"Digital Business Delivery" presentation
Sa1_Jyyy
MN7030Session6ValueCreationInNetworks.pptx
Master of Business Administration Digital Business Delivery S9 Value creation in Networks
Professor Nigel Caldwell
Agenda
Network effects
The strong importance of weak ties
Platforms and business models
Future networks: the circular supply chain, sustainability and eco-systems
Network effects
https://www.reliantsproject.com/2020/06/10/concept-4-job-opportunities-and-granovetters-strength-of-weak-ties/
Structural Hole
Theory
Burt, 1992
Network effects
Usually activities yield less value as consumption increases –
The law of diminishing returns e.g. burgers
Networks are different
The more people or organisations participate
The more valuable the network is to participants
The law of diminishing returns does not apply
The Network growth model
“The value of a communications network is proportional to the square of the number of connected users of the system” Bob Metcalfe
Attract users quickly e.g. no charge
Dominate market raising high barriers for new entrants (F/B 2.91bn)
Virtuous circle – bigger network attracts new users which makes network bigger and attracts new users … repeat Or, ???
Vicious circle – smaller network drives users elsewhere which makes network [even] smaller and drives more users elsewhere …Think about Microsofts Bing search engine vs. Google …
What does this mean with AI?
The Network growth model
Subsidised subscription prices – to attract subscribers
Pioneered streaming instead of posting DVDs
Subscription model = data advantage – better targeting of users’
Create own content [N.B. Talents pay decreasing, supporting services salaries growing]
Hyper competition
growth slowing – shares down 25%
Facebook / Meta
Unparalleled growth based on data harvesting
Ageing demographic – parents/grand parents
Hyper competition – TikTok
Competitors (Apple requiring consent to be tracked by advertisers (ATT) – FB lost $10bn – 8.5% of 2021 revenue but 25% of profit
Growth in numbers stalled – active daily users fell 500,000
Recent (but slightly recovered) 25% drop in share price
Not relationships but Data
New uses of data – e.g. US AI led House buying firms
Customisation through data – anticipating customer choices
New delivery Amazon Prime
New market creation – E-Bay, Etsy,
Digital technologies generate, store or process Data
Platforms and business models
Pre digital models
You either made something and then sold it or performed a service and billed for it
Death of the music industry
Is this servitization?
Shows risk of applying new technology to an established market
Digital networks = Disruptive Innovation
New business models
From subscription to freemium
Amazon – bookshops (Supermarkets?)
Digital cameras – Photo developing, Canon
Digital music – the Music labels as all powerful
Digital phone – fixed location landlines, access
Netflicks – TV, cinema, viewing habits/waiting/bingeing
Facebook – TV, radio, letter writing ….
The circular supply chain, sustainability and eco-systems
Future network forms
From chains..
Raw materials
Supplier
Manufacturer
Customer
Consumer
Disposal
Logistics
Consumer
Manufacturer
Customer
Used material
Product
Re-manufacture
Return & recycle
Supplier
Raw materials
The circular
economy
to a circular economy
‘Take, make, waste’
Figure 7.8 A closed-loop supply chain (Johnsen, Howard & Miemczyk 2014) p231
Such a transition for firms in the past often meant focusing on green or ‘eco-efficiency’ issues.
SCM’s association with sustainability owes much to closed loop & remanufacturing (Thierry et al., 1995, Fleischmann et al., 1997; Jayaraman et al., 1999).
Product recycling was rarely seen as a value creating system (Guide et al., 2003).
Carter & Rogers (2008) the first to demonstrate a relationship between enviro. social & economic.
Definition is continuously evolving
A desired outcome of systems that need to achieve economic, environmental & social targets
The rise of sustainability
Clear warnings in the recent past
Brundtland (1987), OECD (1997), Stern (2006)
Supply chain & suppliers: a re-occurring theme
Lamming R. & Hampson J (1996), Cousins & Lamming (2004), Walker et al (2008), Anderson & Skjoett (2009)
Very complex, multi-facetted problem
Poses a unique set of challenges and trade-offs to business & mankind
(Carter & Rogers 2008)
Components of sustainability
Social – Corporate social responsibility, ethics, trade unions
Economic – R&D investment, new technology, ‘Green to Gold’
Environmental - Climate change, impact on ecosystems, and depletion of wildlife & natural resources
‘Durable’
‘Equitable’
‘Responsible’
Sustainable
Adapted: Carter & Rogers (2008)
SDGs
Photo: Source: UN in collaboration with Project Everyone
Source: UN in collaboration with Project Everyone
In 2015 the UN General Assembly formally accepted a new set of 17 measurable SDGs
SDGs
Natural Resource Based View (NRBV)
Builds on RBV to focus on the natural environment
See: Hart (1995), Hart & Dowell (2011)
Adopts a more dynamic view than RBV
Argues RBV is too firm centric, insular and static (i.e. see below)
Why would a firm share a resource nominally considered core to SCA?
Competitive advantage
Cost
Differentiation
Capabilities
Technology Production
Design Distribution
Procurement Service
Resources
Basic requirements Key characteristics
Valuable Tacit (causally ambiguous)
Non-substitutable Socially complex
Rare (firm specific)
Prahalad & Hamel (1990)
Figure: The Resource Based View (RBV)
Teece (1987)
Wernerfelt (1984)
Barney (1991)
Hamel & Prahalad (1994)
Porter (1980, 1985)
Hart (1995) paper
Natural Resource Based View (NRBV)
Needs a more dynamic view: criticisms of RBV
Argues basic assumptions of RBV focus on resource heterogeneity & immobility (Wernerfelt, 1984)
Socially complex
Requires highly coordinated activities involving large numbers of people and teams
Interconnectedness of overlapping strategies
Pollution prevention & product stewardship
Developed through repeated learning & experience
Few individuals grasp overall phenomenon
NRBV: key concepts & model
Companies seeking the goal of sustainable development access resources through fostering supply chain relationships involving external institutional and internal firm interactions
The 3 environmental strategies below are path dependent, embedded and interconnected:
1. Pollution
Prevention
2. Product
Stewardship
3. Sustainable
Development
Lower costs
Pre-empt
Competitors
Future
Position
Minimise emissions,
Effluents & waste
Minimise life-cycle cost of products
Minimise environmental burden of firm’s growth and development
Mars: supply chain impact vs. control
IBM: carbon’s impact on shipment scenarios
From linear chains to cyclical closed loops
Reverse engineering, remanufacture, design for disassembly
Recognises the wastefulness of linear, ‘input-output’ supply chains
‘Closing the loop’ by thinking about cycles of supply
Biomimicry: mankind copying nature’s cycle of re-use
Plastics recycling
It is estimated that only between 2 - 8% of all plastic is currently reused
‘.more plastics than fish in the ocean by 2050’ (EMF, 2016)
Traditional, sustainable & circular SCs
Traditional
Landfill
Raw materials & resources
Sustainable
Circular
Limited natural resources
Limited raw materials & resources
Repair
Recycle
Reuse
Repair
Refurbish
Recycle
Limited landfill
| Traditional | Sustainable | Circular | |
| Strategy | Price-based | Whole cost | Resilient |
| Structure | Linear, open | Partially closed | Closed loop |
| Flow | Input-output | Mixed throughput | Iterative, locked in |
| Focus | Efficiency | Customer effective | Nature, business & value |
| Scale | High volume | High-medium volume | Medium-low |
| Scope | Global | Global & regional | Regional & local |
Adapted: EMF and McKinsey & Co (2012)
Zero landfill
Cascade
Circular economy (CE)
“..an industrial economy that is producing no waste and pollution, by design or intention, and in which material flows are of two types, biological nutrients, designed to re-enter the biosphere safely, and technical nutrients, which are designed to circulate at high quality in the production system without entering the biosphere as well as being restorative and regenerative by design”
Source: Ellen MacArthur Foundation (2012).
A new era?
Product variety
High
Low
High
Production volume
High
Low
Production cost
Homogenous
Heterogeneous
1850
1910
1955
1980
2010
Craft
Production
Mass
Production
Mass
Customization
Networks or
Eco systems?
Figure 7.5 The evolution of production (Johnsen, Howard & Miemczyk 2014) p215
Sustainable consumption
Circular economy
Networks create value that is not additive like manufacturing or co produced like services; network size is critical in many business models through creating data that is an involuntary co-creation.
Master of Business Administration Digital Business Delivery
Professor Nigel Caldwell
