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Summary Lectures - MDI
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Lecture 1Technology life cycle: Cycles starting with a discontinuity,
a discovery and then organizations and people come up
with different solutions/designs → Era of Ferment. Some
point there will be a dominant design → all the users will
use this design. From then on, Incremental Change. For
example, bikes:
Vroeger, there were a lot of different designs of bikes. But
now, there is roughly just one design. there was a point
where all these different designs changed into one
dominant design.
Does this also apply to digital products/services?
- Yes —> Smartphones, we had Blackberry with buttons etc., now, all the smartphones have the same
outlay and design.
Technology Road mapping: The lay-out for the upcoming
years.
To what extend does this hold for digital?
- The lifecycle is way shorter with a lot more disruptions
so the time frame of 6 years is too long and firms
need to be agile.
- What is the alternative?
Routinization of innovation: The ideas flow through the process but the gates are important. You need
to decide which ideas you let pass onto the next stages.
- You may never get to the last stage because of the gates.
Does it apply to digital?
- The gates have pre-specified criteria. However, in digital,
the characteristics are agile and unsure. So, you need
different criteria. This approach also suggests that, once
defined, you should stick to the idea. With digital ideas, this
is not the case. They evolve and change along the way.
Digital innovation: Incorporation of digital capabilities into
objects that previously had a purely physical materiality. A
product, service, process, or business model that is perceived
as new, requires some significant changes on the part of adopters, and is embodied in or enabled by IT.
The creation of (and consequent change in) market offerings, business processes, or models that result
from the use of digital technology (Nambisan et al. 2017)
Digital technologies are integrated in physical products. So a combination of the physical and the digital.
Sometimes, merely focus on the digital. Specific focus on products, services and business models.
Netflix, cloud services, Google in many of his appearances.
Digitization: is the encoding of analog information into digital format: binary digits (bits). it’s a
sociotechnical process of applying digitizing techniques to broader social and institutional contexts.
1
, 1) Homogenization & Decoupling Because all digital
information assumes the same form, it can, at least
in principle, be processed by the same technologies.
Consequently, digitizing has the potential to remove
the tight couplings between information types and
their storage, transmission, and processing
technologies. Consequences of homogenization and
decoupling:
a. Low marginal costs→ Digitized information
can be transmitted, stored, and computed in
fast and low-cost ways (e.g. electronics,
electromagnetic waves, optical signals). Moore’s law: computing power (costs, speed)
improves exponentially. Implications for innovation: disruption, winner-takes-all. Digital
products/services have very low marginal costs. Bijv: WhatsApp was sold for 18 blln with
only 50 employees. Marginal costs were so low.
b. Convergent user experience→ Information from the map and the compass are both
incorporated in Maps on your iPhone. Companies from adjacent industries enter the
market because they are also involved in the digitalization. Implications for innovation:
convergence of industries; combinatorial innovation
2) Connectivity Connections with other users, connections with other Applications, Connections
between firm and customer. Consequence of connectivity:
a. (Direct) Network externalities→ when the value of a good to a user increases with the
number of other users (installed base) of the same or similar good. Bijv: telephones,
FAQ Forum, and Air bnb, but last one is indirect network effect. You have two groups
that reinforce each other: people offering the rooms and people looking for rooms.
Implications for innovation: disruption, winner-takes-all, ecosystems. Winner-takes-all:
The more people use it, the bigger it gets, the more valuable it gets, enz enz. There is
one winner and the competition is not there anymore, because: when you move, all the
people around you are still with the winner and you cannot communicate with them.
b. Interoperability→ The ability of a product/system to work with other products/systems.
Do you allow your products to operate with products/services from other companies?
Standardized and open interfaces. Interoperability drives network externalities.
Implications for innovation management: platform ecosystems, combinatorial
innovation.
Connections with other applications: IFTTT. A service that lets you create powerful connections
with one simple statement.
3) Reprogrammable & Smart → Digital products can be edited and reprogrammed (software
updates) by the supplier (connectivity) or autonomously (machine learning). Sensors, processors
and actuators are used. Consequences:
a. Emerging functionalities→ Product versioning. Differentiation. Incompleteness (never
finished), back- and forward compatibility. Implications for innovation: continuous
development, agility and cross-functional integration.
b. Servitization→ The shift towards a ‘service’ that products offer. A job to be done.
Instead of selling a motor, leasing the motor so that you give a service and the company
can repair/improve it every time and remains responsible. Shift towards pay for use
instead pay for ownership. Hybrids: integrating products and services into complex
systems.
2
, 4) Digital traces → Cookies and sensors. Consequences:
a. Wakes of innovation→ When you have one innovation, you start looking what you can
do with that small innovation and innovate further and further and further → Satellite
photos: They could measure the height of the snow and in combination with the
forecast they could predict the meltwater. With the meltwater prediction they could
predict the amount of power the meltwater would generate.
5) Modularity→ Module is a unit whose elements are powerfully connected among themselves
and relatively weakly connected to elements in other units. Standalone components that can be
replaced and added. Merely independent. Modularity can be created by standardizing interfaces
between units. Continuum from modular to integral designs. Consequence:
a. Platforms
Affordance of pervasive digital technology: Convergence and
Generativity.
Convergence: Bringing together preciously separate user
experiences. Integration of digital and material. Convergence
in industries.
Generativity: How you create value out of data. Inherently
dynamic and malleable. Reprogramability. Wakes of innovation
and digital traces as by-products.
Lecture 2
Platforms: things that used to be offered by services and products move
to a platform → Uber does not own a car, they just provide a platform.
Drivers use their private car and login on the platform in order to work.
You have more sorts of platforms. Market platforms connect customers
with companies offering their services Platforms are evolving
organizations or meta-organizations that:
- Unifies and coordinate constitutive agents who can innovate and
compete
- Create value by generating and harnessing economies of scope
(a proportionate saving gained by producing two or more distinct
goods, when the cost of doing so is less than that of producing each separately: specific focus
and exploiting niches) in supply and demand
- Entail a modular architecture composed of core and periphery.
Backbone of the platform uses economies of scale and on top of that you use economies of scope and
addressing very specific needs.
Two-sided market: you have an actor A and a buyer B and the network connects the two. Direct
network effects are on the same side of the platform (buyer/actor side).
The increase of users of the platform drives the prices down:
Demand side economies of scope &
Supply side economies of scale.
Indirect network effects: The presence of other type of actors
(complementors) generates additional value. Indirect network
effects are on different sides of the platform.
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