Samenvatting
2020 Summary Theories of Digital Business
- Instelling
- Universiteit Van Amsterdam (UvA)
Includes text book summary of John Gallaugher: Information Systems (version 2018) and all lecture slides
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Voorbeeld 6 van de 103 pagina's
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Voorbeeld van de inhoud
Digital Business SummaryPart 1: Setting the stage
Required reading
- Textbook Chapter 1
- Illustration article: Main trends and issues
- Slides
Textbook Summary – Chapter 1: Setting the Stage
Tech’s Tectonic Shift: Radically changing business landscapes
- Seventy percent of the regions populations live within range of mobile phones
- Fast/cheap computing is accelerating Internet of Things
- Open source software is widely available, leads to access and differentiation in revenue
models
- Cloud computing makes top notch software available to everyone (but also leads to massive
e-spionage threats)
- Big Data: many organizations today collect and seek insights from massive datasets. Data
analytics, BI and ML drive discovery and innovation
It’s your revolution
- Digital forces lower the cost of entrepreneurship. It includes crowdfunding, cloud computing,
social media etc.
Geek up – Tech is everywhere
- Tech is impacting every business discipline: accounting, finance, marketing, operations HR
and the law
- IS jobs are diverse, from programming to design and even strategy
- As tech becomes cheaper and more powerful, it impacts more industries and is becoming
baked into what once were non-tech functional areas.
Setting the stage – Lecture slides
Changing Software Architecture:
1. IT is about business (process) architecture
2. Focus on what, not how à you can design what you want and you can implement it right
away. The logic is already created. There is a fundamental shift, you can get the job done.
Programming is accessible. “It’s a return to the world of Lego” (architect and a builder at the
same time, without knowing how to do it). It enables us to find ecosystems in organizations
3. Flexibility and speed is king à The competitive advantage is not having lego (modular
designs), but constructing new things with your lego. What does it enable us to do? You have
to be quick! Build and kill bridges (constant change your products).
Changes in S&O: economies of speed, scope and scale
Changes in how organizations work
1. Speed: cycle time reduction
2. Disappearing boundaries:
a. within firm: no more silos, globalization.
b. between companies: supply chain management, partnering.
3. Global Business Networks:
- Dis-aggregation, consolidation, focus on core, virtual organization, outsourcing.
,ICT and Business/Industry Redefinition
Level 1-2: IT can be used to simply automate an existing isolated task (localized exploitation) or to
link and integrate a number of tasks (internal integration): both are considered ‘evolutionary’
transformations that can generate significant benefits, but usually less than what is feasible through
more ‘revolutionary’ transformations (level 3-5).
Level 3 is about streamlining and reorganizing internal processes (not simply linking them as in ‘2’),
Level 4: while 4 extends this beyond the boundaries of the organization to involve suppliers, buyers.
Level 5 describes the most radical transformation, where the entire business scope is redefined.
Digital Business: trends and issues
– create the change rather than be affected. We spend a lot of time on IT but we can’t get it right.
the list for basic understanding.
Largest IT investments
- 1 Business and IT alignment - 1 Analytics/Big Data
- 2 Security and Privacy - 2 ERP
- 3 Speed of IT Delivery/ IT Time to Market - 3 Security and Privacy
- 4 Innovation - 4 Software development/maintenance
- 5 Business Productivity/ Efficiency - 5 CRM
- 6 IT Agility/Flexibility - 6 Cloud computing
- 7 Cost reduction/controls
- 8 Business agility/Flexibility
- 9 Business cost reduction/controls IT
- 10 Strategic Planning (Business)
Trends conclusion
Business and IT alignment has been in the top three for 15years (and we still can’t get it right). That
flexibility and business change are major issues, and that security and privacy issues are a new big
concern.
NBT 1 - Big Data, mining for gold or information overload?
Main characteristics, 3 V’s:
1. Volume
2. Variety
3. Velocity
4. Veracity (IBM added this one) – data is not always consistent or truthful.
It’s about what you can do with it, about storytelling. Think of Trump.
,When decisions matter: Math genius hacked a dating site. The algorithms use only the questions that
both potential matches decide to answer and the questions he had chosen were very unpopular. He
sets up multiple accounts and started harvesting 6 million questions from 20.000 different accounts.
Then he clustered the data into seven categories, and had to decide which cluster suited him best.
NBT 2 - Internet of things:
When walls do talk: sensors, optimizing. Data and connectivity as value drivers (billions of things are
connected now). And it increases exponentially. If all these things are connected there is a lot of
magnitude. You can start sniffling and changing the strategy of a company to the demand of the
customers. More and more is about software. Software is eating the world.
NBT 3 - Artificial intelligence:
- AI 1.0 started in the 1960’s, with simple rule-based logic: IF … THEN ... Using this logic Weizenbaum
constructed ‘Eliza’, a Rogerian-style simulated ‘psycho-therapist’ that could interact with a user,
parsing their questions and replying with follow-up questions.
- AI 2.0 uses much more sophisticated natural language interaction, such as that found today in Siri
or ‘OK Google’.
- Today’s state-of-the-art ‘AI 3.0’ (not a universally used term, but you get the idea) uses genetic or
evolutionary algorithms, self-learning algorithms that do not even need to be told how to accomplish
a specific goal. In many ways they are structured around biological metaphors such as neural
networks.
Plug and pray. Intelligence killer robots and many other things form a threat, it’s already there. Also,
consequences for jobs: a lot of professions will end soon.
NBT 4 - Work redefined: hyper specialization
4-hour workweek, freelancing, crowdsourcing
Disrupt: Imagine no possessions: the sharing economy and trust
Sharing economy – economic and social activity involving online transactions. Growing out of the
open-source community to peer-to-peer based sharing of goods and services, now it’s even bigger:
any sales transactions that are done via online market places, even the B2B (business to business)
ones. Access is the new ownership
Based on:
1. Identity and verification – credit card verification (buyer)
2. Trust – insurance, deposit, reputation (platform)
2. Identity and verification – reviews, referrals, social activity/relationships, online behavior (seller)
NBT – 5 - Privacy
Privacy, security and censorship: google, it’s not about whenever you have something to hide it’s
about what it done with the information. Plus, there is nowhere to hide.
A combination of social media and search engine giants, combined with mobile devices that are
constantly tracked, cloud services, a small number of dominant players that are often closely aligning
with governments, and governments that also increasingly monitor and collect data even without
concrete suspicions, together forms a recipe where privacy is non-existent. Very few organizations
or whistleblowers counter this, and those that do often end up in difficult situations. Case in point is
the Dutch referendum-initiative run by several Amsterdam students, starting on September 4 to
block a law allowing the Dutch government to collect an unprecedented amount of data without –
the initiative argues- sufficient privacy safeguards. Good to follow this and form your own opinion!
,Part 2: Digital Strategy
Digital strategy 1: Using Digital Technologies for Strategic Advantage
Required reading
- Textbook Chapter 2, 3 & 4
- Article 1: Weill & Woerner – Digital Ecosystem
- Article 2: Edelman & Singer – Competing on Customer Journeys
- Slides
Textbook summary – Chapter 2: Strategy & Technology
The Danger of Relying on Technology
Firms strive for sustainable competitive advantage. The area where strategy and technology leads to
the question: “How can I possibly compete when everyone can copy my technology and the
competition is just a click away?” According to Porter the reason firms suffer margin-eroding
competition is because they’ve defined themselves according to operational effectiveness rather
than strategic positioning, performing different activities than rivals or the same in a different way.
Understand the value chain and five forces.
Operational effectiveness is performing the same tasks better than rivals perform them. When
offerings are the same, they are more commodity than differentiated. This leads to the fast follower
problem. The problem exists when rivals watch a pioneer’s efforts, learn from success and missteps,
enter the market with comparable or superior product at lower cost.
Resource-based view of competitive advantage: are resources valuable, rare, imitable and no
substitutable? Then a sustainable competitive advantage can be created.
Straddling are attempts to occupy more than one position, while failing to match the benefits of a
more efficient singularly focused rival.
Key takeaways:
- Technology is easy to copy, alone rarely offers competitive advantage
- Firms that leverage technology for strategic position use technology to create competitive
assets or ways of doing business that are difficult to copy
- True sustainable advantage comes from assets and business models that are simultaneously
valuable, rare, difficult to imitate and for which are no substitutes
Powerful resources
(1)The value chain; combine isolated resources to make them stronger and more difficult to match
for rivals. The chain can than be used to map a firm’s efficiency and to benchmark it against rivals,
revealing opportunities to use technology to improve processes and procedures. When resistant to
imitation, a superior value chain may yield a sustainable competitive advantage. Tech only helps in
improving the speed and quality of execution.
Primary components are:
1. Inbound logistics – getting inputs into the firm from suppliers
2. Operations – turning inputs into products/services
3. Outbound logistics – delivering products or services to consumers/retailers/partners
4. Marketing and sales – customer engagement, pricing, promotion and transaction
5. Support
,Secondary components are:
1. Firm infrastructure (GM, planning, finance and IS)
2. HRM (recruiting, training and development)
3. Technology, research development
4. Procurement (obtaining, buying goods and services)
(2)Brand; a strong brand proxies quality and inspires trust. Tech can play a role in rapidly and cost-
effectively strengthening a brand. If the firm performs well, consumers can often be enlisted to
promote a product or service called (so-called viral marketing).
(3)Scale; business benefit from economies of scale when the cost of an investment can be spread
across increasing units of production or in serving a growing customer base. Also bargaining power
with its suppliers and buyers can be gained. The scale of investment can also act as a barrier to entry
for potential new entrants/competitors.
(4)Switching costs & Data; cementing customers in the firm. Sources of switching costs are 1)
learning costs, 2) information and data, 3) financial commitment, 4) contractual commitments,
5)search costs and 6) loyalty programs. So, in order to win customers from an established incumbent,
a late-entering rival must offer a product or service that not only exceeds the value offered by the
incumbent’s value but also any customer switching costs.
(5)Differentiation; products that are nearly identically offered are commodities. As customers are
highly price focused, tech can be leveraged to differentiate offerings (recommendation systems, or
customer data).
(6)Network Effects; (sometimes called network externalities or Metcalfe’s Law) exist when a product
or services becomes more valuable as more people use it.
(7)Distribution Channels; leverage products provided by others to create new distribution channels
to reach customers via application programming interfaces (API’s). Essentially programming hooks
that allow other firms to tap into their services.
Key takeaways:
- Technology can play a key role in creating and reinforcing assets for sustainable advantage
by enabling an imitation-resistant value chain; strengthening a firm’s brand; collecting useful
data and establishing switching costs; creating a network effect; creating or enhancing a
firm’s scale advantage; enabling product or service differentiation; and offering an
opportunity to leverage unique distribution channels.
- The value chain can be used to map a firm’s efficiency and to benchmark it against rivals,
revealing opportunities to use technology to improve processes and procedures. When a
firm is resistant to imitation, its value chain may yield sustainable competitive advantage.
, - Firms may consider adopting packaged software or outsourcing value chain tasks that are
not critical to a firm’s competitive advantage. A firm should be wary of adopting software
packages or outsourcing portions of its value chain that are proprietary and a source of
competitive advantage.
- Patents are not necessarily a sure-fire path to exploiting an innovation. Many technologies
and business methods can be copied, so managers should think about creating assets like the
ones defined above if they wish to create truly sustainable advantage.
- Nothing lasts forever, and shifting technologies and market conditions can render once
strong assets as obsolete.
Barriers to Entry, Technology and Timing
It’s not time nor technology that provides sustainable competitive advantage; it’s what a firm does
with its time and technology lead. If a firm can use time and technology lead to create valuable
assets that others cannot match, it may be able to sustain its advantage. If not, the firm can be
threatened by new entrants.
Key Framework: The Five Forces of Industry Competitive Advantage. In cases where network effects
are strong or a seller’s goods are highly differentiated, the Internet can strengthen supplier
bargaining power. Highly differentiated sellers that can advertise their products to a wider customer
base can demand higher prices. However, in markets where commodity products are sold, the
Internet can increase buyer power by increasing price transparency, counteraction information
asymmetry.
Textbook summary – Chapter 3: Zara: Fast Fashion
How can a firm’s value chain enable quick reactions to the market:
- Vertical integration: owning several layers of a value chain, a firm can leverage tech to speed
up complex tasks, lower cycle time and reduce error
- Inventory optimization: helps determining how many of which items need to be delivered.
E.g. RFID tech, which enables to gather data about the logistic processes.
- Customer focus through store and data management (to sense changes in the market)
Omnichannel: an approach to retail that offers consumers an integrated and complementary set of
shop, sales, and return experiences.
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