Mastering the digital marketplace Simo Vuorinen
Dec 19, 2015
The digital marketplace
Macroeconomic theories’ four components:•land•labor•capital•technology
Digital economy: for the first time, technology becomes a dominant force.
The IT reaches even the most traditional industries.
Evolution of the digital economy
1700 1800 1900 2000
AgriculturalEconomy
IndustrialEconomy
ServiceEconomy
GlobalEconomy
DigitalEconomy
WorldEconomy
•“New brat on the block” - the empowered consumer: the balance of power in commerce shifts to the consumer.•Distributors compete less on their ability to manage fleet of trucks, and more on their ability to know where widgets are in transit•Retailers compete less on the position of the store and store layouts, and more on how they track customer buying patterns
Competition changes
Traditional consumer values: •quality•price •brand
New values: Time-value, Content.
Example: Psion vs. Palm
New Values
Consumer is driven by•pursuit of time•pace of life•information assimilation•communication
Example: MS 95 evolution to MS 98
New Values
CEO’s choices
BPR and other
cost cutting and
operational initiatives
Advantage
Survive
Decay
Yesterday Today Tomorrow
Redefine & reposition
Adopt best practices
Business as usual
In the digital economy technology is the only economic commodity that will cost less as time passes
The DE provides a free channel of information distribution
The DE removes barriers such as size, geographic positioning, and need of the real estate
Rules have changed
Kurt Salmon Survey: 56% of consumers agreed they had far less leisure time than they used to have
Almost 40% of consumers responded that if given a choice between more time or more money, they would choose time
Consumers are spending less time shopping and cooking in attempt to create more leisure time
Examples: Encyclopedia Britannica vs. Encarta, Peapod groceries, 3M
The value of time
Container: a physical productContent: intangible element - typically accompanying information, knowledge, or service that adds value to the container
Consumers are beginning to appreciate containers that include additional content
New: content can be customized - mass-customization
Example: Watch vs. watch - functionality, Palm Pilot modules
The value of content
Price:•Conventional pricing strategy: based on resource availability•Future (today?) pricing strategy: based on increased choices of content
Quality:•Rather expectation, not much of a playing-card
Branding - soft assets increasingly important:•Self-expression•Emotional satisfaction
TODOs:
•Create a strong link to the consumer by streamlining the produc development cycle -> reaction speed
•Netscape Navigator•Attain the perfect degree of consumer interaction•Offer customizable products based on standard components
•Intel Celeron, car sales•Clearly communicate the value you offer to consumers•Set consumer prices based on the value you offer - not on your costs
TODOs:
•Late 50’s: beginning of the traditional supply chain•Companies started applying statistical and mathematical methods to their operations•Cost of IT declines•80’s: EDI•90’s: electronic links within the traditional supply chain and outside the supply chain -> digital value chain
Evolution of the traditional supply chain
1820 1840 1860 1880 1900 1920 1940 1960 1980 1995
20 %
40 %
60 %
80 %U.S. employment by occupation (percent of total)
Knowledge worker
Touch labor
Agriculture
•Traditional supply chain: dysfunctional, carries significant administrative, transactional, and financial costs that do not add value to the end consumer•Companies who participate in digital value chains that extend communication beyond any two adjoining links create 65 % more shareholder wealth for each dollar of earnings than those still operating in the traditional supply chain mode
The coming of age of the digital value chain
•Information and innovation•Availability of capital•Globalization
Forces shaping the digital value chain
New wealth from soft assets:•New ideas and creative capacity are soft assets - they are not reflected on the balance sheet•Soft assets are the primary creators of wealth in the digital economy
New business model: the digital value network
A digital value network (DVN) is a community of business partners and customers that is connected using information technology
•Faster•More dynamic•Players work together to maximize their combined value to the end consumer
DVN components
Digital value chains:•Producers form a digital value chain to create a far more efficient, rapid, and flexible version of the traditional supply chain•One or more participants take the role of an anchor
Digital function platform (DFP):•Multiple digital value chains form a DFP. •DFP is the service or technology platform that supports business processes across multiple value chains. Example: SAP, floppy, EDI standard, Sun Jini
DVN components
Infomediary:•Definition 1: a company that collects and manages access to consumer information•Definition 2: a company that facilitates the exchange of information between other parties, such as company that matches buyers and sellers in an electronic market
Example: Sonera Plaza, LetsBuyIt, Yahoo
DVN components - infomediary continued...
Infomediary tasks:•Integrating services and needs•Aggregating services and needs•Creating a floating price system based on supply and demand•Managing the group of vendors, suppliers, and customers•Monitoring the performance of all members of a DVN•Saving time for DVN members•Managing operational functions that include warranty, exchange, charge-backs, etc.•Developing new customer markets
Example: Telia
Bringing it all together - the digital marketplace
The digitalThe digitalmarketplacemarketplace
DF
PD
FP
Digital value chainDigital value chain
InfomediaryInfomediaryD
FP
DF
P
Digital value chainDigital value chain
Digital value chainDigital value chain
Digital Value NetworkDigital Value Network
ConsumerConsumer
ConsumerConsumer
ConsumerConsumer