Understanding Digital Transformation: From Pipelines to Platforms
Digital Transformation Summary
Week 1
Digital Mastery
Leadership that merges knowledge of business and information technology is necessary to steer digital transformations successfully.
Components of Digital Change
- Digitization: Conversion of analog data into digital form.
- Digitalization: The application of digital technologies in the alteration of business processes.
- Digital Transformation: Holistic modification at every level driven by customer needs, which involves incorporating digital technology into business strategies.
Week 2
Strategies for Digital Transformation
Stages of successful innovation
Creating Your Digital Vision
- Leadership Commitment: Requires top-down commitment from leaders who are ready to tear down silos and implement radical new strategies.
Forms of Digital Visions
- Customer Experience: Using digital tools to heighten interaction with customers and gain insights into their behavior.
- Operational Processes: Enhancing visibility and efficiency in operational processes.
- Hybrid Approach: Combining both customer-focused and operational improvement initiatives while choosing between offensive or defensive strategy depending on competitive landscape requirements.
Digital Matrix
Week 3
Synonyms for Digital Ecosystem
- Digital giants: expand horizontally (Apple, Google)
- Industry incubates: traditional large players (Ford, BMW)
- Tech entrepreneur: solving problems in new ways (Tesla, Uber)
Phases of Digital Transformation
- Phase 1: Experiment with digitalization and business models, must consider internal and external experimentation.
- Phase 2: Ideas become business options, digital challenges traditional industry practices.
- Phase 3: All players work together to solve customer problems using digital functionality. Digital will be central to all products/services.
Matrix Use – Sensing
Where is my company positioned on the digital matrix compared with the main competition & industry average?
Assessing position: what player am I…which phase of the three am I in…where am I compared to competitors?
Matrix Use – Responding
Rules for Digital Transformation
- Rules 1-3: Deciding on roles in experimentation, delineating areas of co-creation, describing the future of company work at the intersect of human talent and machine power.
- Rules 4-6: Broad exploration agenda supported by appropriately allocated investment to learn fast from mistakes.
- Rules 7-9: Managing relationships during the phase in which business models are colliding and the key challenges for incumbents are to coexist (hybrid, traditional, and digital) as long as possible.
- Rules 10-12: Streamlining your relationships and using them and technology to reinvent your business and organizational structures by framing and, ultimately, solving problems in society. Thereby differentiate the company.
Platforms vs. Pipelines
Moving From Pipes to Platforms
- Internal to External Activities: From controlling resources internally towards enabling external interactions.
- Ownership to Community Driven Growth: Community-driven growth rather than direct control over assets owned by individuals or organizations within communities themselves such as businesses or government agencies working together towards common goals.
- Inward to Outward Focuses: Shifting away from an internal focus only but engaging with other stakeholders outside enterprise boundaries such as suppliers, partners, customers, etc.
Advantages of Platforms Over Pipelines
Key Benefits
- Scalability: Platforms allow unlimited scaling since they do not have traditional gatekeepers.
- New Supply Exposure: Platforms bring in new resources previously unused or unknown.
- Idle Capacity Utilization: Platforms make use of what would be considered unproductive assets during normal times where there is no demand hence turning them into active sources when needed most.
- Inventory Management: Lean inventory system applied by platforms similar to just-in-time (JIT) thus reducing overhead costs and improving responsiveness.
How does the company invert the platforms?
- Community-driven value leads to the externalization of activities.
- Focusing on people and resources outside of the organization.
- Uber does not own cars, and Facebook does not create content. These are prime examples.
Why Facebook won over Myspace?
It created a freedom platform for users to create values themselves without much opposition.
Role of Digital Technologies
Cloud computing, among others, enhances platforms’ interconnectivity as well as operational capabilities.
Not Just Products But Building Platforms
Ecosystem building that enables users to interact with each other becomes more vital, especially in regions like North America and China where major platform companies exist, e.g., Apple, Google, Alibaba.
Platform Strategy and Network Effects
Week 4
Network Effects
Business Model Canvas
Network Effects: Critical for the success of a platform – positive network effects capture value when more people use it while negative ones may destroy the same if not well managed.
One and Two-Sided Network Effects
Uber has two sides of the market: riders attract drivers, and drivers attract riders.
Many other platform businesses exhibit similar dynamics: PayPal, Airbnb, App Store.
Must balance supply and demand.
Scaling Network Effects
Frictionless entry is the ability to join a platform easily and quickly.
Scaling here means that both sides of the network grow at the same rate.
4 Network Effects
- Same-side effects: These are network effects caused by the impact of consumers from one side of a market on other consumers from the same side—the consumer-to-consumer impacts—also called inter-customer impacts.
- Cross-side effects: These are network effects generated by the impact of consumers from one side (producers) on their counterparts (consumers) or vice versa; i.e., producer-to-consumer impacts or consumer-to-producer impacts.
Competition Between Platforms
Antique Models
Conventional wisdom suggests that the best way to compete is to control the five forces of competition: threat of new entrants, threat of substitute products or services, bargaining power of customers (buyers), bargaining power of suppliers, and industry rivalry or competitive intensity.
Novel Complexities
The five forces are still important but now:
- “Power for networks to remake markets and take platforms elsewhere” – i.e. the internet allows companies to disrupt industries that might otherwise seem distant from them; for example, Amazon Web Services has become a major force in cloud computing after starting off as an e-commerce company selling books online.
- “Moving managerial work from inside to outside” – i.e. traditional corporations used to be vertically integrated, but they’re increasingly outsourcing work to third-party contractors and freelancers via platforms like Uber, Upwork, etc.
Types of Platform Competition
- Platform vs Platform: e.g. PlayStation vs Xbox
- Platform vs Partner: e.g. Amazon competing with their merchants
- Partner vs Partner: e.g. competing apps on the same platform
Experience Economy and Platform Networks
Week 5
Experience Economy
Economic Distinctions
The Experience Economy recognizes that businesses should move from offering mere products or services to creating memorable events which engage customers emotionally thereby increasing differentiation ability while fostering loyalty among consumers.
Platform Networks leverage network effects to scale up supply-demand matching capabilities so as to manage interactions better thereby optimizing growth prospects for any given digital platform while at the same time ensuring satisfaction levels remain high among its users.
Disadvantages
- Recognition of Experiences? Industries have their own means for enhancing experience, e.g., themed dining establishments.
- Why is it now? Tech is driving experiences, competition leads to a search for differentiation, rising affluence, information does not equal economic offering, but instead do experiences.
- Work is a theatre? Adopting an experience-led mindset that thinks about the design and production of things and the design of these things’ orchestration using experiences too.