new industrial revolution and digital business models
TRANSCRIPT
Navigating the New Industrial Revolution(s)----
Exploring digital business models
Professor Robin Teigland Stockholm School of Economicswww.slideshare.net/eteigland
[email protected] @RobinTeigland
January 2017
FUNDAMENTAL SHIFT IN STRATEGY
MOVING FORWARD
INCUMBENT BUSINESS MODELS
Digital is the main reason just over half the Fortune 500 companies have disappeared since the year 2000.-Pierre Nanterme, CEO Accenture, 2016
Yet..Digital disruption has only just begun.
Technology replacing Energy and Banking
http://www.visualcapitalist.com/chart-largest-companies-market-cap-15-years/
SMACITS = Social
M = MobileA = Analytics
C = CloudIT = IoT
ExploitationImproving existing
value creation activities
ExplorationDeveloping new value creation
activities
Adapted from March 1991
FIRM FOUNDED EMPLOYEES MKT CAP
BMW 1916 122,000 $56B
UBER 2009 7,000 $62B
MARRIOTT 1927 200,000 $32B
AIRBNB 2008 5,000 $21B
WALT DISNEY 1923 185,000 $172B
FACEBOOK 2004 15,000 $369B
WALMART 1962 2,300,000 $206B
ALIBABA 1999 36,000 $241B
Adapted from Parker & Van Alstyne, with Choudary, 2016, and updated January 2017
Something fundamental is changing
The world’s largest taxi firm owns no cars
The world’s most popular media company creates no content
The world’s most valuable retailer carries no stock
The world’s largest accommodation provider owns no property
The Power of the Digital Platform
The New Multinationals
9 CGE Platform Database with Quid visualization, 2015
Over $3 trillion in firm market capSelected Platform Companies Emerging platform clusters
2016 Parker & Van Alstyne, with Choudary – licensed under Creative Commons Attribution-ShareAlike 4.0 International (CC BY-SA 4.0).
• Launched June 2010• 551 cities in 70 countries • 7000 empl, owns no taxis• USD 62.5 bln valuation(Ericsson, 1876, 114,000 empl, USD 19 bln)
“DOING MORE WITH LESS”
A technology platform to allow customers to receive easy and reliable access to a ride using the tap of a button
Industries are transforming
http://www.slideshare.net/MarketRevolution/shsu-sharing-economy-collaborative-consumption
Pipeline BMs vs Platform BMs
• Seller of products and/or services• SMACIT to make linear process
efficient• Supply-side economies of scale• Manager of firm with distinct
boundaries• First mover advantage• Ownership of resources
• Destination for solving customer needs• SMACIT to co-create value• Demand-side economies of scale
(network effects)• Leader of ecosystem with fuzzy
boundaries• First to scale advantage• Access to resources
PLATFORM
CONSUMERSPRODUCERS
Elements of value exchange
Adapted from Parker & Van Alstyne 2016
1 connection
2 phones
10 connections
5 phones
66 connections
12 phonesMetcalfe’s LawMore users = more value = more users…
PLATFORMS LEVERAGE NETWORK EFFECTS
WikIpedia
Demand-side economies of scale
Enabling retailers to create a personalized experience for each individual consumer
across the globe
“We want to help small businesses grow by solving their problems.” - Founder and CEO Jack Ma
Alibaba Group – “Doing more with less”
PLATFORM
CONSUMERSPRODUCERS
Ecosystem Leadership
Ensure central position within
ecosystemDevelop deep understanding
of users on both sides
Define value co-creation
opportunities
Leverage resources in
the ecosystem
Create attractiveness
through cultivating
trust
Leveraging network principles1. Enable
interactions across all “boundaries”
5. Scale through operational excellence
4. Create agility through control over and access
to resources, not ownership
3. Expand industry boundaries through
providing holistic solutions
2. Analyze data from multiple
sources
Teigland 2017
It is much easier to add a technology to a community
than it is to add a community to a technology.
Marshall Van Alstyne, Platform Revolution
TRUST: The prerequisite to the ability to scale
• Third parties attached to platform– Fraud– Operational– Health, safety
• Payment systems– Functionality– Fraud
• Privacy of data – Cybersecurity– Ethical usage of personal data
Trust inDigital
Environments
FUNDAMENTAL SHIFT IN STRATEGY
MOVING FORWARD
INCUMBENT BUSINESS MODELS
MANY INCUMBENTS HAVE UNLOCKED THE VALUE OF DIGITAL…
Adapted from McKinsey Global Institute
Nike put the customer first and invested in an end-to-end digital athletics ecosystem
x4
10M+
30M+Analyst reports, press articles, web search
Creating more touch-points and data
MIT study: Four incumbent digital business models
Omnichannel business-”Life” events
e.g., ING, Schindler
Supplier-Products/services
e.g., Sony
Ecosystem Driver-One stop destinatione.g., Amazon, Aetna
Modular Producer-Ecosystem plug’n play
e.g., Paypal
NeedsLife Events
DemographicsPurchase history
Control/Influence over decisions on brand, price, quality, etc.
* 32% Higher growth* 27% Higher profit margin
Weill & Woerner 2015
Omnichannel Business-Own customer relationship-Multiproduct, multichannel
-”Life events”-Integrated value chain
Supplier-Sell through another-Low-cost producer
-Incremental innovation
Ecosystem Driver-Branded platform
-Great customer experience-3rd party plug’n plays
-Matchmaker
Modular Producer-Niche plug’n play
-Adapt to ecosystems-Continuous innovation
NeedsLife Events
DemographicsPurchase history
Control over decisions on brand, price, quality, etc.
MIT study: Four incumbent digital business models
Weill & Woerner 2015
% Companies: Larger vs Smaller Firms
Farm equipment sellerto
Farm equipment omnichannelto
Full service solutions ecosystem driver
- Analytics of global data from machinery, irrigation systems,
soil and nutrient sources, weather info, crop prices, etc.
- Platform access for suppliers, consultants, food processors,
food retailers, etc.
- APIs enabling customization through third-party development
“To enable efficient growth of the global food supply”
B2B digital leaders:5Xs more revenue growth than their peers
B2B
B2B2C
Leadership• Commit to digital at strategic level• Create culture anchored on innovation and execution• Shake up organizational structure and metrics to support
digital aspirationsDigital operational excellence
• Create consistent online and offline experiences • Enable and empower sales force through data• Improve insight and decision making through end-to-end
connection of processes
http://www.mckinsey.com/business-functions/marketing-and-sales/our-insights/how-b2b-digital-leaders-drive-five-times-more-revenue-growth-than-their-peers
MIT Sloan CIO Leadership Award 2015
CDOMichael Niles, Chief Digital Officer- GE Digital partner
- Towards B2B2C
From elevators and escalators to “Moving humanity digitally”
Percentage of firms using predictive analytics for maintenance
Betting on “The winner takes all” Immelt’s goal: “A top 10 software company” by 2020
• Predix: USD 1 bln investment• Open-source model, e.g., Android• 19,000 developers + 3rd party developers • Software building blocks (e.g., blockchain)
FUNDAMENTAL SHIFT IN STRATEGY
MOVING FORWARD
INCUMBENT BUSINESS MODELS
By 2018, IDC predicts that >50% of large enterprises, and >80% of digital
transformation leaders, will create and/or partner with industry cloud platforms.
https://www.idc.com/getdoc.jsp?containerId=prUS40552015
INCUMBENTS ARE SITTING ON A DIGITAL GOLD MINEDATA
RELATIONSHIPS
TALENT
BRAND
BALANCE SHEET
CASH FLOW
INTELLECTUAL PROPERTY
McKinsey
Moving up and to the right- Knowledge about customer goals and “life events”- Amplify customer voice inside company- Evidence-based decision making- Integrated multi-product, multi-channel customer experience
- Be first choice in your space- Skilled at partnerships and acquisitions- Service-enabled core business transactions (with exposed APIs)- Compliance as competenceWeill & Woerner 2015
THEY ADDRESS SYMPTOMS, NOT ROOT CAUSES
No sense of urgency for “Digital” Decaying supplier business model Siloed organizational structure Missing core capabilities
MGI, 2016
Steel ecosystem Internal innovation unit External innovation unit
Vision, Leadership, Governance, IT Relationships (Westerman)
Klöckner’s digital transformation
http://www.kloeckner.com/en/strategy.html
From a “Product company leveraging data” to a “Data company solving customer needs”
Galina Shubina
“Jobs to be done” – Clayton Christensen
Pipeline BMs vs Platform BMs
• Seller of products and/or services• SMACIT to make linear process
efficient• Supply-side economies of scale• Manager of firm with distinct
boundaries• First mover advantage• Ownership of resources
• Destination for solving customer needs• SMACIT to co-create value• Demand-side economies of scale
(network effects)• Leader of ecosystem with fuzzy
boundaries• First to scale advantage• Access to resources
PLATFORM
CONSUMERSPRODUCERS
Elements of value exchange
Adapted from Parker & Van Alstyne 2016
Network position
ResourcesInnovation Influence
Agility e
Successful performance
Ecosystem leadership
Cognitive computingBlockchain3D printing
43Source: P. Evans, “Networks, Data and Platforms,” in Growing Global: Lessons for the New Enterprise, Center for Global Enterprise, 2015.
Trends likely to continue and intensifyFORCES OF CHANGE
Surge in data and tools that can manage and
analyze dataNetworks connect physical, digital, and social
Age of Networks Age of DataFIRM
Age of PlatformsNew business models that leverage
networks and intelligence
2016 Parker & Van Alstyne, with Choudary – licensed under Creative Commons Attribution-ShareAlike 4.0 International (CC BY-SA 4.0).
The Blockchain is the glue that is going to drive a productivity revolution across the globe on par with
what Henry Ford did with the automobile.— Paul Brody, Americas Strategy Leader, Technology Sector, Ernst & Young
“We always overestimate the change that will occur in the next two years and underestimate
the change that will occur in the next ten.”- Bill Gates, The Road Ahead, 1996
Scenario Thinking
http://www.slideshare.net/janschmiedgen/design-thinkingbootcamp
Robin [email protected]
www.slideshare.net/[email protected]
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PlatformRevolution.com
Geoffrey G. ParkerMarshall W. Van AlstyneSangeet P. Choudary
Published by:
WW Norton & Co.