Assignment 4

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CHAPTER THIRTEEN

CREATING INNOVATIVE ORGANIZATIONS

CLASSROOM OPENER

GREAT BUSINESS DECISIONS – Edwin Land Develops the Polaroid Camera

In 1937, Edwin Land started a company that made a polarizing plastic and named it Polaroid. The business boomed. Land was taking family pictures on his vacation in 1943 when his three-year-old daughter asked why they had to wait so long to see the developed photographs. Land was struck with the idea of combining the polarization technology with developing films. By 1950, Land had a camera that produced black-and-white images and by 1963, he released a camera that produced color pictures. The Polaroid camera took off and by the late 1960s, it was estimated that 50 percent of American households owned one.

If Polaroid executives had used Porter’s Five Forces analysis would they have discovered the threat of substitute products of the digital camera?

What could they have done to combat this threat?

CLASSROOM EXERCISE

First Movers that Flopped

The right technology at the wrong time. This slideshow displays ten products that were first movers but that failed to move beyond that status.

http://etech.eweek.com/slideshow/index.php?directory=first_movers

Ask your students if they can list any additional first movers that flopped

LEARNING OUTCOMES

Compare disruptive and sustaining technologies and explain how the Internet and WWW caused business disruption

Describe ebusiness and its associated advantages

A detailed review of the learning outcomes can be found at the end of the chapter in the textbook

DISRUPTIVE TECHNOLOGY

Digital Darwinism – Implies that organizations which cannot adapt to the new demands placed on them for surviving in the information age are doomed to extinction

How can a company like Polaroid go bankrupt?

CLASSROOM OPENER

GREAT BUSINESS DECISIONS – Edwin Land Develops the Polaroid Camera

If Polaroid executives had used Porter’s Five Forces analysis would they have discovered the threat of substitute products of the digital camera?

What could they have done to combat this threat?

CLASSROOM EXERCISE

First Movers that Flopped

The right technology at the wrong time. This slideshow displays ten products that were first movers but that failed to move beyond that status.

http://etech.eweek.com/slideshow/index.php?directory=first_movers

Ask your students if they can list any additional first movers that flopped

DISRUPTIVE VERSUS SUSTAINING TECHNOLOGY

What do steamboats, transistor radios, and Intel’s 8088 processor all have in common?

Disruptive technology – A new way of doing things that initially does not meet the needs of existing customers

Sustaining technology – Produces an improved product customers are eager to buy

What do steamboats, transistor radios, and Intel’s 8088 processor all have in common?

They are all disruptive technologies

CLASSROOM EXERCISE

Disrupting the Classroom

Break your students into groups and ask them to identify the primary differences between disruptive and sustaining technologies, along with several current examples of each

Disruptive technologies:

Disruptive technologies redefine the competitive playing fields of their respective markets

Disruptive technologies tend to open new markets and destroy old ones

Disruptive technologies typically cut into the low end of the marketplace and eventually evolve to displace high-end competitors and their reigning technologies

Sustaining technologies:

Sustaining technologies tend to provide us with better, faster, and cheaper products in established markets

Sustaining technologies virtually never lead in markets opened by new and disruptive technologies

DISRUPTIVE VERSUS SUSTAINING TECHNOLOGY

The above figure only displays the top four and bottom four companies. To review the entire figure please refer students to the text.

This figure displays companies that are expecting future growth to occur from new investments (disruptive technologies) and companies that are expecting future growth to occur from existing investment (sustaining technologies)

Ask your students to list additional companies, not mentioned in the figure, that depend mostly on new investments (disruptive technologies) for profits

Ask your students to list additional companies, not mentioned in the figure, that depend mostly on existing investments (sustaining technologies) for profits

DISRUPTIVE VERSUS SUSTAINING TECHNOLOGY

Innovator’s Dilemma discusses how established companies can take advantage of disruptive technologies without hindering existing relationships with customers, partners, and stakeholders

The Innovator’s Dilemma is a book by Clayton M. Christensen

Companies like Xerox, IBM, Sears, and DEC all listened to existing customers, invented aggressively in technology, had their competitive antenna up, and still lost their market-dominate positions

Christensen believes that these companies placed too great an emphasis on satisfying customers’ current needs, while forgetting to adopt new disruptive technology that will meet customers’ future needs, thus causing the companies to eventually fall behind

Ask your student to identify several additional companies that fell victim to the innovator’s dilemma

CLASSROOM EXERCISE

Clayton in the Classroom

Show your student’s the video on MIT highlighting Clayton Christensen, simply google Clayton Christensen for his list of talks on disruptive technologies

THE INTERNET AND WORLD WIDE WEB – THE ULTIMATE BUSINESS DISRUPTORS

One of the biggest forces changing business is the Internet – A massive network that connects computers all over the world and allows them to communicate with one another

Organizations must be able to transform as markets, economic environments, and technologies change

Focusing on the unexpected allows an organization to capitalize on the opportunity for new business growth from a disruptive technology

Do your students agree that the Internet is an example of a disruptive technology?

When it was first introduced would they consider it a form of disruptive technology?

CLASSROOM EXERCISE

Finding Innovation

Innovation, new ideas, and new technology are exciting. It is currently estimated that everything we know technically will represent 1 percent of all technology in 2050. Break your students into groups and ask them to search the Internet for the most exciting form of innovation that is going to hit our market and change our lives over the next ten years. Have your students present their findings to the class and offer a small prize to the winner.

A few examples include:

Computers that offer smells, click on a perfume and the scent permeates from your computer, movie theatres will offer smells that correspond to the movie

Electronic toilets – analyze output and let you know if you getting sick days before the cold actually hits. Great for rest homes and hospitals

Planes the size of small ships that offer shopping and restaurants

Ships the size of small cities where you can purchase an apartment

What's For Dinner? Just Call Your Refrigerator – google smart appliances to show your students what’s new in the kitchen!

THE INTERNET AND WORLD WIDE WEB – THE ULTIMATE BUSINESS DISRUPTORS

The Internet began as an emergency military communications system operated by the Department of Defense

Gradually the Internet moved from a military pipeline to a communication tool for scientists to businesses

Internet – computer networks that pass information from one to another using common computer protocols

Protocol – standards that specify the format of data as well as the rules to be followed during transmission

CLASSROOM EXERCISE

Where the Internet Really Started

Ask students, “How did the Internet (really) get started.” A few responses might include: Al Gore (“Information Superhighway”), or the Department of Defense (ARPANET), or even Bill Gates (Microsoft)

Ask students to “Imagine an almost instantaneous communication system that would allow people and governments all over the world to send and receive messages about politics, war, illness, and family events. The government has tried and failed to control it.” Was it the Internet? Nope, the humble telegraph fit this bill way back in the 1800s. The parallels between the now-ubiquitous Internet and the telegraph are amazing, offering insight into the ways new technologies can change the very fabric of society within a single generation.

Emphasize the history of the telegraph: Begin with the funny story of a mile-long line of monks holding a wire and getting simultaneous shocks in the interest of investigating electricity, and ending with the advent of the telephone (this is the true scenario)

Discuss the early “online” pioneers: Samuel Morse, Thomas Edison, and a seemingly endless parade of code-makers, entrepreneurs, and spies who helped ensure the success of this communications revolution

With the invention of the telegraph, the world of communications was forever changed. The telegraph gave rise to creative business practices and new forms of crime. Romances blossomed over its wires. In addition, attitudes toward everything from news gathering to war had to be completely rethought. The saga of the telegraph offers many parallels to that of the Internet in our own time, and is a remarkable episode in the history of technology.

THE INTERNET AND WORLD WIDE WEB – THE ULTIMATE BUSINESS DISRUPTORS

World Wide Web (WWW) – Provides access to Internet information through documents including text, graphics, audio, and video files that use a special formatting language called HTML – hypertext markup language

Web browser – Allows users to access the WWW

Hypertext Transport Protocol – The Internet protocol Web browsers use to request and display Web pages using URL – universal resource locator

Are the Internet and the WWW synonymous?

People often interchange the terms Internet and the World Wide Web, but these terms are not synonymous

The Internet is a global public network of computer networks that pass information from one to another using common computer protocols

The World Wide Web is a global hypertext system that uses the Internet as its transport mechanism

The World Wide Web operates on the Internet

CLASSROOM EXERCISE

The 13 Most Embarrassing Web Moments

The Internet is the most efficient information distribution system ever known. But if you're not careful, it's also the perfect way to embarrass yourself in front of the entire world. Google PC World for the top 13 most embarrassing web moments

There were 1 billion Internet users in 2005

How will 2 billion additional Internet users change the competitive landscape for businesses over the next few years?

Greater access to a larger number of customers

More competitors

Location and distance becomes a smaller factor for businesses

THE INTERNET AND WORLD WIDE WEB – THE ULTIMATE BUSINESS DISRUPTORS

Reasons for growth of the WWW

Microcomputer revolution

Advancements in networking

Easy browser software

Speed, convenience, and low cost of email

Web pages easy to create and flexible

What are the two primary reasons for growth of the WWW?

Two events changed the history of the Internet

On August 6, 1991 Tim Berners-Lee built the first website

Marc Andreesen built and distributed Mosaic

WEB 1.0 – THE CATALYST FOR EBUSINESS

The Internet has had an impact on almost every industry including

Travel

Entertainment

Electronics

Financial services

Retail

Automobiles

Education and training

Industry Business Changes Due to Technology

Travel Travel site Expedia.com is now the biggest leisure-travel agency, with higher profit margins than even American Express. Thirteen percent of traditional travel agencies closed in 2002 because of their inability to compete with online travel.

Entertainment The music industry has kept Napster and others from operating, but $35 billion annual online downloads are wrecking the traditional music business. U.S. music unit sales are down 20 percent since 2000. The next big entertainment industry to feel the effects of ebusiness will be the $67 billion movie business.

Electronics Using the Internet to link suppliers and customers, Dell dictates industry profits. Its operating margins have risen from 7.3 percent in 2002 to 8 percent in 2003, even as it takes prices to levels where rivals cannot make money.

Financial services Nearly every public e-finance company left makes money, with online mortgage service Lending Tree growing 70 percent a year. Processing online mortgage applications is now 40 percent cheaper for customers.

Retail Less than 5 percent of retail sales occur online. eBay is on track this year to become one of the nation’s top 15 retailers, and Amazon.com will join the top 40. Wal-Mart’s ebusiness strategy is forcing rivals to make heavy investments in technology.

Automobiles The cost of producing vehicles is down because of SCM and Web-based purchasing. eBay has become the leading U.S. used-car dealer, and most major car sites are profitable.

Education and training Cisco saved $133 million last year by moving training sessions to the Internet, and the University of Phoenix online college classes please investors.

CLASSROOM EXERCISE

Business Disruption

Break your students into groups and assign them each a different industry from above

Ask them to review the Figure which displays the Internet’s impact on each industry and have them update how new technologies are changing these industries even further

WEB 1.0 – THE CATALYST FOR EBUSINESS

Web 1.0 – A term to refer to the WWW during its first few years of operation between 1991 and 2003

Ecommerce – Buying and selling of goods and services over the Internet

Ebusiness – Includes ecommerce along with all activities related to internal and external business operations

Ebusiness opened up a new marketplace for any company willing to move its business operations online

Paradigm shift – Occurs when a new radical form of business enters the market that reshapes the way companies and organizations behave

Ask your students to list other types of paradigm shifts besides the Internet

Radio

Printing press

WEB 1.0 – THE CATALYST FOR EBUSINESS

Both individuals and organizations have embraced ebusiness to enhance productivity, maximize convenience, and improve communications

EXPANDING GLOBAL REACH

The Internet’s impact on information

Easy to compile

Increased richness

Increased reach

Improved content

What is the difference between information richness and information reach?

Information richness refers to the depth and breath of information transferred between customers and business

Instead of a company catalog with a simple text box and perhaps a small photo, the Web allows companies to post 3-dimensional photos, video, customer reviews, newspaper and magazine articles, product comparisons including price, etc.

Information reach refers to the number of people a business can communicate with, on a global basis

Companies can now reach customers around the world, not just customers who can physically travel to their store

Internet’s Impact on Information

Easy to compile - Searching for information on products, prices, customers, suppliers, and partners is faster and easier when using the Internet.

Increased richness - refers to the depth and breadth of information transferred between customers and business. Businesses and

customers can collect and track more detailed information when using the Internet.

Increased reach - refers to the number of people a business can communicate with, on a global basis. Businesses can share information with numerous customers all over the world.

Improved content - A key element of the Internet is its ability to provide dynamic relevant content. Buyers need good content descriptions to make informed purchases, and sellers use content to properly market and differentiate themselves from the competition. Content and product description establish the common understanding between both parties to the transaction. As a result, the reach and richness of that content directly affects the transaction.

OPENING NEW MARKETS

Mass customization – The ability of an organization to tailor its products or services to the customers’ specifications

Personalization – Occurs when a company knows enough about a customer’s likes and dislikes that it can fashion offers more likely to appeal to that person

CLASSROOM EXERCISE

Video Clip: Personalization

I use this clip for the beginning of my mass-customization and personalization lecture. http://www.youtube.com/watch?v=vAdjn1_pppY

Personalization occurs when a website can know enough about a person’s likes and dislikes that it can fashion offers that are more likely to appeal to that person. Personalization involves tailoring a presentation of an ebusiness website to individuals or groups of customers based on profile information, demographics, or prior transactions. Amazon uses personalization to create a unique portal for each of its customers.

A blog (the contraction of the phrase “Web log”) is a website in which items are posted on a regular basis and displayed in reverse chronological order. Like other media, blogs often focus on a particular subject, such as food, politics, or local news. Some blogs function as online diaries. A typical blog combines text, images, and links to other blogs, Web pages, and other media related to its topic. Since its appearance in 1995, blogging has emerged as a popular means of communication, affecting public opinion and mass media around the world.

Real simple syndications (RSS) is a family of Web feed formats used for Web syndication of programs and content. RSS is used by (among other things) news websites, blogs, and podcasting, which allows consumers and journalists to have news constantly fed to them instead of searching for it. In addition to facilitating syndication, RSS allows a website’s frequent readers to track updates on the site.

Podcasting is the distribution of audio or video files, such as radio programs or music videos, over the Internet to play on mobile devices and personal computers. Podcasting’s essence is about creating content (audio or video) for an audience that wants to listen when they want, where they want, and how they want. Podcasters’ websites also may offer direct download of their files, but the subscription feed of automatically delivered new content is what distinguishes a podcast from a simple download or real-time streaming. Usually, the podcast features one type of show with new episodes either sporadically or at planned intervals such as daily, weekly, etc.

Ask your students to create a list of companies or products that are using mass customization

Mini Cooper

Nike shoes

M&Ms

Ask your students to create a list of products that feature personalization

Amazon is the best example

Netflix

REDUCING COSTS

The Long Tail – Refers to the tail of a typically sales curve

Ask your students to list products they would include in the head of the sales curve

Top 40 music

Top 40 videos

Brand name apparel

Top selling books

Regular sized shoes and clothes

Ask your students to list products they would include in the long tail of the sales curve

Indie bands

Irregular sized shoes and clothes

Books on specific topics

REDUCING COSTS

Intermediary – Agents, software, or businesses that provide a trading infrastructure to bring buyers and sellers together

Disintermediation

Reintermediation

Cybermediation

Disintermediation – Occurs when a business sells directly to the customer online and cuts out the intermediary

Reintermediation – Steps are added to the value chain as new players find ways to add value to the business process

Cybermediation – Refers to the creation of new kinds of intermediaries that simply could not have existed before the advent of ebusiness

REDUCING COSTS

Business Value of Disintermediation

For the reasons discussed in the previous slide, information reach and information richness, companies want to be able to post audio, video, graphic and text files to help run their businesses

CLASSROOM EXERCISE

Formatting the Web

Ask your students their majors – accounting, finance, marketing, management, human resources, information technology, etc.

List the different majors on the board and ask them how each one can use the different file formats to improve the way they achieve tasks

Accounting – video and audio files for audits

Marketing – all formats for website sales and marketing campaigns

Finance – video and audio files for training on new tax laws or training new employees how to use the systems

Human Resources – video and audio files for training and demonstration of sexual harassment or unethical behavior that is not tolerated by the company

IMPROVING EFFECTIVENESS

Clickstream data tracks the exact pattern of a consumer’s navigation through a website

Clickstream data can reveal

Number of page views

Pattern of websites visited

Length of stay on a website

Date and time visited

Number of customers with shopping carts

Number of abandoned shopping carts

Click-stream data can reveal a number of basic data points on how consumers interact with websites

Ask your students what an organization can learn from understanding click-stream data

For example, what does number of abandoned shopping carts tell an organization?

MARKETING/SALES

Generating revenue on the Internet

Banner ad - Box running across a web page that contains advertisements

Pop-up ad - A small web page containing an advertisement

Associate program (affiliate program) - Businesses generate commissions or royalties

Viral marketing - A technique that induces websites or users to pass on a marketing message

CLASSROOM EXERCISE

Viral Marketing Video Clip

From Spam to Viral Marketing from John Cleese

One B2B marketer used a lot of silliness to increase its web traffic tenfold and generate thousands of sales leads starting a viral phenomenon which went from a wacky idea to revenue-generating success. Great John Cleese video on the backup trauma institute. I like to use this video when introducing IT Architectures. This is also one of the first examples of a successful viral marketing campaign.

http://www.backuptrauma.com/video/default2.aspx

An online ad (often called banner ad) is a box running across a web page that is often used to contain advertisements. The banner generally contains a link to the advertiser’s website. Web-based advertising services can track the number of times users click the banner, generating statistics that enable advertisers to judge whether the advertising fees are worth paying. Banner ads are like living, breathing classified ads.

A pop-up ad is a small web page containing an advertisement that appears on the web page outside of the current website loaded in the web browser. A pop-under ad is a form of a pop-up ad that users do not see until they close the current web browser screen.

Associate programs (affiliate programs) allow businesses to generate commissions or royalties from an Internet site. For example, a business can sign up as an associate of a major commercial site such as Amazon. The business then sends potential buyers to the Amazon site using a code or banner ad. The business receives a commission when the referred customer makes a purchase on Amazon.

Viral marketing is a technique that induces websites or users to pass on a marketing message to other websites or users, creating exponential growth in the message’s visibility and effect. One example of successful viral marketing is Hotmail, which promotes its service and its own advertisers’ messages in every user’s email notes. Viral marketing encourages users of a product or service supplied by an ebusiness to encourage friends to join. Viral marketing is a word-of-mouth type advertising program.

Mass customization is the ability of an organization to give its customers the opportunity to tailor its products or services to the customers’ specifications. For example, customers can order M&M’s with customized sayings such as “Marry Me.”

IMPROVING EFFECTIVENESS

Website metrics include

Visitor metrics

Exposure metrics

Visit metrics

Hit metrics

Review each section of the website metrics Figure for a detailed listing of visitor, exposure, visit, and hit metrics

CLASSROOM EXERCISE

Measuring Metrics

Break your students into groups and assign each group one of the four categories found in the above Figure

Have your students detail each category explaining how each metric can be used to help an organization improve its operations

Ask your students to share their answers with the class

LEARNING OUTCOME REVIEW

Now that you have finished the chapter please review the learning outcomes in your text

Be sure to review the learning outcomes included in the end-of-chapter material