eStrategy -- Day 1 Inventing Marketspace for Internet Success

1. eStrategy -- Day 1Inventing Marketspace for Internet Success Two Day Workshop October 2000 Stuart Henshall

3. Re-Inventing or Inventing?

4. Why eStrategy to invent the future? • “No matter how good your product you are only 18 months away from failure.” • “You can’t shrink yourself to greatness!” • “Good Strategy is always subversive.” • “Best Practice destroys companies and industries but still have to do it.” • “Strategy as a Process of Discovery (rather than positioning)” • “It is no good sticking to your knitting if there is no demand for sweaters.” • “Strategy is where to you want to go and how to get there.” • “Maximise knowledge creation / minimise risk.” Gates, Peters, Hamel, Porter, Prahalad, Nalebuff

5. Discussion:Exploring Our Perspectives • How has your organization responded to the Internet? • Where are your current web initiatives concentrated? E.g. B2B, B2C, C2B, or C2C? • What new business model or net initiative do you find most interesting? • What is your core business in 5 years time?

6. Outline: Day One - Inventing New Marketspace • Orient & Explore the Driving Forces • Changing Strategy Tools and Assessment • Assess New Models • Develop New Functionalities / Internet DNA Day Two - New Opportunities for Wealth Creation • New Roles for COMsumers • Synthesizing Emerging Business Issues • Scanning Agenda • Engaging the Organization

7. Bubble or new order?

8. “When new technologies disrupt entire industries, the worst thing you can do is stay close to your customers” Clayton Christensen Not just technology but the power of: “In the network economy, producing and consuming fuse into a single verb: prosuming” Kevin Kelly disruptive ideas

9. Are common references more than just talk? • Globalization • Intangibles • Netification • Atoms to Bits • Speed - Real-time - 24/7/365 • Mass Customization

10. Discussion:Yes or No? • Will the web reshape your marketplace? • Are new players most likely to re-shape your competitive landscape? • Are your web initiatives a core business function? • Will your organizational structure change significantly? • Are you waiting for a web team to figure it out?

11. Evidence of real economic productivity in new processes? Typical Bank Transaction - 60 times! • Teller $1.25 • Phone $.54 • Atm $.24 • Internet $.02 Job application Health Care Co. • Traditional $128.00 • Internet $.06 Truly efficient companies, particularly in the first couple of waves of change, will be able to drive (overall) productivity at 20% - 40% per year.” John Chambers - Cisco Sept. 2000

12. Discussion:Amazon or E-bay? • Where would you place money for the long term? Amazon or E-bay? Why? • Will Amazon ever make a profit? • What assets justify Amazon’s valuation?

13. Discussion: Driving Forces / Emerging Models Driving Forces Emerging Models

14. Where is your attention? Evolution in eMarkets • Markets • Industry • Business Models • Organizations • Individuals

15. Starting points: • How quickly are new Internet models proliferating that expand the scope, scale and markets for information assets? • With exchange costs near zero how large is the opportunity for real-time information aggregation? • If Consumer data and knowledge become the most important resource in the knowledge economy, who will control it?

16. End to End B2B One to Many B2C Customer - Led New World 2000 2010? Many to One C2B Many to Many C2C Supply Driven Old World How will markets and approaches evolve? What will prevail?

17. What drivers are at work on Industry Structure? Integration driven by: • Best practice in firm • Avoidance of intermediate stage competition • Economies of co-ordination Dis-integration driven by: • Best practice outside the firm • Rise of new entrants or new technologies and business models. • Falling costs of co-ordination Where is the tipping point where all businesses become web-businesses?

18. How will knowledge types impact new economy business models? Explicit Knowledge • Knowledge that has been articulated and codified in words or numbers • Can be retrieved from the tacit knowledge grid and transmitted relatively easily. Harvesting • Intuitions, perspectives, beliefs and values that result from experience • Can best be communicated interpersonally through dialogue with use of metaphors • The mindsets (or mental models of individuals and the collective mindsets of the organizational culture. Tacit Knowledge Aligning

19. So many new ways to capture attention? Upcoming Data Explosion • GPS systems • Wireless • SMART things, things that think, SENSORS • Voice, voice activation • Wearable always on computing • Nano, manufacturing at the molecular level • Genomics and Bio-informatics

20. New marketspace fueled by knowledge / global connectivity. Demand Driven Idea Driven Open / Facilitating • Different Knowledge Markets? • How is competitive space changing? What opportunities for codification and standards? • What’s the real worth of a datamine? How might new recipes be found? • How will consumers gain leverage in data markets? • Where are new forms of idea exchanges emerging? Many to One C2B Many to Many C2C Explicit Transparency Competing for Knowledge Tacit Trust Competing for Attention One to Many B2C End to End B2B Closed/ Mediating Process Driven Supply Driven

21. Will new info aggregators rule?How quickly will your business become commoditized? • lowest price / easy to switch • direct sourcing • transparent margins • informed customers • inventory eliminated • multiple model and feature combinations • new functionality • scope vs scale • agents see www.botspot.com • What % before current model breaks down? 10% now, 30%? • Old value chain deconstructed, no meaning in old context! • Profit a function of Innovation • Recombinant models? • New Alliances?

22. E-commerce changing traditional strategy approaches Idea Driven Open / Facilitating Value Optimization Aggregation Agents / Bots Navigators Info-mediaries Data Markets Many to Many C2C Explicit Transparency Tacit Trust Competing for Knowledge Competing for Attention One to Many B2C Efficiencies & Standards Efficiencies Connectivity Processes Recipes Operational Efficiency Closed/ Mediating Process Driven

23. Changing Rules for Consumer Attention • Open source movement • Competing for permission • 1 to 1 marketing - personalization • From killer website to web business • Markets are conversations

24. Emerging knowledge markets driven by new interactions Real-time Functions Idea Driven Open / Facilitating Conversations Facilitated Co-creation Data Markets Idea Exchanges Many to One C2B Explicit Transparency Tacit Trust Competing for Knowledge Competing for Attention End to End B2B Efficiencies & Standards Datamines Customization Datamines Collaborative Filters Privacy / Permission Closed/ Mediating Process Driven

25. Tomorrow’s attention? Are new functionalities coming from here? Demand Driven Idea Driven Open / Facilitating Many to One C2B Many to Many C2C Explicit Transparency Tacit Trust Competing for Knowledge Competing for Attention End to End B2B One to Many B2C Closed/ Mediating Process Driven Supply Driven

26. Changing approaches to market • C2C / P2P • Real-time • Privacy / Permission • Value Optimization • Operational Efficiency Customers Product Operational Community Market Connectivity

27. Current Models and Tools Learning Objectives: • How do you model your business? • Describe your planning system. • What’s in your strategy toolkit? • Overturning strategic assumptions!

28. Discussion: Starting Point Modeling the Business • As a group select a business, either one you all use or one someone can represent. • Using post-its, how would you model it? How and where is the value created? How are the components defined?

29. Traditional Strategy Assumptions and Themes • Industry Structure is a given • Differentiation within a structure possible • Limited number of Strategic Options • Stability of Industry Structures • Barriers to Entry 70’s How do you Integrate? 80’s How do you explain profits? 90’s How do you root in competencies? 00’s ? Create wealth in a Knowledge Economy? 10’s ? Facilitate migration in ecological systems???? Did we see the underlying patterns and assumptions?

30. Old Views of Strategy are dead! • Industry Structure: • View tries to predict winners, using a static view that if the structure is A then the profit is B. Helps to explain why winners are winners. (Porter) • Guru Think: • Adapted from current excellent companies and written into management books. (Hamel & Prahalad)

31. Mintzberg thinking Intended Strategy Deliberate Strategy Unrealized Strategy Realized Strategy Emergent Strategy

32. Getting a flavor for eStrategy? CK Prahalad-1999 • Theory of innovation and discovery • Create a social architecture and get individuals at the heart of the process • Values give energy and enthusiasm to us all • We need to develop communities of interest Continued searching for new sources of advantage • Being unique. Creating wealth, reducing risk in new investments and use of manager’s time. • Inventing new rules and new games. • Inventing new market space • Providing new functionality • Creating new networks • Stimulating new wealth creation

33. Why is e redefining strategy? • Ecological • Emerging • Endless • Energetic • Engaging • Entertaining • Enveloping • Environmental Discuss: • How does your planning process work? • Who? Participants? • Time? Frequency? • Resource allocations • Play?

34. Three challenges for the eStrategist • Strategic opportunities are created by the spontaneous creation of new business models. (Strategies are solutions that deal with problems) • Opportunities are created by industry transitions, but to understand transitions need to turn industries upside down. • Stimulating growth that generates further learning by the network or whole system.

35. Plus…. Most companies wreck their own strategies • Sustaining a unique position requires trade-offs. Trade-offs are incompatibilities between positions that create the need for choice. • Providing more of A necessitates less of B • Serving Customer X well means not serving customer Y. • Tradeoffs increase the cost of imitation and thwart competitors Michael Porter

36. And…..Change can be difficult. • Beware of simple singular changes • Activities are complementary when changes that increase the effectiveness of some activities in the group influence change to take place in others. • Only a small % (<5%) of co’s do all three simultaneoulsly Boundaries Uncertainty Importance Structures Processes Change Renewal

37. An emerging school of thought?

38. Yesterday’s strategy questions:asked about a business • Why do your customers buy from you, why don’t they go to a competitor, or make it (do it) themselves? • Which competitor do you admire most? Why? • In what respects are you different? What is unique about you? • How do you justify your superiority claim? • How do you sustain your uniqueness? Why can’t competitors not do the same thing and in that way compete away your competitive advantage? • Where do you make your strategic investments, that allow you to maintain your distinctiveness?

39. new economic networks non-linear growth more gives more make virtuous circles follow the free anticipate the cheap feed the web first knowledge resources the net wins chaordic organisations shifting boundaries of loyalty and affiliation Changing concepts “Those who play by the new rules will prosper; those that ignore them will not”*

40. Exploit the “Network Effect Differentiate your information product Don’t overprotect your property. Lock-in Users (& Employees) Cooperate on Standards Five Key Rules Shapiro & Varian Information Knowledge Wisdom Data Network Economics

41. Changing Forms of Value Creation Integrator (linear to market) P&G, Nestle, NZDB Orchestrater (Knowledge Strategies) Nike, Sara Lee Layer Player (horizontal resources) Temporary Employment Agency Market Manager (e.g. portal) Sabre, Autobytel, Marshall Industries

42. Linking the Chain Figure 1: Inter-enterprise Business Processes Enabled by E-Commerce Applications http://www.firstmonday.org/issues/issue4_12/fingar/index.html

43. Integrating applications Figure 7: Key Application Drivers for I-Markets http://www.firstmonday.org/issues/issue4_12/fingar/index.html

44. Cisco Model: good/services, knowledge and intangibles Flows & Influence Source: www.actnet.com

45. How do you create a value web? M Sawhney Business 2.0

46. Focus on Customers M Sawhney Business 2.0

47. M Sawhney Business 2.0

48. Discussion: Modeling II • Reviewing your model, the Cisco and Swahney examples. Could new ways emerge to model your example? • Reviewing your model what are the four or five functions that are most important? Why? • Underlying structure? Influence? • What issues are emerging for how we should begin to model our organizations?

49. New Models! Learning Objectives • new models • functionalities • web taxonomies • client is server • swarms! • pricing / strategies / usability

50. From aggregated buy to auction! How shall I shop?