Category: Digital Business

Join the platform revolution

Posted by MIT Sloan Executive Education - 4 days ago

It's no overstatement to say that the two-sided networked market--or platform--model is one of the most important economic and social developments of our time. The platform model powers many of today's biggest and most disruptive companies, like Amazon and Airbnb, with others, like Nike, coming on board. Platforms use technology to connect people, organizations, and resources in an interactive ecosystem in which enormous value is created and exchanged. And researchers believe that the transformation is soon to hit a range of other economic and social arenas, from health care and education to energy and government.


Surprisingly, many people--even savvy business executives--remain unaware of how the platform revolution happened, or what to do about it. In a new MIT Sloan Executive Education program, Platform Revolution: Making Networked Markets Work for You (online)Geoffrey Parker, Professor of Management Science at Tulane University and Visiting Scholar and Research Fellow at MIT's Initiative for the Digital Economy, explores the escalation of IT-driven platforms over established product leaders--such as iPhone's rapid domination of its industry at the expense of Nokia, Blackberry, Motorola, Sony Ericsson and others. The four-week, online course also provides technology leaders with ways to prepare for even more rapidly unfolding disruption.

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Intuit embraces its digital strategy

Posted by MIT Sloan Executive Education - 11 days ago

cloud computing

Intuit, the Mountain View, California-based maker of business and financial management software, has made the move from packaged product to a purely online digital strategy. The company started in 1983 with its Quicken personal finance software--one of the early success stories in boxed software. But the company has recently decided to shed its PC roots and become a cloud software company, selling Quicken to a private equity firm in order to focus the business on their Software-as-a-Service (SaaS), or cloud, offerings--its TurboTax software and QuickBooks Online.

"[Intuit] is a classic case of a onetime disrupter being challenged by an upstart with a new approach and a simpler product," reported The New York Times, referring to Xero, a New Zealand company that offers a flexible, online accounting system for as little as $9 a month.

Intuit has made a bold move to embrace its digital strategy, which Jeanne Ross, Principle Research Scientist at MIT Sloan's Center for Information Research, defines as “an integrated business strategy inspired by the capabilities of powerful, readily accessible technologies and responsive to constantly changing market conditions.”

According to the The New York Times, Intuit’s digital reinvention strategy is bearing fruit. Subscriptions to its QuickBooks Online software grew 49% last year, and overall revenue grew 23%. QuickBooks Online now connects with about 2,000 apps, and the open structure has increased customer retention and helped feed customers into the TurboTax side of the business, especially its online version. 

In one sense, this strategy shift makes sense--more and more people are turning to cloud computing. However, according to the McKinsey & Company article, "From box to cloud: An approach for software development executives," only 8% of the revenues generated by the top 100 software vendors originate from SaaS models (as of early 2015). And seven of the ten biggest companies draw less than 5% of their software revenues from SaaS. Nonetheless, the global SaaS market is projected to grow from $49B in 2015 to $67B in 2018.

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Digital strategy: One company's approach to digitized solutions

Posted by MIT Sloan Executive Education - 1 month and 17 days ago

Elevator

Recently we shared some insight presented by Principal Research Scientist at MIT Sloan, Jeanne Ross. In her webinar, Digital Disruption: Transforming your Company for the Digital Economy, Ross stated that there are two paths for a digital strategy: customer engagement or digitized solutions. In our earlier blog post, Responding to disruption with digital strategy, we covered how the U.S. retailer Nordstrom took the customer engagement approach to developing a digital strategy.

Ross' webinar included a second example of a company that opted for developing digitized solutions to create disruption in the marketplace. Schindler Group, based in Lucerne, Switzerland, is one of the world's leading providers of elevators, escalators, and moving walks. The company believed a digitized solution was the best approach to disrupt a permanent business annoyance--small service companies receiving maintenance contracts for their elevators and escalators, or being called for emergency repairs. Schindler wanted to capture that maintenance and repair revenue. Instead of just selling elevators and escalators, Schindler wanted to be the service provider of choice for ongoing maintenance contracts, emergency calls, and preventative and predictive maintenance. 

As Ross points out in her webinar, a proper digital strategy requires a strong operational backbone. Schindler’s first step was to create SHAPE--Schindler's Harmonized Applications for Process Excellence. This business process leveraged the company’s enterprise resource planning (ERP) system and provided the foundation for its overall digital solution.

The company's next step was to better understand the repair process. The findings were intriguing: overall, repairing elevators and escalators is a tough job. There are many generations and versions of the equipment, therefore technicians need to find the needed parts in a massive catalogue. Schindler solved this issue by creating a simplified, digital catalog that technicians could access using an iPad, iPhone, or other mobile technology. Subsequently, Schindler analyzed trends in this data so that the company could have partners deliver the right parts to the technicians, reducing the amount of down time for the elevator or escalator.

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Responding to disruption with digital strategy

Posted by MIT Sloan Executive Education - 2 months and 1 day ago

We're well into an age of digital disruption. Businesses in all industries are experiencing changes in their competitive environments that result from the use of digital technologies by new market entrants or established companies. These disruptions can undermine the viability of products, service portfolios, and approaches to the market.

The response to digital disruption is to develop a digital strategy. As defined by Principal Research Scientist at MIT Sloan's Center for Information ResearchJeanne Ross, told attendees of her recent webinar, Digital Disruption: Transforming your Company for the Digital Economy, digital strategy "is an integrated business strategy inspired by the capabilities of powerful, readily accessible technologies and responsive to constantly changing market conditions."

According to Ross, there are two choices for a successful digital strategy: customer engagement or digitized solutions. Customer engagement requires thinking about an organization's relationship with the customer; it should be one built on trust and loyalty, and ideally, passion. Digitized solutions transform the business model. Both rely on a strong operational backbone.

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Is a world without ads nirvana?

Posted by MIT Sloan Executive Education - 5 months and 24 days ago

In October, Apple announced approval of a new application, Been Choice, into the iTunes App Store. The app blocked advertisements in mobile applications as well as in native apps. Shortly thereafter, Apple pulled the app due the potential risk of security breaches. However, the promise of an app that blocks ads in both Safari and in native mobile apps had consumers cheering. After all, who really likes ads interrupting their online browsing, shopping, or reading experiences?

Sinan Aral, Associate Professor of Information Technology and Marketing at MIT Sloan, was recently a featured guest on NPR's OnPoint with Tom Ashbrook, where Ashbrook, Aral and Rebecca Lieb, a research analyst and author, discussed ad blockers and the future of digital advertising.

"I get annoyed by ads, just like other people," commented Aral. "Most people would consider a world without ads to be nirvana. But the bigger question is how to go forward."

As Aral explains, ads pay for the content we all consume on the Internet. When new technologies enable us to block ads, it means that advertisers and content producers need to think about how to pay for the content available today. As many publishers have learned, most consumers are unwilling to pay for content placed behind paywalls. As much as we’d like to think of the Internet as free, the fact is, someone has to pay for the quality content available online

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Who will power the IoT economy?

Posted by MIT Sloan Executive Education - 6 months and 12 days ago

By Peter Hirst, Associate Dean, MIT Sloan Executive Education

IoT smaller

From driverless cars and sensor-laden industrial equipment to connected kitchens and smart cities---the Internet of Things (IoT) is cropping up everywhere, or so it seems. Recognizing the tremendous economic potential, tech giants and startups are investing heavily in IoT products and platforms. A recent report estimates that "the IoT will result in $1.7 trillion in value added to the global economy in 2019." Yet many employers are struggling to find the talent to propel the rapidly developing IoT economy towards the full extent of its promised value.

At last year's Internet of Things Word Forum in Chicago, Jeanne Beliveau-Dunn, Vice President and General Manager of Cisco Services, presented startling findings based on data from CareerBuilder, IBSG, and the U.S. Bureau of Labor Statistics:

  • One-million shortage of qualified workers in the Internet security industry in the next five years
  • Two million jobs needed in information technology and communications in the next ten years
  • Over 11 million people unemployed in the United States at that time
  • 45% of employers unable to find qualified candidates for open jobs

 As of this August 2015, the number of unemployed people in the U.S. dropped to 8 million. However, according to the U.S. Bureau of Labor Statistics, job growth came primarily from healthcare, social assistance, and financial services sectors--not technology companies.

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Are you a digital or analog leader?

Posted by MIT Sloan Executive Education - 8 months and 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 - 9 months 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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