertainty - Technology is not at experimental stage, not mature yet - Role is pivotal, success will trigger the mass adoption, failure can end the new technology Early Majority - Will join when most risks have been mitigated, while the benefits are high Late Majority - Reflects adopters who will invest in the new technology because of a strong peer pressure - Realized that it peers have gained competitive advantage, investment becomes necessary Laggards - Hostile to new technologies, very conservative Hype cycle – Gartner Innovation trigger- Technological breakthrough or proof of concept which triggers public interest ➔ Technology is still at the experimental stage ➔ No proven viable business applications Peak of inflated expectations- Followed by a period of unrealistic expectations ➔ Some companies start investing in the new technology Tough of disillusionment- Majority of the first adopters fail to extract value from their investment, initial hype is followed by disillusionment ➔ Overall adoption of the new technology remains at less than 5% ➔ Corresponds, to innovators in Rogers’ classification Slope of enlightenment- Gradually, new instances of how the new technology can deliver tangible benefits emerge ➔ Renewing interest, new generation of adopters Plateau of productivity- Mainstream adoption takes off ➔ Their success, provides the proof that the technology is viable and generates benefits ➔ Rogers’ Early majority Importance of business analytics for the accounting and finance community - Data analytics can unlock significant value by making information transparent and usable at much higher frequency - As organizations create and store more transactional data in digital form, they can collect more accurate and detailed performance information on everything from product inventories to sick days, and therefore expose variability and boost performance - Analytics allows ever-narrower segmentation of customers and therefore much more precisely tailored products or services. - Sophisticated analytics can substantially improve decision- making - Data analytics can be used to improve the development of the next generation of products and services Week 6 – Data Driven Strategy Development Digitization – conversion of products to digital format and the concomitant inventions that ensue Digitalization – innovation of business models and processes that exploit digital opportunities Digital transformation – system-level restructuring of economies, institutions, and society that occurs through digital diffusion Digital business strategy - IT strategy as a functional-level strategy: SAP for procurement, reimbursement, auditing, marketing management - IT strategy as a process strategy: automate business processes for order management, customer service - Digital business strategy has transcended functional and process areas o Amazon has digitized bookstores, cashier-free convenience store o Pay-as-you-go for cloud computing services, e.g., Dropbox o Nike Fuel: digitized running shoes o GE’s Internet connected real-time patient monitoring o Netflix digitized DVD rentals to streaming o Apple control industry architecture for premium profits from telecom carriers - No separation between business strategy and digital business strategy - Organizational strategy formulated and executed by leveraging digital resources to create different value - Digital resources o Business-to-business: business sells products or services to other businesses or brings multiple buyers and sellers together in a central marketplace o e.g., Alibaba.com, Globalsources.com o Models: E-distributor, E-procurement, exchange, Industry consortium Common B2C business models - E-tailer o Online version of traditional retailer; eg. Amazon o Revenue model: sales revenue o Variations: ▪ Virtual merchant ▪ Bricks-and-clicks ▪ Manufacturer-direct o Low barriers to entry - Community provider (social network) o Provide online environment (social network) where people with similar interests can transact, share content, and communicate o Examples: Facebook, LinkedIn, Twitter o Revenue models: typically hybrid, combining advertising, subscriptions, sales, transaction fees - Content provider o Digital content on the Web: news, music, video, text, artwork, financial information o Example: YouTube, The New York Times o Revenue models: ▪ Variety of models: ads, subscription, sales of digital goods, content purchase ▪ Gifts; Tips - Portal o Search plus an integrated package of content and services o Revenue models: advertising, referral fees, transaction fees, subscriptions for premium services o Variations: ▪ Horizontal/general (public) ▪ Vertical/specialized (corporate, need authorization) - Transaction broker o Process online transactions for consumers ▪ Primary value proposition—saving time and money o Revenue model: transaction fees o Industries using this model: ▪ Financial services ▪ Travel services ▪ Job placement services - Market creator o Create digital environment where buyers and sellers can meet and transact ▪ Examples: Priceline, eBay ▪ Revenue model: Transaction fees, fees to merchants for access o Sharing economy (mesh economy): platforms that allow people to sell services ▪ Examples: Uber, Airbnb - Service provider o Online services ▪ Example: Google Maps, Gmail o Value proposition ▪ Valuable, convenient, time-saving, low-cost alternatives to traditional service providers o Revenue models: Sales of service, subscription fees, advertising, sales of marketing data Why do B2B, B2C, C2C work? Long tail - “We sold more books today that didn't sell at all yesterday than we sold today of all the books that did sell yesterday” - Traditional businesses focus on head o 80-20 rule (Pareto principle, law of the vital few) - for many events, roughly 80% of the effects come from 20% of the causes o In business – 80% of sales come from 20% customers o Focus on the most effective areas and produce blockbuster hits and ignore the rest Why long tail works for e-Commerce? - Chris Anderson, EIC of “Wired”, suggests that e-commerce, especially for digital products, media and entertainment industry, can capture the long tail - Heterogeneity of consumer tastes and preferences Offline business – world of scarcity E-commerce – world of abundance Limited physical resources (e.g., book shelves) No constrains on inventory, shelf space, incremental product/distribution cost nearly 0 Reach to customer – “an audience too thinly spread is the same as no audience at all” Reach to customer not geographically constrained How to make long tail work? - Rules for business capturing long tail o Make everything available ▪ Almost anything is worth offering on the off chance it will find a buyer o Sell at lower price ▪ Production costs of digital goods are different from physical goods o Help me find it ▪ Amazon’s recommendation ▪ Touching the Void o Hits still matter ▪ Attract customers Effects of digitalization on business models - Evolving business model patterns enabled by IT Live streaming - Instant gratification of customer needs - Real time interaction and response from your customers or prospects - Share immediate information without any distortion - Show behind-the-scenes stories - Bring the brand top of mind - Augmented reality tools for live streaming Freemium - Users get basic features at no cost and can access richer functionality for a subscription fee - Pandora o Free service(s): free ad-supported radio listening o Premium service(s): premium plan without ads Why freemium works for digital products - Cost o Product prices affected by marginal costs ▪ Change in total costs that arises when the quantity produced is incremented by one unit o For most Internet products, the marginal cost today is practically zero because of declining hosting and bandwidth costs - Experience good o Most Internet products or services are experience good ▪ Product that needs a period of use before the customer can determine the value they can derive from it ▪ “The fact was that Dropbox was offering a product that people didn’t know they needed until they tried.” o The optimal pricing for an experience good is a low introductory price which is then increased when the customer realizes the value of the product - Psychology of free o Reduces mental barriers and accelerates adoption Crowdsourcing and Crowdfunding - Crowdsourcing o Outsourcing of tasks to a crowd through an open innovation approach or an open call ▪ Reduce cost ▪ Find right external people ▪ Find new business opportunities ▪ Solve difficult problems ▪ Intellectual property issues - Knowledge of the new technology - Willingness and ability to develop a technology for new customers, as well as a need to develop the sustained technology - Willingness to accept new forms of marketing, sales, and production - Willingness to accept new profit margins for each sale - Willingness to terminate the existing staff, hiring new employees instead - Timing to invest in new technology Two strategies for creating new disruptive businesses - Create a new market as a base for disruption: competing against non-consumption o Examples: iCloud, DropBox, Charles Schwab, Robinhood o Test questions ▪ Does innovation target customers who in the past haven’t been able to “do it themselves” for lack of money or skills? Eg. Online banking ▪ Is the innovation aimed at customers who will welcome a simple/good enough product? Eg. Apple vs Xerox ▪ Will the innovation help customers do more easily and effectively what they are already trying to do? Eg. Digital imaging technologies - Disrupting the business model from the low end: new growth business within an existing market o Aim at the same markets dominated by industry leaders o Disrupt industry leader’s business model by harnessing power of asymmetric motivation o It needs to focus on least-demanding tiers of a market and products need to be made or marketed within a disruptive business model. o Test questions ▪ Are prevailing products more than good enough? E.g., Smart phones? ▪ Can you create a different business model? E.g., earn attractive returns at prices that can steal business at the low end, YouTube? Walmart? Big bang disruption - Unplanned and unintentional - Do not follow conventional strategic paths or normal patterns of market adoption - Three features o Unencumbered development ▪ Born of Rapid-fire low-cost experiments on fast-maturing, ubiquitous technology platforms ▪ Build out of readily available components with low or no cost o Unconstrained growth ▪ Marketable to every segment simultaneously o Undisciplined strategy ▪ Better performance, lower price, greater customization Examples of big bang disruption - Twitter, commercialized one year after its invention at a hackathon (2007) o Experiment on sending standard text messages to multiple users simultaneously o Requires no new technology, but a recombination of existing technologies - Google Maps navigation apps o Offer all the feature of high-end GPS devices, costs nothing o Constant innovating: updated and rereleased o Disrupt mapmaking industry or standalone GPS device industry Big bang disruption Disruptive innovation Quality/cost Better quality and cheaper services/product Lower quality, simpler easier to use but cheaper services/product by upstarts Customer segment Target all customers Upstart from the low-value customers to upmarket high-value customers Adoption cycle Happen fast: trial users and then the vast majority Gradually outperform these incumbents in product quality New technology Require no new technology, but a recombination of existing technologies Driven by breakthrough new technologies Consequence If successful, disrupt the incumbent industry completely and at a larger scale. Make incumbent out of business Little impact on incumbents’ businesses by start. At the later stage, disruption can happen at a large scale. Incumbent can still survive at a smaller customer base. How to survive from big bang disruption - Slow the big bang disruption long enough to develop it by the company o Make disrupters difficult to make money for their invention o E.g., lowering pricing, locking in customers with long-term contracts or forming strategic alliances with advertisers or other companies for the catching up - Acquire the new technology - Look for opportunities elsewhere: create new customer segment or market niches - Get closer to the exits and be ready for fast escape - Diversify businesses Week 10 – Social Media Analytics Social media - Public forum for sharing experience, opinions, and connecting with other people online - Place for brands to connect with individual customer; source of insight for new strategy formation - Social conversation strategy for gaining customer insight o Listen and monitor: collect social media postings regarding brand mention, customer feedback and discussion o Analyze social conversations: customer segmentation (customer demographics to divide customers), identify influences o Discover customer needs/preferences: digital profiles of customers, insights on customer activity and location data, insights into customer spending habits o Identify opportunities for market growth, make better-informed decisions Tool for enterprise use - Engage employees for work-related postings - Sharing knowledge with other employees - Socialize new employees with company visions, values as well as cultures is made possible by crowdsourcing processing power. Ensuring a party actually owns the bitcoin pledged in a transaction—or any asset being tracked by this type of system—only requires a simple query of the blockchain. - Blockchain technology offers a way for untrusted parties to reach agreement (consensus) on a common digital history (or ledger) without using a trusted intermediary. A common digital history is important because digital assets and transactions are in theory easily faked and/or duplicated. In essence, blockchain technology was created as a sophisticated way to prevent digital transactions from being faked or duplicated, without the need for a Visa or MasterCard as an intermediary. - A distributed, decentralized ledger that, when combined with a digital transaction validation process, allows for peer-to-peer electronic transfer of an asset without the need for an intermediary, such as a bank. Limitation of centralized ledger - Due to a bug or hacker attack, the ledger is corrupted - Ledger crashes or coerced to crash by a criminal or the government - The entity entrusted with keeping the ledger is not trusted anymore Hashing - The network timestamps transactions by hashing them into an ongoing chain of hash-based proof- of-work, forming a record that cannot be changed without redoing the proof-of-work - it takes a value and maps it to another, ideally random, value - It is very important to realize that hashing operates only one way. - We can use potatoes to make hash brown but we can not rebuild a potato from hash brown - One-way trap door Proof of work - The network timestamps transactions by hashing them into an ongoing chain of hash-based proof- of-work, forming a record that cannot be changed without redoing the proof-of-work - Proof of work and validation/verification play a very important role - Ensure the blockchain, which is visible/transparent to all participants, is also virtually immutable. - The proof of work is just evidence that some computation has occurred and it is part of the consensus mechanism used in blockchain - Computation must be hard in the sense that it takes time to finish it, but it must be easy to verify Five basic principles - Distributed database - Peer to peer transmission - Transparency with pseudonymity - Irreversibility of records - Computational logic 51% attack - attempt by malicious miner to reverse existing transactions with the aim of double spending (own more than 51% of hashrate or computing power) Potential impacts of blockchain technology - Application of blockchain technology on supply chain o Improve traceability o Replace manual processes o Still relies on manual data input - Impact on financial services o Fidelity Investment plans to buy and sell crypto assets for customers Bitcoin Storage - Hot wallet: keep single-signature wallet with private keys on online computer or mobile phone - Cold storage: keep private wallet keys offline, which avoids online hacker attack or intrusion o Hardware wallet (security-hardened device for generating private keys and sign transactions), USB drive, physical bitcoin o Vulnerable to material corrosion, accidental loss, hardware failure, or theft Week 12 – Digital Entrepreneurship Entrepreneurship - dynamic process of identifying opportunities, assessing and acquiring necessary resources and implementing ideas to create new businesses Digital entrepreneurship – process of creating new businesses through digitization and digitalization - Type 1: Digitizing physical products and smartening them with Internet connections o New firms producing products based on ICT technologies, e.g., making smart devices o Representing firms: iWatch, Go Pro, Fitbit, Tesla, iRobot o Changed business model components: channels, Customer relationship, value proposition - Type 2: Digitalizing product or service offerings o New products or services purely based on the Internet o Using big data or AI to serve users o Representing firms: Google, Facebook, Snapchat, Dropbox, AirBNB o Changed business model components: channels, Customer relationship, value proposition, revenue/cost, key resources, key activities Digital Platform Economy - Economic and social activities facilitated by platforms; Two types: o Match-making: e.g., Amazon, AirBNB, Uber, Facebook, Google o Innovation platform: iOS, GooglePlay, Github, Behance, etc. - How does it work o Platform provides technical functionality support to members. Members interact, transact or collaborate with each other under the guidance of platform rules. o Platform profits from transaction commission, membership fees, or usage fees Sharing Economy - New economic model based on sharing, swapping, bartering, trading, or renting access - Changes in value proposition, customer relationship, revenue stream - Use value economy - Things or services can be shared: Car (Uber), Home (AirBNB), Bikes - Nature of sharing economy: o Sell the use, not the product/ownership o Support customers in their desire to resell goods o Exploit unused resources and capacities o Provide repair and maintenance services o Use sharing economy to target new customers Social Commerce - Facebook marketplace o User-to-user exchange for buying and selling goods o Sell or buy from friends o Libra to make money transfer as easily as sending a message - Virtual gifting o For live streaming services o Purchase in-app currency, then use it to purchase virtual gifts, then send it to broadcasters, finally broadcasters can cash it out or convert it to in-app currency • Digital products like movies, and software, information about physical products • Challenged status quo Customer experience • Website • digitized business processes: shopping cart and payment options • Well-developed customer created content: customer product rating and reviews, history of search and tailored recommendations, and search tool The Platform • Data & infrastructure • Internal components (Customer data, analytics, human resources, finance and merchandising) • External platforms (phones, tablet, computers) • UPS delivery services • To achieve economies of scale with digital business models requires the development and reuse of digitized platforms across the enterprise • Without shared platforms, IT units implement new solution for every business need, creating a spaghetti-like arrangement of systems that do not meet specific customer demand while being expensive and fragile, and don’t scale enterprise-wide • Customer will have a better experience with multiproduct experience LexisNexis Digital Business model: Apple’s digital model: • Competitive advantage: Top Customer experience and platform, NOT content • Created a new type of customer experience: the mobile app to access greater content • The industry with the strongest effectiveness of all three component is IT software and services • The industry with the worst is mining & Health care THE EFFECTIVENESS OF CONTENT, EXPERIENCE AND PLATFORM BY INDUSTRY We surveyed companies in various industries lo assess (he effectiveness of their content, experience and platform. Effectiveness was measured on a I0-point scale, from | = nat effective to 10 = very effective. Encueneeke eng Ceres EXPERIENCE Banking, Financial 64 Services and Insurance Transportation 68 and Utilities Health Care 6.0 HighTech, Aerospace 6.2 and Electronics IT Software 8.0 and Services Other Services* 84 Energy and Mining 58 Manufacturing and 69 Chemicals Telecommunications 70 and Media For all respondents 68 b4 b.B 58 6.2 54 56 6.2 6A 70 7a 6.2 70 44 54 44 64 6.0 68 5.6 64 *Other Services includes legal, professional and consumer services, restaurants and hospitality, and distribution and logistics. ASSESSINGYOUR DIGITAL BUSINESS MODEL Use the following questions to help you and your colleagues prioritize the improvement to your digital business model. ie \g Pee ener aur eee Ce es Ce) ale of 1 to 10, where 1= “Does not CORSE RUE err Cea] Bie ene) in Cenc Content: What is consumed? Experience: Howis it packaged? Platform: Howis it delivered? (NRC an aCe mM ec’ Pee ROS Recut iC at) areas for success in your busine: Ses F the average af your scares on the first quest on today is seven ar helowin any area, here are same questions ta help you work an refining your digital business model. Content *How much of your revenue is generated online? «Of the content you provide today, wat do your cus:omers find most valuable? What. other content could you provide that cus- tomers (or channel partners) would value or pay for? Who has responsibility for content in your er- terprise? Is responsibilty for digital products: and in‘ormation about physical products held by different groups? Should it be? Social media Experience *Do you knew how good your customer experience is? Who ownsit? *Whar aspects of your digital customer experience do custcmers like? What aspects do they find frustrating? *Who has the best customer experience in your industry? (Consider toth traditional compet tors and new entrants.) Platform *How good are your internal digital olat- forms? Who owns -hem? *How can you expose more of your interral cigital platforms to your customers te im- prove their experience? *How can you better leverage the merket for your platforms — for example, the cloud, software as a service, partners, external data? *How good are your partners’ platforms? Social media are Internet-based applications that encourages users to generate their own content for the application. Overall, the broader reach and great flexibility of presentation and channel in social media enable rich and familiar relationships with investors and potential investors at a low cost. However! It also increases the potential for misinterpretation of new and communication crises-more informal interactions and public discourse • At its core, social media is simply another dissemination channel for firm communication 1. Disclosure and social media- social media has the power to affect firm’s information selection, information presentation, and choice of information presenter (can increase and decrease flexibility ➔ Has the power to affect the types, subjectivity and the amount of information disclosed ➔ The less established regulatory oversight of dissemination via social media= more flexibility in what information is emphasized and included ➔ Encourages informal communication ➔ Potential variation in audience sophistication, subject information and allowed disclosure= interesting settings to examine how management respond to different incentives ➔ Each social media application facilitates and encourages specific choices for medium (text, image, audio, video) ➔ Wider range of language intensity, presentation style, and readability level Disruption innovation overlooked aspect: • Disruption is a process- from business model to the quality of the product (Netflix started with a different business model from incumbents not gaining enough customers, however later shifted to internet where it appealed to mainstream customers, IF Netflix started by targeting core customers, competitors would have responded more vigorously) • Disruptors often build business models that are very different from those of incumbents- Apple is originally thought as sustainable innovation, however disruption happened when they introduced a new business model of building a facilitated network connecting application users with iphone users • Some disruptive innovation succeeds, others don’t- Success is not build on the definition of disruption, as there are competition and better-resourced incumbents • The mantra “disrupt or be disrupted” can misguide us- incumbents should invest more in sustaining innovation or new division that specializes in disruption, but corporate leaders should not try to solve before it is a problem Two strategies for creating new disruptive growth businesses: • Creating a new market as a base for disruption – It is easier to target potential customers that are not buying than to steal customers from entrenched competitors ➔ Test #1: Does innovation target customers who in the past haven’t been able to “do it themselves” for lack of money or skills? ➔ Test #2: Is the innovation aimed at customers who will welcome a simple product? ➔ Test #3: Will the innovation help customers do more easily and affectively what they are already trying to do? • Disrupting the business model from low end ➔ Test #1: Are prevailing products more than good enough? ➔ Test #2: Can you create a different business model? Block chain: Electronic money transfer ➔ Double spending- Spending after spending all of the money in the account (writing a cheque) ➔ Can use trust third party to facilitate email transfer ➔ Bank plays the role of a ledger that records time and date of all of his deposits and withdrawals, so it can provide verification for his account ➔ Need to pay the bank a fee ➔ No need for cash to change hands and everything is reliably recorded ➔ Ledge has to be accurate, up-to-date ➔ A ledger that can be verified by everyone is one that can be trusted Genesis block: ➔ Does not follow any other transactions since it is the first one in the chain of transactions ➔ Block on ledger: ➔ Many transactions are packaged together to form a block ➔ Keep track of transactions, and balance of accounts ➔ Time stamp: ➔ Avoid double spending ➔ Automatically assign a time stamp to one transaction if both request were submitted simultaneously Limitations: ➔ Bug/hacker ➔ The ledger crashes by the criminal or the government ➔ The entity entrusted with keeping the ledger is not trusted anymore • Block chain was designed as an act of defiance to global financial crisis • Nakamoto’s paper: ➔ Bitcoin/blockchain is a pure peer-to-peer version of electronic cash that allow online payments to be sent without the facilitation of a financial institution. ➔ The peer-to-peer network timestamps transactions by hashing them into an ongoing of hash based proof of work, forming a record that cannot be changed without redoing the proof of work ➔ The trust problem can be resolved by participants holding their own ledgers (distributed ledger) ➔ Blockchain facilitates bitcoin transactions (electronic money) ➔ Bitcoin genesis block: time stamps, block rewards/ amount ➔ No issued by the central bank ➔ Transactions are recorded on blockchain.com ➔ Each participants is responsible for updating the ledger ➔ Transactions are packaged into blocks before transmitted onto the network Problems that Bitcoin/blockchain solves: ➔ Eliminate problems with third party trust ➔ Eliminate double spending ➔ Consistent distribution of the larger with a large number of participants How blockchain works and various terms: ➔ Participants=nodes ➔ Consensus mechanism: if the majority of the participants believe that the ledger can be trusted then it’s the reference point ➔ A group of transactions