Ch. 1 – Setting the Stage: Technology and the Modern Enterprise
Technology/the internet is reshaping industries and redefining skills needed to reach today’s
consumers. It globalizes countries and companies; creating profound shifts in the way we
communicate and advertise.
New technologies:
- Fueled globalization
- Redefined concepts of software and computing
- Crushed costs
- Fueled data-driven decision making
- Raised privacy and security concerns
Many successful technology firms were created by young people. Examples are Microsoft
(Bill Gates), Dell (Michael Dell), Facebook (Mark Zuckerberg) and Apple (Steve Jobs).
Entrepreneurship has no minimum age requirement.
Tech skills are increasingly important, as technology is embedded in more and more job
functions (Moore’s Law; tech faster and cheaper hence embedded). Modern finance or
accounting wouldn’t exist without tech, the marketing landscape changed (higher ROI, social
media, search engine marketing (SEM), search engine optimization (SEO), customer
relationship management (CRM), personalised systems etc). Technology is often key to a
firm’s operations management’s future. HR uses tech for hiring, training, screening and
evaluation. First cuts are likely to be made on keywords by a database; not a human being.
Law subjects changed, as ‘problems’ focus more on technology (piracy, privacy, patents).
Because of the changes, tech jobs rank among the best and highest-growth positions, and
tech firms among the best and highest-paying firms to work for. Information systems (IS)
jobs are diverse, ranging from those that require heavy programming skills to those focused
on design, process, project management, privacy and strategy.
,Article Weill, P., & Woerner S.L. (2015) – Thriving in an increasingly digital ecosystem
How should companies prepare for digital disruption of their businesses?
Findings:
- Use digital techniques to know more about the end consumer and help solve their life
event needs
- Companies that operate strictly as suppliers will be under growing pressure.
- Consider developing a digital ecosystem and partnering with others, even
competitors.
Digital disruption – breaking down industry barriers and creating new opportunities, while
destroying long-successful business models.
Digital disruption creates threats, but also opportunities. Companies can leverage strong
customer relationships and increase cross-selling opportunities.
Important insight: in period of digital disruption, businesses focused narrowly on value
chains were at a disadvantage; they need to think more broadly about their business
ecosystems. Companies that had 50% of more revenues from digital ecosystems and
understood their end customers better than their average competitor had higher revenue
growth and higher profit margins than the industry average.
,Ch2 Strategy and technology: concepts and frameworks for understanding what separates
winners from losers
Many firms struggle at the intersection where strategy and technology meet.
Firms strive for sustainable competitive advantage; financial performance that consistently
outperforms the industry peers. Hard to achieve, especially when competition involves
technology (easy and fast to copy, everyone works with same ‘lego’). Hence tech is rarely a
source of competitive advantage.
Porter: suffering firms define themselves according to operational effectiveness –
performing the same tasks better than rivals (risk; sameness) – rather than strategic
positioning. When offerings can be interchanged with one another (windows vs laptop,
different brands of milk) they are a commodity. The more commoditized an offering, the
more competition will be based on price. Last follower problem; savvy rivals watch a
pioneer’s efforts, learn from their success/failures and enter the market quickly with a
comparable/superior product at lower cost. “Move fast and break things” vs “Move last and
take things”.
Operational effectiveness is critical, but not enough to get sustainable competitive
advantage. In contrast, strategic positioning refers to performing different activities from
those of rivals, or same activities in a different way. Technology can be essential to create
competitive assets or ways of doing business (and this cán be difficult to copy!) Example:
traditional supermarket vs online supermarket (less peaks, labor costs, waste, rent, energy
costs etc). Leads to higher inventory turns, selling product faster so it collects money quicker
than rivals. Tech is critical to online supermarket strategic positioning advantage. Traditional
grocers can’t fully copy due to straddling two markets (low-margin store, high-margin
delivery). Entry costs are high, lack of existing data etc.
Resource-based view of competitive advantage. To maintain SCA, resources
(assets/business models) must have all four characteristics. They must be:
- Valuable
- Rare
- Imperfectly imitable (tough to imitate)
- Non-substitutable
This way of thinking can help avoid carelessly entering markets simply because there is
growth.
Often, a firm with effective strategic position can create an arsenal of assets that reinforce
one another, creating advantages that are difficult for rivals to challenge (supermarket
example!). The value chain is the set of activities through which a product or service is
created and delivered to customers.
There are five primary components of the value chain:
- Inbound logistics – getting needed materials and other inputs from suppliers
- Operations – turning inputs into products or services
- Outbound logistics – delivering products or services to consumers, distribution
centers, retailers or others
, - Marketing and sales – customer engagement, pricing, promotion and transaction
- Support – service, maintenance and customer support
Secondary (supporting) components are:
- Firm infrastructure – functions that support the whole firm, including general
management, planning, IS and finance
- HRM – recruiting, hiring, training and development
- Technology/ R&D – new product and process design
- Procurement – sourcing and purchasing functions
The value chain can give a competitive advantage. Firms can create an imitation-resistant
value chain; develop a way of doing business that competitors struggle to replicate,
technology often plays a key enabling role here. Elements in their value chain work together
to create and reinforce competitive advantages.
Incumbents of the market will often straddle across two business models, late movers in the
market will struggle due to underdevelopment.
Analysis of the value chain can also reveal operational weaknesses, for which technology is
often great to improve. Firms can buy software tools, or efficiently integrate activities within
the firm. Such as supply chain management (linking inbound and outbound logistics with
operations), customer relationship management (supporting sales, marketing or R&D) or
enterprise resource planning software (automate entire value chain). Note: this all can be
bought by competitors too! To create difficult-to-imitate competitive advantage, firms prefer
to develop their own software rather than buying it.
Channel conflict exists when a firm’s potential partners see that firm as a threat; because it
offers competing products/service via alternative channels or because the firm works closely
with threatening competitors.
A firm is going/taken private when its shares are bought up. Usually done when a firm has
suffered financially and the turnaround will create more loss before gain (Dell example). This
can be done by management/investors, or another firm (mostly hoping to improve results
and reselling shares).
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.
A firm’s brand is the symbolic embodiment of all information connected with a product or
service; hence a strong brand can be a very powerful resource. Consumers use brands to
lower search costs. A brand is built on customer experience, quality, trust, cost-effective.
Viral marketing means consumers are enlisted to promote a product or service. Early
customers for a new service positive press free advertising. Established brands are
hard to swap.
