Download Mastering the digital marketplace

Mastering the digital
marketplace
Simo Vuorinen
The digital marketplace
Macroeconomic theories’ four components:
•land
•labor
•capital
•technology
Digital economy: for the first time, technology
becomes a dominant force.
The IT reaches even the most traditional industries.
Evolution of the digital
economy
Digital
Economy
Global
Economy
World
Economy
Service
Economy
Industrial
Economy
Agricultural
Economy
1700
1800
1900
2000
Competition changes
•“New brat on the block” - the empowered consumer: the balance
of power in commerce shifts to the consumer.
•Distributors compete less on their ability to manage fleet of
trucks, and more on their ability to know where widgets are in
transit
•Retailers compete less on the position of the store and store
layouts, and more on how they track customer buying patterns
New Values
Traditional consumer values:
•quality
•price
•brand
New values:
Time-value,
Content.
Example:
Psion vs. Palm
New Values
Consumer is driven by
•pursuit of time
•pace of life
•information assimilation
•communication
Example:
MS 95 evolution to MS 98
CEO’s choices
Redefine & reposition
Advantage
BPR and other
Adopt best practices
Survive
cost cutting and
operational initiatives
Business as usual
Decay
Yesterday
Today
Tomorrow
Rules have changed
In the digital economy technology is the only
economic commodity that will cost less as time passes
The DE provides a free channel of information
distribution
The DE removes barriers such as size, geographic
positioning, and need of the real estate
The value of time
Kurt Salmon Survey: 56% of consumers agreed they
had far less leisure time than they used to have
Almost 40% of consumers responded that if given a
choice between more time or more money, they would
choose time
Consumers are spending less time shopping and
cooking in attempt to create more leisure time
Examples: Encyclopedia Britannica vs. Encarta,
Peapod groceries, 3M
The value of content
Container: a physical product
Content: intangible element - typically accompanying
information, knowledge, or service that adds value to
the container
Consumers are beginning to appreciate containers that
include additional content
New: content can be customized - mass-customization
Example: Watch vs. watch - functionality, Palm Pilot
modules
TODOs:
Price:
•Conventional pricing strategy: based on resource
availability
•Future (today?) pricing strategy: based on increased
choices of content
Quality:
•Rather expectation, not much of a playing-card
Branding - soft assets increasingly important:
•Self-expression
•Emotional satisfaction
TODOs:
•Create a strong link to the consumer by streamlining
the produc development cycle -> reaction speed
•Netscape Navigator
•Attain the perfect degree of consumer interaction
•Offer customizable products based on standard
components
•Intel Celeron, car sales
•Clearly communicate the value you offer to
consumers
•Set consumer prices based on the value you offer - not
on your costs
Evolution of the traditional
supply chain
•Late 50’s: beginning of the traditional supply chain
•Companies started applying statistical and mathematical methods to their
operations
•Cost of IT declines
•80’s: EDI
•90’s: electronic links within the traditional supply chain and outside the
supply chain -> digital value chain
U.S. employment by occupation (percent of total)
80 %
Knowledge worker
Touch labor
60 %
Agriculture
40 %
20 %
1820
1840
1860
1880
1900
1920
1940
1960
1980
1995
The coming of age of the
digital value chain
•Traditional supply chain: dysfunctional, carries
significant administrative, transactional, and financial
costs that do not add value to the end consumer
•Companies who participate in digital value chains that
extend communication beyond any two adjoining links
create 65 % more shareholder wealth for each dollar of
earnings than those still operating in the traditional
supply chain mode
Forces shaping the digital
value chain
•Information and innovation
•Availability of capital
•Globalization
New wealth from soft assets:
•New ideas and creative capacity are soft assets - they
are not reflected on the balance sheet
•Soft assets are the primary creators of wealth in the
digital economy
New business model: the
digital value network
A digital value network (DVN) is a community of
business partners and customers that is connected
using information technology
•Faster
•More dynamic
•Players work together to maximize their combined
value to the end consumer
DVN components
•Digital value chains
•Digital function platform
•Infomediaries
DVN components
Digital value chains:
•Producers form a digital value chain to create a far more
efficient, rapid, and flexible version of the traditional
supply chain
•One or more participants take the role of an anchor
Digital function platform (DFP):
•Multiple digital value chains form a DFP.
•DFP is the service or technology platform that supports
business processes across multiple value chains.
Example: SAP, floppy, EDI standard, Sun Jini
DFP example - Sun Jini
Source: Jini whitepaper, Sun Microsystems, http://www.sun.com/jini/
DVN components
Infomediary:
•Definition 1: a company that collects and manages
access to consumer information
•Definition 2: a company that facilitates the exchange of
information between other parties, such as company that
matches buyers and sellers in an electronic market
Example: Sonera Plaza, LetsBuyIt, Yahoo
DVN components infomediary continued...
Infomediary tasks:
•Integrating services and needs
•Aggregating services and needs
•Creating a floating price system based on supply and
demand
•Managing the group of vendors, suppliers, and
customers
•Monitoring the performance of all members of a DVN
•Saving time for DVN members
•Managing operational functions that include warranty,
exchange, charge-backs, etc.
•Developing new customer markets
Example: Telia
Bringing it all together - the
digital marketplace
The digital
marketplace
Digital Value Network
Infomediary
Consumer
Digital value chain
Consumer
Digital value chain
Consumer
Digital value chain
Conclusion and critics
•Couple of words on TODO’s
•Couple of words on intelligent organizations
•Couple of words on Creating digital value
•Critics and discussion