Category: Digital Business

Are you a digital or analog leader?

Posted by MIT Sloan Executive Education - 12 days ago

As digital technology reaches into every corner of the business world, the rules are changing. Digital has reshaped the expectations of customers and changed way teams collaborate. Digital platforms have given rise to companies like Uber and Airbnb, and other new business models are just around the corner

George Westerman, Research Scientist at the MIT Center for Digital Business, refers to companies that are using digital for a strategic advantage as Digital Masters (see our previous post on the topic). "Digital masters differ not only in their capability but in their clarity of vision," writes Westerman in a recent article in MIT Sloan Management Review.  Rather than incrementally adjusting current practices, they search for ways to use today's fast-moving technologies to transform the way they do business. And it’s worth it--Westerman's research shows that digital masters are 26% more profitable than their industry competitors 

Leading Digital

Of course, Digital Mastery begins with people. More specifically, it begins with senior leaders. Among the hundreds of companies Westerman studied for his recent book, Leading Digital: Turning Technology into Business Transformation, co-authored by Didier Bonnet and Andrew McAfee, none created true digital transformation (of the entire company) from the bottom up. According to Westerman, digital vision from senior executives is pivotal in driving change than spans all boundaries of the company.

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So you want to be the next Uber?

Posted by MIT Sloan Executive Education - 1 month and 16 days ago

Using mobile app

One can only imagine the sheer volume of pitches angel and VC investors get today that start with, "We'll be the next Uber…" or "We'll be the Uber of X industry." Uber has become a generic term for a highly visible, seemingly successful disruptive business. It is a perfect example of a successful platform company.

As we wrote a few weeks ago in Why platforms beat products every time, 14 of the top 30 global brands by market capitalization in 2013 were platform-oriented companies. Both established companies and startups are flocking to the platform business model. But as participants in the recent MIT Sloan Executive Education program Platform Strategy: Building and Thriving in a Vibrant Ecosystem learned, creating a successful platform is much more complicated than simply connecting two parties and collecting the revenue. (In the case of Uber, the two parties are people with cars sitting idle and people who need rides from one place to another.)

What makes a platform a platform?

 "Just because something is called a platform, doesn’t make it a platform from a business perspective," says Catherine Tucker, Associate Professor of Marketing at MIT Sloan. “A platform business must have network effects--people value it more highly the more others use it." The easiest way to think of the network effect of a platform is to consider Skype or the fax machine--they’re only valuable if many people are using them.

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Bringing spice to platforms--literally

Posted by MIT Sloan Executive Education - 2 months and 7 days ago

spices square

As a panel discussed during the MIT Sloan CIO Symposium this year, platform strategies are beginning to displace product strategies. Two of the three panelists came from newer businesses--Paddy Srinivasan, Vice President of Products for Xively, and Bryan Kirschner, Director of the Apigee Institute. Xively works with companies to build applications for the Internet of Things (IoT) and the Apigee Institute is a research and strategy organization that helps businesses succeed in the new digital world. The panel was moderated by Professor Marshall Van Alstyne, Research Associate with the MIT Initiative on the Digital Economy.

The third panelist, Jerry Wolfe, founder and CEO of Vivanda, has come to the platform business from a most unusual route; he was previously the first CIO at McCormick & Company. Yes, that McCormick--the spice company founded in 1889. After significant analysis of the current grocery store product ecosystem, Wolfe led an initiative at McCormick to develop FlavorPrint, an API-enabled, predictive food personalization platform.

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Why platforms beat products every time

Posted by MIT Sloan Executive Education - 2 months and 21 days ago

MIT CIO

Is the product business model broken? According to Professor Marshall Van Alstyne, Research Associate with the MIT Initiative on the Digital Economy, and moderator of the MIT Sloan CIO Symposium panel, "Platform Shift: How New Business Models are Changing the Shape of Industry and the Role of CIOs," the answer is definitely yes

Case in point: BlackBerry. While there remain some holdouts relying on their BlackBerrys, the numbers don't lie: in 2009, BlackBerry had nearly 50% market share in U.S. operating systems, and now the company has 2.1% market share.

On the other hand, in 2013, 14 of the top 30 global brands by market capitalization were platform-oriented companies. These are companies that have created and now dominate areas in which buyers, sellers, and third parties are connected. In addition to the platform-oriented brands listed in the chart below, standout platform companies include Uber and Airbnb. They've each created innovative and disruptive business models that have drastically changed how consumers (and now businesses) secure transportation and lodging. (Read our previous posts related to Uber and Airbnb.)

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Is reuse part of your digital strategy?

Posted by MIT Sloan Executive Education - 3 months and 11 days ago

When most think of digital strategy, assets, and IT work, they think of efforts to develop new and innovative technology, systems, and processes. The focus is on how to build something completely new, or how to get rid of what already exists for something better. As a result, a new project can be compared to cooking from scratch. The end dish is includes a variety of ingredients, none of which were pre-made. It's an entirely new effort.

With that concept in mind, why do technologists and IT departments approach everything from scratch? Why has the idea of digital reuse not bubbled to the surface more? After all, as the illustration above shows, sometimes building on the work of others is a much more efficient approach to a project.

Peter Weill, Senior Research Scientist at MIT Sloan, and his partners, fellow MIT Sloan Research Scientist Dr. Stephanie L. Warner and Dr. Mark McDonald, Group Vice President at Gartner Executive Programs, designed a study to measure the effect of digital reuse strategies across 1551 firms in over 77 countries. The respondents were enterprise CIOs, business unit CIOs, and senior-most IT executives. In a research article published in the European Business Review, Weill, Warner, and McDonald revealed their findings. 

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Authors of Leading Digital share how leadership and vision drive digital transformation

Posted by MIT Sloan Executive Education - 7 months and 10 days ago

While young and eager employees are often credited with moving innovation at their companies, research shows that true technological transformation—such as those achieved by "Digital Masters"—must come from the top down.

For their new book Leading Digital: Turning Technology into Business Transformation, authors Andrew McAfeeGeorge Westerman, and Didier Bonnet, spent years researching companies they call “digital masters:” organizations that were not born digital, but have leveraged digital technologies to drive new levels of productivity, profit and efficiency.

In this video, posted to MIT Sloan Reviews, the authors explain that Digital Masters "excel in two critical dimensions: the what of technology and the how of leading change."

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What can enterprise architecture do for your organization?

Posted by MIT Sloan Executive Education - 8 months and 29 days ago

As the business world continues to digitize and grow in complexity, many businesses will need to avail themselves of “enterprise architecture”—the process of defining every aspect of an organization’s structure for the successful development and execution of strategy. Enterprise architecture may not be synonymous with enterprise transformation, but it is a means to that end.

There are some significant challenges to leveraging enterprise architecture for success. By definition, architecting a business is a vast undertaking; designing every aspect of an organization’s structure including people, processes, strategies, and accountabilities requires time, resources, and education. The biggest challenge blocking most businesses from prioritizing enterprise architecture is its emergence as a new discipline. Because it is new, most organizations don’t know what enterprise architecture is and/or how to utilize it. 

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The ups and downs of dynamic pricing

Posted by MIT Sloan Executive Education - 9 months and 29 days ago

In 2013, fourteen of the top 30 global brands by market capitalization were platform-oriented companies—companies that created and now dominate arenas in which buyers, seller, and a variety of third parties are connected in real time. These leaders include companies such as Akamai, LinkedIn, Airbnb and Uber. (See our earlier blog posts on Airbnb and Uber). 

Of those brands, Uber in particular is known for its use of dynamic pricing—price fluctuations driven by supply and demand. For example, on a rainy Saturday night, Uber may raise its fares because its drivers are in high demand and more consumers opt for car services over public transportation or a walk in the rain. Why is this not considered price gouging, you ask? Because Uber is transparent about their dynamic model—the app alerts users that the current rate is higher than usual, and by how much, giving the consumer the option to decline and find alternate means of transportation.

As Uber investor and board member Bill Gurley points out in his blog post on Uber’s dynamic pricing model, this strategy is not new. Hotels, airlines, and rental car companies have long relied on dynamic pricing. This is why your flight during the Thanksgiving holiday will cost more than a plane ticket purchased almost any other time of year.

Of course, dynamic pricing can also benefit the consumer. Hotels loathe empty rooms. The same pricing model that raises the rates on some days also allows hotels to offer last-minute deals to fill inventory. And in those cases, the consumer wins.

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