The Net-enabled Business Innovation Cycle Bradley C. Wheeler Kelley School of Business Indiana...

The Net-enabled The Net-enabled Business Innovation Business Innovation

CycleCycle

Bradley C. WheelerKelley School of Business

Indiana [email protected]

wheeler.kelley.indiana.edu

©Bradley C. Wheeler, Indiana University

What is ___ Good At?What is ___ Good At?

Sony?

Proctor & Gamble?

Google?

BMW?

UPS?Why are they good at ___?

Capabilities Are Bundles of Capabilities Are Bundles of Organizational RoutinesOrganizational Routines

Implications of Pervasive Digital Implications of Pervasive Digital NetworksNetworks

Networks and IT provide a domain for innovation in products and business processes based on IT capabilities and business opportunities.

IT investments should be targeted at specific “productivity levers,” vetted for sequence and timing, and accompany purposeful changes in business processes.

Organizational capabilities and competences (collective learning) are essential to wisely chose net-enabled IT among innovation opportunities

Net-enabled Organizations Net-enabled Organizations (NEOs)(NEOs)

NEOs employ innovative uses of digital networks to

reduce barriers of time and distance,

substitute information for physical processes, and

engage in innovation that aligns and favorably positions the firm in its competitive environment.

IT (IS!) to Value?IT (IS!) to Value?

Enabling Technologies lead to Economic Opportunities. These opportunities, when realized, spur growth through Business Innovation that further makes possible the creation of Customer Value.ET EO BI CV

Which firm can most quickly innovate ET into CV?

Conveying New IT Insights

CommunicatingBusiness Initiatives

Taking Value Propositionsto Market

Time

Matchingwith Economic

Opportunities (EO)

ChoosingEnabling/EmergingTechnologies (ET)

Executing Business Innovation

for Growth (BI)

Low

Hi

ETET ET

Net-enabled Business Innovation Net-enabled Business Innovation CycleCycleCapabilities & Competencies

Internal Organization

External Market

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Organizatio

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AssessingExternal Customer &

Internal Client Value (CV)


Where will theInternet createnew possibilities?

Business plans, Strategy, capital

Activating thewebsite

Time

Choose Books!

Web browsers,servers, PCs, Internet

Setting up distributionwith book distributorsCreating the company

Low

Hi

BroadbandWAP VoiceRec

NeBIC Example:NeBIC Example:


External Market

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Organizatio

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AssessingCustomer preferences,

loyalty, profits?

Efficiencies, reliabilities


Choosing CapabilityChoosing Capability

•Hardware

•Software

•Networks

Processors

Storage & Retrieval

Data IntegrationSecurity

Applications

WiredWirelessMobility

Time

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Choosing ET CapabilityChoosing ET Capability


Input Process Output

•Emerging technologies•Enabling technologies•Vendors•Trade shows•Briefings

•Choices for IT architecture•Results of ET experiments•Timing predictions

•How are ET identified?

•Who has formal responsibility for ET selection? Time?

•What mechanisms are used for filtering and deciding?

•How are executives and line managers apprised of ET?

OrganizationalRoutines

Virtuous Cycle of Virtuous Cycle of Rising Technical Rising Technical PotentialPotential

TelecomSpeed/Reach

ProcessorSpeed

The challenge is the timely application of these in value-adding ways within firms and across

industries.

StorageSpeed/Mass

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Time


Opportunities (EO)


Low

Hi

Matching CapabilityMatching CapabilityV

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Matching with Economic Matching with Economic Opportunities CapabilityOpportunities Capability


Opportunities (EO)


•Strategic choices without full knowledge of ET are choices from an incomplete set.

•What mechanisms are used for matching?

•How are priorities set for now, soon, and later?

•How are strategic options setup and executed?

•Vetted technologies•Current business strategy•Environmental scanning•Customers, competitors

•Strategic options•Timely business initiatives•Resource assessments•Capital allocations

ProductivityEquation

Supply Chain IOS

Business Models


Opportunities (EO)

Matching EO CapabilityMatching EO Capability

Time

Low

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Productivity Equation

Increase Outputs Decrease Inputs

IncreaseNumber of Units

Increase Valueof Portfolio

Reduce Labor Costs Reduce Non-labor Costs

Increase Labor Efficiency

IncreaseAsset Utilization

Sell New Value-Added Goods

Shift to HigherGoods in Portfolio

Realize MoreValue from Goods in

Current Portfolio

Substitute Capitalfor Labor

Deploy LaborMore Efficiently

Reduce CapitalCosts

The Real New Economy, HBR, Oct 03

Matching EO QuestionsMatching EO Questions

Which productivity levers does this business case target?

Why now? Is this the right investment to achieve a result or are there antecedents?

What changes in business processes are required to realize the benefits of this IT?

Inter-organizational Systems Inter-organizational Systems (IOS)(IOS)

How do electronic links affect economic activity via Inter-organizational systems?

Economic coordination by Electronic Markets? Electronic Hierarchies?

Markets & HierarchiesMarkets & Hierarchies

Hierarchies

Markets

TransactionCosts

Production Costs

High

HighLow

e?

Adapted from Malone, Yates, Benjiman, 1987

Types of B2B MarketplacesTypes of B2B Marketplaces

Adapted from Kaplan & Sawhney, 2000

What Businesses BuyManufacturing InputsOperating Inputs

How Businesses

Buy

SystematicSourcing

SpotSourcing

MRO HubsHorizontal

Catalog HubsVertical

“Hierarchy”

Yield Managers

Horizontal

ExchangesVertical

“Market”

B2B Exchange Governance?B2B Exchange Governance?

Who creates the exchange? Unbiased Channel (Neutral)

New Third Party? Industry Players?

» Can rivals really cooperate?

Biased Channel Industry Leader?

Supply Chain Design ChoicesSupply Chain Design Choices

Competing as a virtual supply chain e-hierarchy, tight electronic integration among a few

select suppliers

Competing on economic efficiencies via market-based procurement e-market, liquidity and transparency among large

number of buyers and suppliers via a centralized exchange

peer-to-peer (B2P), ad-hoc electronic relationships via electronic agents

What is a Business Model?What is a Business Model?

A business model is a description of an inter-related set of business activities that collectively enable a firm to engage in profitable commerce.

What is a Business Model?What is a Business Model?

It has a top line component in how revenue is generated

It also has a cost structure component in how the business chooses and organizes its activities to produce the product or service.

Top Line RevenueTop Line Revenue

How is Revenue Generated? Margin

fixed pricing spot pricing

Metered (pay per use)

Subscription (recurring) Commission (performance-based) Subsidy (below cost) etc.......

Cost StructureCost Structure

Cost of primary activities directly engaged in the production of the product/service

Cost of support activities Facilities, logistics Human resources function Finance, etc.

Business Models are a Business Models are a ChoiceChoice

The companies in many industries choose to organize around highly similar business models -- with highly similar business results over the long term.




Time


Opportunities (EO)



for Growth (BI)

Low

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Executing CapabilityExecuting Capability

Executing BI CapabilityExecuting BI Capability


for Growth (BI)


•Classic change management w/heavy IT involvement.

•What governance mechanisms should be used for IT-enabled business initiatives – especially those that cut across organizational units?

•How should initiatives be coordinated with faster/ slower moving business partners or customers?

•Technology/strategy choices•Prioritized strategic options•Business cases•Resources•Clear time mandates

•Value propositions to market•Clear communications to customers/partners•Effective service delivery•Reconfigured resources

Business Governance Business Governance ChallengesChallenges

Initiatives within and across business units Funding (business unit or corporate subsidized?) Timing Aligning priorities

Initiatives with trade partners and suppliers Funding, timing, aligning

Geography issues International/regional/country scope Fit…”but my market is different!”




Time


Opportunities (EO)



for Growth (BI)

Low

Hi


External Market

Low

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Assessing CapabilityAssessing Capability

Assessing CV CapabilityAssessing CV Capability

AssessingClient/Customer

Value (CV)


•Customers and clients create value through their choices.

•The capability to assess should not be confused with the actual data from the assessment.

•Where are the Assessing capabilities in the firm?

•What organizational routines convey timely and useful assessments back to decision makers for choosing ET, matching EO, executing BI?

•Behaviors of clients/customers•Attitudes of client/customers•Socio-economic trends

•Measures are amplified back through the organization•Provides the market-driven data for changing understanding

Behavioral Measures

Perceptual Measures

Financial Measures

Assessing CV CapabilityAssessing CV Capability

Time

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Financial MeasuresFinancial Measures

Income Statement Balance Sheet Statement of Cash Flows

… lagging indicators

Perceptual MeasuresPerceptual Measures

Surveys, questions

Asks about proposed or likely future behavior

… leading indicators

Behavioral MeasuresBehavioral Measures

Clickstream data

Data Warehouse Queries

Analyses actual behavior

… leading/lagging indicators




Time


Opportunities (EO)



for Growth (BI)

Low

Hi

ETET ET

Net-enabled Business Innovation Net-enabled Business Innovation CycleCycleCapabilities & Competencies


External Market

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Organizatio

nal Learning




The Net-enabled The Net-enabled Business Innovation Business Innovation

CycleCycle

Bradley C. WheelerKelley School of Business

Indiana [email protected]

wheeler.kelley.indiana.edu


The Net-enabled Business Innovation Cycle Bradley C. Wheeler Kelley School of Business Indiana...

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