MIS302F Exam 1

Who is coding for free?:

-75% Majority of OSS software contributors work for companies -Less then 20% are traditional lone coders

IT = Strategic Business Value

-IT is not magic -It's not about the technology for the sake of technology Say it with me... -What comes before technology? STRATEGY

Vertical vs Horizontal Integration

-Vertical integration is when a single firm owns several layers in its value chain.

Openness VS Closed

-open: Windows/MSFT: it can be adopted to multiple hardware, not open in OS cant change it, and open in apps. -closed: only one person makes it. set the price.

3 element that are vital for finding high peaks in fitness landscapes:

1) Keep Moving: stasis is death. If you are not constantly exploring , you'll never find new peaks. Never settle for the current peak, always keep moving and explore. 2) Deploy Platoons of Hikers: Another key factor is parallelism: the more places you are simultaneously exploring, the more likely u are to find a new higher peak or to know where good spots are when your peak begins to collapse. Parallelism has 3 benefits: -1) innovation & progress require experiments, parallelism in experiments increases the odds that one or more will work out. - 2) what is fit today may not be fit tm; having a population of strategies allows some diversity, which increases the odds of survival when the environment changes. -3) Parallelism breeds boldness, having multiple experiments allows you to take a few risks w/o betting the farm. 3) Mix Short & Long Jumps: The first thing to do is look for a path leading upward in the landscape, taking incremental steps. The process of incremental upwards steps in the landscapes an adaptive walk. An adaptive walk is an efficient method for searching fitness landscapes, especially if the peaks are correlated. However, they have flaws: you might arrive on a peak that is a local max, and get stuck b/c every direction will lead down. Successful growth companies manage a strategic initiative across 3 horizons: -1) Horizon 1: initiatives are efforts to extent or defend existing businesses (adaptive walks) ~what am i doing today to defend my current busineess -2) Horizon 2: initiatives seek to build off existing capabilities to create new businesses (medium jumps) ~how can i leverage what i currently do and make a new business (google is doing this, google docs & trying to get into corporate market) -3) Horizon 3: initiatives plant the seeds for future business that do not yet exist (long jumps). ~creating things you dont do. oMOST companies focus on horizon 1 activities, but not 2 or 4.

Create Populations of Strategies:

- Build & manage evolving population of strategies -Diverse People = Diverse Ideas = Diverse Strategies -Bring market inside ~Be unbiased (Don't keep failures & give up on potential) -Map your jumps of your initiatives ~Timeframe, Risk, Relation to Current Business -Test a population of strategies

Operating System:

-Interface between the hardware and Users & Applications ~Processes key strokes & mouse movements ~Sends signals to display monitor ~Reads and writes disk files ~Controls processing of user applications -Responsible for managing and coordinating tasks and sharing the computer's resources

Simpler View Ecosystem:

(FROM CENTER->OUTWARD) -Hardware -Operating System -Consumer Applications -What is impact of purchasing a certain hardware or OS? ~whichever hardware one chooses determines the operating system that can be run on that hardware. In turn that operating system determines which applications can be run, etc. Outside layers of the ecosystem can only run when they comply with the system's previous layers. -compatibility is critical and creates lock in -Hardware, Operating System, Consumer Apps: ~iPad, iOS, Itunes ~Kindle Fire, Android, Google Play

Konana's Ecosystem:

(FROM CENTER->OUTWARD) -Hardware -Operating System -Database -Middleware -Enterprise Application -Enterprise Management -Consumer Application

2) Staying Power (3 sources of network effect value)

- Users don't want to buy a product or sign up for a service that's likely to go away, and a number of factors can halt the availability of an effort: a firm could bankrupt or fail to attract a critical mass of user support, or a rival may successfully invade its market and draw away current customers. Networks with greater numbers of users suggest a stronger staying power. -A user invests in learning how to use a system, buying and installing software, entering preferences or other data, creating files—all of which mean that if a product isn't supported anymore, much of this investment is lost. -The concept of staying power (and the fear of being stranded in an unsupported product or service) is directly related to switching costs (the cost a consumer incurs when moving from one product to another) and switching costs can strengthen the value of network effects as a strategic asset. -Learning time Buying Software Installing Software Setting Preferences Installing external devices like router, webcam, printer, etc... Creating files Organize files

Fitness Landscape:

- lets imagine a flat gird, each point on the grid represents a possible strategy your company could pursue. this grid is called a fitness landscape, to understand patterns of evolution in nature. They can take various shapes. It is not fixed like a mountain range, but is constantly bucking and heaving. As the environment & the strategies of competitors change, the fitness attributable to any given potential strategy will also change. -•peaks = successful adaptations -•valleys = failed adaptations. -ALWAYS CHANGING. what a peak is today may not be tm. what a valley is today may not be tm.

The OS War of 1988:

-. Microsoft makes applications, like word, PP & excel. •They placed bets on a lot of diff strategies. placed a bet on 3. Microsoft office is still really big. •Who won the war? Microsoft. Operating systems market share. (92%)

Leverage Distribution Channels through Partnerships:

-90% market of PC hardware -1985 MS signs deal to be the OS for IBM

Why would a company building tablets choose Android (an open source Operation System) over building their own or paying to license Windows Mobile OS? How does this choice affect the pricing of their tablet?

-A company would choose to use the Android platform because they then can use the ideas of many consumers to improve their product or create a new product based on the preferences of many. This choice to use OSS should reduce the cost of the tablet because it was cheaper to produce the software by using the minds of the people.

Switching Costs:

-A cost that a consumer incurs when switching from one product to another is called a switching cost (aka lock-in) -Gmail is free and convenient, but moving to another platform would require effort to import/export messages or lose this valuable e-mail history. Gmail mailbox size was easy to match, so other email providers copied them. -this is why Microsoft is still a powerful company, because customers stick with Windows because it would be so much work to move over that they just want improvement rather than a new product.

Straddling:

-Straddling is basically like stretching yourself thin: you devote such a small amount of resource/time/energy/effort to both endeavors that you end up doing a mediocre or poor job at both, instead of focusing your energy and solidly succeeding in one position

Porters Value Chain Model:

-A value chain is a set of activities that an organization carries out to create value for its customers. Porter proposed a general-purpose value chain that companies can use to examine all of their activities, and see how they're connected. -5 Functions: operations, inbound logistics, outbound logistics, marketing & sales, Service & support (EXTEERNALLY FOCUSED) -Primary functions - touch the product (or service) -Support functions - don't touch product (or service)

Enterprise Application:

-An enterprise resource planning (ERP) system integrates many functions needed in an organization (EX: UTDirect, allows a lot of people to use it at once). -ERP Big Players: Oracle, Sage, SAP, -Enterprise software helps an entire organization work together ~Supply chain management (SCM): software helps firms manage aspects of its value chain ~Customer Relationship Mgmt (CRM): software supports customer-related sales and marketing activities

TiVo When A Strategy is Missing:

-At first blush, it looks like this first mover should be a winner since it seems to have established a leading brand; TiVo is now a verb for digitally recording TV broadcasts. But despite this, TiVo has largely been a money loser, going years without posting an annual profit. By the time 1.5 million TiVos had been sold, there were over thirty million digital video recorders (DVRs) in use. Rival devices offered by cable and satellite companies appear the same to consumers and are offered along with pay television subscriptions—a critical distribution channel for reaching customers that TiVo doesn't control.

Barriers to Entry:

-Barriers to entry make it difficult for other firms to enter an industry and compete -When barriers to entry stop your competitors, then sustainable profits are more likely -cost of pro football team = HUGE barrier to entry. Include: -brand -differentiation -patents -distribution channels -scale -low barriers are good because more options for consumers. (EX: more ppl have gotten into drilling oil which is good for consumer so driven price down but BAD for oil companies. many layoffs, not making enough $$. additional rivalry & supply is bad)

Brand (barrier to entry):

-Brand - the symbolic embodiment of all the information connected with a product or service.(online search provider = automatically think Google). -Clint's restaurant Salsas has trouble competing with Chuy's and Torchy's -Consumers use brands to lower search costs, so having a strong brand is particularly vital for firms hoping to be the first online stop for consumers

What are benefits of taking an open source approach to building anything (not just software) and tie in your answer with the concepts of crowdsourcing, the group brain, and cognitive diversity?

-By taking an open source approach to anything a business can easily see what consumers want changed and then using those ideas to present a new and improved product. By using crowdsourcing, or gathering the minds of the people, you get multiple and different ideas because of cognitive diversity.

Arguments against OSS:

-Can be more complex to install/manage so need specialized skillset in IT Admin group -Higher TCO for some products ~No support contract = rely on community support. just b/c it is free doesnt mean you dont have to pay for IT ppl. -Legal and licensing concerns

Can't Build to Last forever

-Companies built with continuity and stability in mind. Market is in constant start of discontinuity -Companies built to last and specialize on one thing. Overtime as world changes, companies must adapt to change or risk becoming obsolete. -As innovation and tech advancement pace increases, we're seeing a correlation in companies lifespans on the market

3) Complementary Benefits (3 sources of network effect value)

-Complementary benefits are those products or services that add additional value to the network. These products might include "how-to" books, software, and feature add-ons, even labor. -Products and services that encourage others to offer complementary goods are sometimes called platforms. Allowing other firms to contribute to your platform can be a brilliant strategy because those firms will spend their time and money to enhance your offerings. -Complementary benefits create a "positive feedback loop"More users -> more game developers -> more games

Summary List of CAS Characteristics

-Contain large number of elements (no-brainer characteristic) -No one element understands entire system -Have rich interaction -Operate in an open system, one of many -Affected by positive and negative feedback loops -Operate far from equilibrium -Any agent can influence and be influenced by other agents -Demonstrate emergent behavior -Are unknowable and unpredictable -Self-organize into patterns -Can experience big change from small causes -Co-evolve with environment in nonlinear ways -Operate best at the Edge of Chaos -All systems are a function of their history

Within What layers does MSFT compete?

-Core: Windows -Database: SQL Server -Middleware: .NET -Enterprise: Dynamics -Customer Apps: - Office Suite which is deeply tied to OS - Web Browser - Media player

RAS Summary:

-Developing strategies requires predictions about the future -We like to make predictions based on historical patterns and trends -Business World is a complex adaptive system -Patterns in Business World do not have great predictive value -Therefore, business world is even less predictable than we thought -Taking cues from nature when developing business strategies -Singular focused strategies is wrong mind-set for an uncertain world -Managers should cultivate and manage populations of multiple strategies that evolve over time

E-waste:

-Discarded, often obsolete technology -bad, toxic waste due to all the crap on electronics -negative impact of Moore's law

How does diversity play a role in dealing with complexity and specifically what kind of diversity are we speaking of?

-Diversity means that there are different minds thinking of different ideas to solve problems or come up with new ideas. It is completely appropriate when dealing with complexity because the more minds that work together, coming up with different solutions, the more efficient businesses can run.

Every product has a FREE OSS equivalent:

-Firefox (Internet Explorer) -OpenOffice (Microsoft Office) -Gimp (PhotoShop) -Alfresco (Content Mgmt) -Marketcetera (Financial Trading) -Zimbra (Email) -MySQL, Ingres, and EnterpriseDB -SugarCRM (Salesforce.com) -Asterix (Phone systems) -Android (Mobile OS)

Is Groupon an example of a one-sided market or a two-sided market? What's the difference between one and two sided markets? What about AOL Instant Messenger? How does growth or monetization of a network change when you're are two-sided versus one-sided.

-Groupon is an example of a two-sided market because although they aren't "selling" anything, they are advertising businesses through the dispense of coupons. Businesses go to Groupon to try to build more long-term customers by giving out coupons to buy their products. One-sided markets derive their value from a single class of consumers and two-sided markets are markets comprised of two distinct categories of participant, both of which that are needed to deliver value for the network to work (e.g. video game console owners and developers of video games). AOL IM is a one-sided market as people do not choose what type of IM tool to use, they choose on the type of contacts they have. Growth of a network changes when you're in a two-sided market because businesses want to sell to the market that has more consumers, thus, gaining a bigger profit.

Can you explain what the three basic layers of the ecosystem are and how Microsoft's strategy differed from Apple in terms of what parts of the ecosystem is competed within?

-HW, OS, Applications. -MSFT concentrates OS layers. MSFT also concentrates on Applications (ex: MicrosoftOffice) -Apple concentrates HW, OS, Applications to lock in users.

Why did Harvard write a case about the Fire at Mann Gulch? What mental models can we draw from in terms of "fighting fires" in business, control, equilibrium, and also about the type of leadership that thrives in chaos.

-Harvard wrote about the Fire at Mann Gulch to illustrate the principle of a CAS and how you need to manage efficiently at the edge of chaos. By keeping your tools (equilibrium, stability to previous structure) and refusing to throw them down and run like instructed to (resisting to change and discontinuity) you died. This example shows you that in order to be successful and survive, you need to learn to be ready for the unthinkable by learning how to adapt at a moments notice (managing at the edge of chaos) and be open to risky ideas.

Software Characteristics:

-High upfront cost and low marginal cost -Has significant switching cost -> lock-in -Need compatibility across software systems ~Trade off though between Compatibility & Performance -Maintenance support limited to current and past 2 versions -Need complements [V(a+b) > V(a) + V(b)] -> More complements = more lock-in -Software exhibits network effect -Potential for market tipping (especially when lack of variety) -Need interoperability between systems (i.e. middleware allows for different types of systems to communicate) -Need standards -The software ecosystem exhibits certain characteristics - the above figure gives some major differences. At the core they are called infrastructural technologies. There is hardly any customization. While at the ERP layer it is highly customized. The type of knowledge is technical at the core and highly domain specific at the periphery. Please see the above for some differences. Core exhibits lot more network effect relative to periphery which are domain specific.

What prevents us from dealing effectively w/ complexity?

-Humans are good at linking cause & effect. When you see something occur in a CAS, your mind is going to create a narrative to explain what happened - even though cause & effect are not comprehensive in that kind of system. Also we have a tendency to think that certain causes will lead to particular effects. -What else gets in the way? •1st: We tend to listen to experts, b/c they are authoritative so we listen to them even if they are predicting something that is fundamentally hard to predict. If you're more authoritative, you seem more believable. •2nd: were reluctant to share private info so we aggregate info poorly.

What are examples of barriers to entry such as Brand, Distribution Channel, Switching Cost, and Network Effects? Recognize the different between creating barriers to entry and recognizing low barriers to entry. When are barriers a good thing for you and a bad thing?

-If there is already a well established brand it can be difficult to overcome their reputation, they also have established means of distributing because they probably have more money than you do. If you are trying to enter a market then you do not want to face barriers, but if you are a company trying to maintain the top spot then you do want barriers so that it is hard for others to overcome the market.

Imitation Resistant Value Chain = Powerful Resource

-If your Product is unique, the process can be usual (Apple Inc) -If your Process is unique, the product can be usual (FreshDirect)

When it comes to the ecosystem, Apple followed a similar strategy in the mobile phones and tablets that it did in desktops. How was that strategy different than Microsoft and explain why it worked better for mobile phones and tablets.

-In both cases, Apple owned all layers of its ecosystem. This was different for Microsoft because they did not own the hardware layer of their ecosystem. -The fact that Apple owned its whole ecosystem allowed for them to create more and better apps. The Apple in 2010 reading cites that a study showed that iPhone users had an average of 37 apps on their phone as opposed to the average 22 apps on Android OS phones.

Differentiation (barrier to entry):

-In order to break the commodity trap, many firms leverage technology to differentiate their goods and services -The iPhone's interface provided an edge against Nokia/Blackberry

What is the model of the hardware/software ecosystem entail? What are its layers? What does control over certain layers provide in terms of competitive advantage, staying power, and network effects?

-In the Konana ecosystem layers depend on one another starting with hardware. For example, whichever hardware one chooses determines the operating system that can be run on that hardware. In turn that operating system determines which applications can be run, etc. Outside layers of the ecosystem can only run when they comply with the system's previous layers. The model goes from hardware - operating system - database - middle ware - enterprise application - enterprise management - consumer applications. By controlling layers of the ecosystem, you can control what type of products will be compatible with the hardware. For example, Microsoft has a product for each of the layers and that is why they are so profitable. This can persuade staying power and network effects because the more users that will get Microsoft will soon want to/have to get all products that Microsoft has for each of the ecosystem layers.

Wisdom of the Crowds:

-In this concept, a group of individuals (the crowd often consists mostly of untrained amateurs), collectively has more insight than a single or small group of trained professionals -In this concept, a group of individuals (the crowd often consists mostly of untrained amateurs), collectively has more insight than a single or small group of trained professionals

Explain what it means to manage your business at the "Edge of Chaos?"

-Just like the Fire at Mann Gulch, businesses have to adapt to change. Just when a business reaches a successful structure, they want to stay at that status quo (stability) but in a CAS, change is bound to happen due to unforseen circumstances, and this change leads to instability. You have to run the business, then change the business; basically adaptation is vital to be a successful market.

OSS - Not just Linux!:-LAMP

-LAMP ~Linux OS ~Apache Web  server software ~MySQL database ~Programming  languages (Perl,  Python, PHP) --LAMP is 4 main things to build a website. -acronym for Linux OS, Apache Web server software (pre-middleware type of software), MySQL database, and Programing languages (Perl, Python, PHP). Basically a list of products that represent each layer of the ecosystem that show that OSS is operated by a community and not a company. Facebook and YouTube were built on this. - you need these layers to work. -FB for example: not just software, on hardware, running linux, running database (MYSQL), original built on PHP.

Porter's Model of Competitive Strategy:

-Lowest cost across the industry -Better product/service across the industry -Lowest cost within an industry segment -Better product/service within an industry segment ~Operational effectiveness ~Strategic Positioning: -Difference based on PRICE and Scope

Scale (barrier to entry):

-Many firms gain advantages as they grow in size. Advantages related to a firm's size are referred to as scale advantages. Businesses benefit from economies of scale when the cost of an investment can be spread across increasing units of production or in serving a growing customer base -Starting a new business may take more money than you have or are willing to bet.

Other Strategies to gain Network Effects:

-Move Early -Be Backwards Compatible (Excel '97, '03, '10 all can be opened on a PC with Microsoft Office) -Seed the Market (Blu-ray players came with the Playstation) -Leverage Distribution Channels (MSFT gave Media Player and Internet Explorer away free as part of Windows) -Form Alliances/Partnerships (Microsoft partnered with IBM to be the exclusive OS for the PC) -Encourage Complimentary Goods (Apple gives away Software Developer Kit for App Store) -Subsidizing the Market (Tuttle upgraded to 6 cuz verizon made it less money than 5s).

Should Apple care that Android has a bigger market share in the mobile phone market? Yes or no? Why?

-No, because Apple is still making a greater profit than Android. Since Apple is part of a closed ecosystem, they can price their products higher. Android is part of an open ecosystem, meaning that they face vicious rivalry; therefore, they can't price their products as high, and won't generate as much revenue as Apple.

If OSS is free then what is gained by using it and funding the projects that contribute to it?

-OSS is a $60bil industry but it has disproportionate impact on the $1tril IT market. Companies profit from OSS by selling support and consult services, OSS lowers computing costs which allows less barriers for small businesses to get access to better software, and using this robust, reliable software allows you to "keep the light switch on", in other words, you can keep running computer software without having to worry about its operation and focus on running your business.

Marginal Cost of Software:

-One very unique characteristic for software -Once something like Windows 10 is written, the economics are among the best in any industry: Unlike physical products made from raw materials, Marginal Cost = 0 MC = Cost to produce 1 more unit. -This leads cash cow businesses

Patents: (barrier to entry):

-Only pharmaceutical company Merck can produce NASONEX®

Business of OSS:

-Open source industry may make less revenue than traditional software BUT it has disproportionate impact on the IT market: ~Vendors make money on OSS by selling support and consulting services ~Lowering computing costs = less of a barrier for small firms ~More reliable, secure computing lowers costs for all users ~OSS diverts funds that firms would otherwise spend on fixed costs so that these funds can be spent on innovation or other more competitive initiatives

What made MSFT so Profitable?

-Partnering with OEMs -Upgrades (Major and Minor) ~2B for major upgrade, payback in ~6 weeks (MC = 0) ~MSFT only supports current and past 2 versions -Economies of Scale (90% market share) -Encouraging Compliments (msft let people build apps/complements for them) (apple had few complements until iOS) -Product Bundling ~How does Office give a greater value?: is greater value than buying them each individually, price bundling = price discount.

What are positive and negative global impacts of Moore's Law?

-Positives: costs fall, workers are more productive, innovations flourish and digital entertainment -Negatives: toxic wastes/landfills cause genetic defects, death, environmental damage (e-waste)

What are the risks and/or concerns of using OSS?

-Some companies view OSS as a form of socialism, it doesn't allow for competitors to join the market, and it is more complex to install/manage since it is downloaded from the internet versus a CD like paid software. There is a higher TCO, there is no support contract, leaving you to solve your problems only by community support. There are also legal/licensing concerns because if you start editing the Android OSS and like the code you created, you might want to start selling it on your own. Who are main contributors to the code of OSS? How is this different than perception of OSS code? ↓ See other side 75% of the contributors was developed by programmers for corporations. They are being paid to do their jobs, just happens it is OSS and they can submit their ideas. Comes from companies like Samsung, IBM, and Microsoft. OSS diverts funds that firms would otherwise spend on fixed costs so that these funds can be spent on innovation or other more competitive initiatives.

Computer Architecture (4 parts of computer)

-Storage (magnetic disk, optical disk, magnetic tape) -Input (keyboard, mouse, scanner, microphone) -Processor CPU (memory, special function cards) -Output (video display, printer, speakers, slide projector)

Be able to list the major components of computer architecture. Be able to classify commonly seen computer parts as input, output, storage, or processing devices. Know the purpose of each.

-Storage: magnetic disk, optical disk, magnetic tape -Input: keyboard, mouse, scanner, UPC reader, microphone -Output: video display, printer, speakers, slide projector, plotter -Processor: CPU, main memory, special function cards

How is operational effectiveness different from strategic positioning? Think of examples for both. Also explain why competitive advantage derived from operational effectiveness hard to sustain? (Think Dell)

-Strategic positioning is performing different activities from those of rivals, or the same activities in a different way and operational effectiveness is performing the same tasks better than how rivals perform them. An example of this is Apple when they first came out with the iPod and Microsoft tried to use operational effectiveness by creating the Zune. Competitive advantage derived from operational effectiveness is hard to sustain because technology is constantly being created and improved that competition is always going on.

What is TCO (Total Cost of Ownership) about and how does it relate to switching cost?

-TCO is the overall cost of owning a product, even if something was given to you for free. For instance, if I received a car from a friend for free, I still have to pay for insurance, repairs, maintenance, and gas, which when it is all put together, equals the TCO. TCO relates to switching cost because (in a software sense) the TCO of switching software involves learning the new system, finding some sort of support, and maintenance (updating). If you are already know your current software well-enough and you are already paying a fixed TCO, it may be a high switching costs to transfer over to a new software, especially an OSS, which only offers a community support group and is constantly being updated by the public.

What is the concept of "wisdom of crowds" or "group brain" about? How does something like Wikipedia apply when talking about this concept? What is a way that businesses today utilize crowdsourcing to gain advantage?

-The concepts of "wisdom of crowds" or "group brain" basically mean that a large group of individuals, usually untrained amateurs, present better ideas and solutions better than a single professional or small group of professionals because of their better insight. Wikipedia is a perfect example of this because it is constantly being updated and edited by Internet users, professionals and amateurs, and by having Wiki, viewers can get a more defined answer to their answers. Best Buy recently performed this when they had their own workers predict gift card sales and they were 99.5% accurate while professional statisticians were off by 5%.

Resource-based view of competitive advantage

-The idea here is that if a firm is to maintain sustainable competitive advantage, it must control a set of exploitable resources that have four critical characteristics. These resources must be : •(1) valuable, (2)rare, (3) imperfectly imitable (tough to imitate), and (4) nonsubstitutable.

Explain why network effects determine whether an Independent Software Vender (aka ISV) would prefer to make a Windows-compatible application over a Mac-compatible application.

-The more users that are on Windows-compatible applications makes more applications more valuable, therefore, network effects determine whether an ISV should or should not make this type of application. If more people are using Macs, then it would be appropriate to make a Mac-compatible application. Open source software (OSS) ↓ See other side it is open to the public; you can download it, look at the source code, edit and change the source code; Mozilla and Google Chrome is a good example because it uses the wisdom of crowds. It is operated by a community and not a company; it is still supervised but definitely not managed.

How does competing on product uniqueness versus process uniqueness affect the type of software a company would potentially use, specifically around buying packaged software versus building custom software?

-The packaged software could potentially be more efficient or just easier than building your own software. Instead of trying to figure it out on your own, they have a product that has already been perfected. - apple: unique in product -fresh direct: unique process -they run thru a basic software, the software can be basic. but you dont need customized software if process is usual = adv for apple. -for fresh direct there is no other thing like it, so it would need a customized software. -Dell: going from custom ERP to more standard ERP software, the new one they were gonna implement constrained things. needed it for every 2 hrs. so they abandoned the standard software & stayed w/ custom. (expensive & hard to maintain)

Inbound logistics (Porters Value Chain Model):

-These are all the processes related to receiving, storing, and distributing inputs internally. Your supplier relationships are a key factor in creating value here.

Service (Porters Value Chain Model):

-These are the activities related to maintaining the value of your product or service to your customers, once it's been purchased.

Porter's Five Forces Model:

-This model is focused externally, describing how a firm is positioned within its industry - 1) Potential for new entrants, power of suppliers, 2) rivalry among competitors,3) power of buyers, 4)threat of substitute products or services 5) Power of sellers -IF any thing increases in power/intensity = bad thing for potential profitability. - IF anything decreases in power/intensity =GOOD thing for probability & staying competitive &or potential profitability. -EXAMPLE: tuttles example of mexican resturaunt. -bad cuz alot of rivalry -food trucks made low barrier to entry -many substitutes cuz a lot of other mexican food places -no power over supplier cuz not buying enough to get a good deal -no power of buyer cuz they have other options

Linux:

-Unix-like OS created 1991 by Linus Torvalds -Didn't sell it - Gave it away -Leverages the Wisdom of Crowds -Prominent example of OSS -Version for Servers, Desktops, and Mobile -Basis for inexpensive OLPC and Android OS

Markets where network effects are at play experience what kind of competition? How are feedback loops are contributor to this?

-We see fierce competition when network effects are at play in markets. Examples are iPhone vs. Android, Goggle+ vs. Facebook, and Amazon vs. Barnes & Noble. Feedback loops are contributing to this because the more people buy a product, the more complimentary products are made, the less competitor complimentary products are made, and the less people buy the competitor products.

How can a product with less technical functionality end up being the overall winner over a better product? and don't just tell me "because of network effects".

-When the PS2 and Xbox came out, Xbox was a better overall performing system, thus had more technical functionality than PS2. What made PS2 more valuable, though, was the fact it was backwards compatible (able to play PS1 games) and already had a strong network effect, which in turn had a greater exchange for PS2 gamers. Since there were already more games for the PS2, more game makers focused on the PS2 (compliments) which in turn produced more staying power with PS2 gamers. By being the first in the market, Sony was able to be a more valuable gaming console company than Microsoft was.

Why Open Source?:

-Why firms choose open source products over commercial alternatives: ~How much does it cost? -> FREE ~Is it reliable? -> More eyes = 100x better ~Is it secure? -> Less "hackable" ~Scalability -> FB grew from 4K to 1.3b quickly (can it handle a lot of traffic?) ~Agility and time to market -> No starting from scratch ~Support Communities, Not Team

1) Exchange (3 sources of network effect value)

-as each new Facebook friend or fax user comes online, a network becomes more valuable because its users can potentially communicate with more people. These examples show the importance of exchange in creating value. Every product or service subject to network effects fosters some kind of exchange. -More Xbox owners ->more people to play with -> more value to you as Xbox owner

Flash memory:

-cameras, MP3 players, USB drives, and mobile phones often use it. It's not as fast as the RAM used in most traditional PCs, but holds data even when the power is off. You can think of flash memory as the chip-based equivalent of a hard drive. The big advantage? Chips are solid state electronics (meaning no moving parts), so they're less likely to fail, and they draw less power. For RAM chips and flash memory, Moore's Law means that in eighteen months you'll pay the same price as today for twice as much storage.

What strategy means to business:

-company can possibly outperform rivals only if it establish a difference that it can preserve. •Competitive strategy is about being different. It means deliberately choosing a different set...

Semiconductors:

-computer chips are sometimes also referred to as semiconductors (a substance such as silicon dioxide used inside most computer chips that is capable of enabling as well as inhibiting the flow of electricity)

What layers of ecosystem does microsoft compete in:

-core: Windows -Database: SQL, Server -Middleware: .NET -Enterprise: dynamics -Customer Apps: office, internet explorer, media player. -they control 90% of market share, can control databases.

How long does a MSFT support Windows?

-current version and last 2 versions. - this drives lock-in b/c it makes you upgrade, forcing you to switch & learn all the new stuff. once you switch & learn, you dont want to do it again. -software is not a 1 time cost. its re-occurring. every few years you must spend some $$

Two-sided markets:

-derive their value from two classes of users (Cross-side exchange) -More buyers = more sellers -More sellers = more buyers -AKA "positive feedback loop": more ppl buy xbox -> more xbox games are made -> less PS3 games are made -> Less ppl buy PS3.

Network Effects:

-exist if the value of a network increases with the number of users -Facebook would be of little value to you if your friends weren't part of it -Network effects are sometimes referred to as "Metcalfe's Law" or "network externalities." When network effects are present, the value of a product or service increases as the number of users grows. Simply, more users = more value. -Essentially you are more forced to a certain network if it has the larger group of users Not about popularity Example: The more people own phones the more valuable phone is to each owner

Feedback Loops within network effects:

-feedback loops are things that can be detrimental to one company & beneficial to another company. 2 sides or multiple side to market. if one goes up, other goes down -AIM: aim has more people added, you dont see more people join another one. -Ebay: more ppl on ebay so u go to ebay and increase in sellers. increase in sellers will increase buyers. these 2 affects eachother. beneficial for ebay, bad for yahoo auctions -if more ppl buy xbox, more xbox games made, less ppl making games for ps3, less ppl will buy ps3 (loop) dominoe effect.

Horizontal Integration VS Vertical Integration:

-horizontal: less you own. (ex: Dell. used to be vertical, but now more horizontal they dont service computers anymore, they dont sell only on their cite, they dont even make the computer anymore) -vertical: if you control more parts of value chain. managing it in house (fresh direct, manage everything) (Zara another example: do everything) -apple is vertically integrated in ecosystem cuz manages hardware, OS and apps. more control over layers = vertical

Complex Adaptive System:

-is a dynamic network of many agents (which may represent cells, species, individuals, firms, nations) acting in parallel, constantly acting and reacting to what the other agents are doing. The control of a CAS is highly dispersed and decentralized. If there is to be any coherent behavior in the system, it has to arise from competition and cooperation among the agents themselves. The overall behavior of the system is the result of a huge number of decisions made every moment by many individual agents.

Emergence:

-is a macro-level phenomenon, like the functioning of an ant colony, as a result of local-level interactions. -if you look at the ant and they are doing stuff, then zoom back and see millions of ants doing stuff and complex structure of the ant farm. (bird-1 thing, together w/ a lot of birds looks completely different. product of one bird turning and changing directions. idea that millions of things happen but you cant predict what shape will come from the flock) looks like one thing but is actually a million things happening.

Random-access memory (RAM):

-is chip-based memory. The RAM inside your personal computer is volatile memory, meaning that when the power goes out, all is lost that wasn't saved to nonvolatile memory .Think of RAM as temporary storage that provides fast access for executing computer programs and files. When you "load" or "launch" a program, it usually moves from your hard drive to those RAM chips, where it can be more quickly executed by the processor.

Open source software (OSS)

-is often described as free. While most OSS can be downloaded for free over the Internet, it's also "free" as in liberated (you may even see the acronym FLOSS for free/libre/open source software). The source code for OSS products is openly shared. Anyone can look at the source code, change it, and even redistribute it, provided the modified software continues to remain open and free. --scalibility: superior product in some ways. superior in ability to handle traffic. can it be used by millions. Linux runs efficiently & can handle alot of activity. can it manage lots of load & users. VS windows, if you open a lot of windows it starts to slow down.

Microprocessor:

-is the brain of a computing device. It's the part of the computer that executes the instructions of a computer program, allowing it to run a Web browser, word processor, video game, or virus. For processors, Moore's Law means that next generation chips should be twice as fast in 18 months, but cost the same as today's models.

ISV (independent software vendor)

-norton, oracle, macafee, -windows wanted to grow OS, and approached app layer in open approach & encourage complements and become more powerful. incouraged complements for windows. -tons of software compatible w/ windows. not a lot w/ mac & apple.

Which part of the value chain was Dell not originally in?

-outbound logistics -dell would take order, bought parts & made computer and worked w/ fedex & UPS to deliver the computer. -owned 4/5 of value chain

Strategic Positioning

-performing different activities from those of rivals, or the same activities in a different way. But while technology can be copied, technology can also play a critical role in creating and strengthening strategic differences—advantages that rivals will struggle to match. -EX: FreshDirect

Operational effectiveness

-refers to performing the same tasks better than rivals perform them. Everyone wants to be better, but the danger in operational effectiveness is "sameness." This risk is particularly acute in firms that rely on technology for competitiveness -easy to match -HEB vs Randalls

Supply Chain Software:

-software focused on first three parts of your value chain: inbound logistics,operations outbound logistics -software used for ordering parts for people, giving instructions on manufacturing & manages shipping and inventory. -allows parts of business to talk to one another.

Crowdsourcing:

-the act of taking a job traditionally performed by a designated agent (usually an employee) and outsourcing it to an undefined, generally large group of people in the form of an open call. -EX: Netflix offering anonymous data to any takers, along with a one-million-dollar prize to the first team that could improve the accuracy of movie recommendations by 10 percent. Frustrated for nearly three years, it took a coalition of four teams from Austria, Canada, Israel, and the United States to finally cross the 10 percent threshold. -EX: Facebook, leveraged crowd wisdom to develop versions of its site localized in various languages. Facebook engineers designated each of the site's English words or phrases as a separate translatable object. Members were then invited to translate the English into other languages, and rated the translations to determine which was best. Using this form of crowdsourcing, fifteen hundred volunteers cranked out Spanish Facebook in a month.

The Age of Discontinuity did not arrive in the 90s by happenstance. It arose from fundamental economic forces. Including

-the increasing efficiency of business, due to declines in capital costs. as industry shifted from goods to services, there was a concurrent decline in interaction & transaction costs. These costs declined b/c of the advent of info tech & steady rise in labor productivity due to advances in tech and management methods. -The increasing efficiency of capital markets due to the increasing accuracy of corporate performance data. -The rise in national liquidity, due to the improved profitability of US corporations, and a favorable bias, unparalleled anywhere else in the world, towards US equities. -Strengthened fiscal management by the fed govt, including an effective Federal Reserve, and reduced corporate taxes.

Distribution Channels (barrier to entry):

-the path through which products or services get to customers—can be critical to a firm's success. -AT&T and Comcast convinced you to not need a Tivo.

Moore's Law:

-the power and speed of computer chips double every 18 months w/ ZERO additional cost -applies to storage and fiber tool too. -(allowed IT to proliferate but made cheaper. DISRUPTIVE)

Metcalfe's Law:

-the value of a network is proportional to the number of users squared -value=(users)^2 -Bob Metcalfe invented the Ethernet and was a UT Professor of Innovation.

Outbound logistics (Porters Value Chain Model):

-these activities deliver your product or service to your customer. These are things like collection, storage, and distribution systems, and they may be internal or external to your organization.

Marketing and sales (Porters Value Chain Model):

-these are the processes you use to persuade clients to purchase from you instead of your competitors. The benefits you offer, and how well you communicate them, are sources of value here.

Operations (Porters Value Chain Model):

-these are the transformation activities that change inputs into outputs that are sold to customers. Here, your operational systems create value

Excel Knowledge:

-v look up: know what it is doing, what are the 4 parts. know what is happening. -IF statement: -functions: -conditional formatting (LOOK AT INSTRUCTIONS)

One technique for leveraging the wisdom of crowds is a Prediction Market:

-where a diverse crowd is polled and opinions aggregated to form a forecast of an eventual outcome. The concept is not new. -The stock market is arguably a prediction market, with a stock price representing collective assessment of the discounted value of a firm's future earnings. But Internet technologies are allowing companies to set up prediction markets for exploring all sorts of problems.

What CAS Characteristics Lead to Robust Adaptive Strategies?

1) Contain a large number of elements 2) Operate in an open system - one of many. 3) Have rich interaction & thus learn from one another 4) STRATEGIES must reflect knowledge of the complex system -ex: As of Nov 2015, Google bought 187 companies (search, software, news, mapping, entertainment)

Best Buy EX of Wisdom of The Crowds:

-where employees are encouraged to leverage the firm's TagTrade prediction market to make forecasts, and are offered small gifts as incentives for participation. The idea behind this incentive program is simple: the "blue shirts" (Best Buy employees) are closest to customers. They see traffic patterns and buying cycles, can witness customer reactions first hand, and often have a degree of field insight not available to senior managers at the company's Minneapolis headquarters. Harness this collective input and you've got a group brain where, as wisdom of crowds proponents often put it, "the we is greater than the me." -•When Best Buy asked its employees to predict gift card sales, the "crowd's" collective average answer was 99.5 percent accurate; experts paid to make the prediction were off by 5 percent. Another experiment predicting holiday sales was off by only 1/10 of 1 percent. The experts? Off by 7 percent! -Leadership is....Bottom Up

What does it mean to say Strategy comes before Technology? How can this guide us from making bad IT decisions and good ones? Also what does it mean to say IT is about strategic business value and use Prada and one other company as an example.

-• You have to know how you're going to execute before you produce. • Its not about technology for the sake of technology. • Prada had the magic glass doors and video cameras that would let you virtually try on clothes in the dressing room, but people did not like it because no one wants to be on camera while getting undressed. Just because it was innovative use of technology does not mean it should have happened. Tivo did not have a good strategy by trying to sell their device as a separate entity from the cable box, because now everyone else has it and they have lost out.

Tesco: Homeplus Subway Virtual Store video:

-•ranked 2 in korea. Problem: less number of stores than their competition e-mart. They wanted to be number 1 w/o increasing the nymber of stores. They studied Koreans, they are 2nd most hardworking ppl and they hated grocery shopping. •Idea: let the store come to the people. Made virtual stores in subway systems. Displays were same as actual stores. You use your phone to shop, scan the QR code & puts it in cart. When purchase is done, it will be delivered to your home right when you get home. Online sales increased tremendously. New members rose by 76%. Homeplus is number one in online market & 2nd in offline.

3 Sources Where Value of Network Effects can be derived from:

1) Exchange 2) Staying Power 3) Complementary Benefits -These three value-adding sources—exchange, staying power, and complementary benefits—often work together to reinforce one another in a way that makes the network effect even stronger. When users exchanging information attract more users, they can also attract firms offering complementary products. From a strategist's perspective this can be great news for dominant firms in markets where network effects exist. The larger your network, the more difficult it becomes for rivals to challenge your leadership position.

Examples of Porters 5 Forces:

1) Force: Bargaining power of customer: ~EX: Strong Force: Toyota's purchase of auto paint. ~EX: Weak Force: Your power over the procedures & policies of your university. 2) Force: Threat of Substitutions: ~EX: Strong Force: frequent-traveler's choice of auto rental ~EX: Weak Force: patients using the only drug effective for their type of cancer. 3) Bargaining power of suppliers: ~EX: Strong Force: students purchasing gas ~EX: Weak Force: grain farmers in a surplus year. 4) Threat of new entrants: ~EX: Strong Force: corner latte stand (huge potential for new entrants) ~EX: Weak Force: NFL team (very little threat of new entrants, cornered market) 5) Rivalry: ~EX: Strong Force: Used car dealers (lot of rivalry, harder to be profitable & sustainable) ~EX: Weak Force: IRS (only one, no one competes)

Kodaks Issues in a Nutshell:

1) In 2005 digital sales exceeded film sales 2) At one time 97% of shares held by institutional investors! Kodak beholden to shareholders 3) Make up of company - Mostly chemical engineers will little experience in digital world 4)Managerial Inertia (Film value proposition more attractive) - People buy camera and constantly earning Kodak more money with continued film development and film purchase both of which provide additional revenue for Kodak -Digital cameras don't have same revenue model -Unwilling to cannibalize cash-cow business 5) Cultural lock-in (Strong beliefs in cultures & value system) -Consensus-based value system led to rely on status-quo

Sources of switching costs:

1) Learning costs: Switching technologies may require an investment in learning a new interface and commands. 2) Information and data: Users may have to reenter data, convert files or databases, or may even lose earlier contributions on incompatible systems. 3) Financial commitment: Can include investments in new equipment, the cost to acquire any new software, consulting, or expertise, and the devaluation of any investment in prior technologies no longer used. 4) Contractual commitments: Breaking contracts can lead to compensatory damages and harm an organization's reputation as a reliable partner. 5) Search costs: Finding and evaluating a new alternative costs time and money. 6) Loyalty programs: Switching can cause customers to lose out on program benefits. Think frequent purchaser programs that offer "miles" or "points"

Porters Frameworks: Suggested order of Analysis:

1) Look at the industry structure -Porters 5 Forces Model -Looking externally from your company. 2) Look at your product/service -Porter's Model of Competitive Strategy -Looking internally at your company. 3) Look at HOW you produce & provide your product/service -Porter's Value Chain Model -Looking internally at your company.

Challenges in choosing disruptive technology:

1) More on inertia - Cognitive inertia -Middle and most of top-management resistant to change & didn't know much about digital imaging - Threatened by lack of skills and know-how about digital imaging. -Unwilling to give up or cannibalize existing cash-cow (film business) -Price-performance not appealing and unwilling to envision future technological progression 2) Cultural lock-in -Strong beliefs in existing cultures and value system - Consensus-based value system leading to rely more on status-quo -"We've always done it this way"

Complex Systems Exhibit:

1) Path dependence-- small, random changes can lead to radically different outcomes ~Weather: the butterfly effect ~Traffic: multiplecar pileups 2) Punctuated equilibrium--long periods where nothing changes followed by short, revolutionary transitions ~Evolution ~Stock market ~Weather ~Music industry ~Media delivery

In the presence of the Innovator's Dilemma:

1) Restructure the business aggressively to the new market reality (e.g. Netflix ) 2) Spinoff new part as separate entity w/own company structure (e.g. Twitter was a spinoff) 3) Monetize intellectual assets by licensing to other players (e.g. Intel licenses its patents to AMD) 4) Sell off older parts of the business to other industry players (e.g. HP sold its computer division)

Lessons Learned in MSFT:

1) Software exhibits some unique characteristics: ~Upfront development costs are high ~Marginal costs are low ~Potential network effect -> high switching costs -> lock-in -> frequent upgrades are profitable ~Compliments are important ~Potential for market tipping (i.e. winner take all) 2) Software Companies - In the presence of network effect of competitors, a firm must provide low switching costs; otherwise it can be hard to compete 3) We as Businesses - need to evaluate various factors and be aware of how lock-in will affect our IT decisions.

How would one threaten MSFT?

1) Vista was a mistake but why? ~This gave users a switching cost so OS users avoided the upgrade to next OS 2) Substitution / Obsoleting of the Windows: 35% revenue is office. ~Open source OS (in emerging markets) ~Web-based applications don't care about OS (more on this when we talk about "cloud" and "SaaS") ~Non-PC devices (Tablets & Mobile) -Anti-trust Litigation (bundling now harder) -Security - Everyone is after this big guy!

When Network Effects are present:

1) We see fierce competition -Google+ vs. Facebook -iPhone vs. Android & Samsung -Amazon vs. Barnes & Noble 2) Tipping point is reached where one winner can take all 3) Best Product? -Does not always win -Unless it "leapfrogs" the competition

Software:

1)Can you see it or touch it? -No...it's digital. Very unique and unlike other valuable products (e.g. You can't virtually distribute oil) -Must sit on something physical = hardware.

Understanding the Value Chain:

1)Improvement in any step has the potential to increase profitability 2) Technology is key in crafting an imitation resistant value chain (i.e. Dell in the 90's) ~Typically requires unique "proprietary" or custom software to run this... 3) If process is typical then typical "off the shelf" or packaged software can do the job (i.e. Apple) ~SCM = linking inbound and outbound logistics ~CRM = supports sales, marketing, and R&D ~ERP = helps to automate whole value chain

What are different methods noted in class and in text of how one can acquire network effects? Can you spot the method if I gave you an example of a company's strategy?

1. Move early (Yahoo! Auctions in Japan) 2. Subsidize product adoption (PayPal) 3. Leverage viral promotion (Skype; Facebook feeds) 4. Expand by redefining the market to bring in new categories of users (Nintendo Wii) or through convergence (iPhone). 5. Form alliances and partnerships (NYCE vs. Citibank) 6. Establish distribution channels (Java with Netscape; Microsoft bundling Media Player with Windows) 7. Seed the market with complements (Blu-ray; Nintendo) 8. Encourage the development of complementary goods—this can include offering resources, subsidies, reduced fees, market research, development kits, venture capital (Facebook fbFund). 9. Maintain backward compatibility (Apple's Mac OS X Rosetta translation software for PowerPC to Intel) 10. For rivals, be compatible with larger networks (Apple's move to Intel; Live Search Maps) 11. For incumbents, constantly innovate to create a moving target and block rival efforts to access your network (Apple's efforts to block access to its own systems) 12. For large firms with well-known followers, make preannouncements (Microsoft)

Explain the driving forces behind discontinuity and what that means for long-term survival of a company? How were companies in the earlier part of the 20th century built and manage change?

A company cannot go along thinking that there will be perfect equilibrium. Something will come along that is going to disrupt the flow of things. A company needs to be able to adapt to changing environments and situations that arise. Those companies were built on operations, turning the materials into products, and adapted later when the markets began to change.

How does a platform contribute to network effects? Think "Made for iPod" and how Apple or Microsoft may have built up network effects for their platform by encouraging exchange, lock-in, and complimentary benefits.

A platform contributes to network effects because the stronger the platform, the more users it will attract, thus making it more valuable. For example, the iPod is a strong platform because from the iPod you buy songs, a protective case, different chargers, car docks, and more accessories. What makes the platform strong, however, is the fact that accessories that are sold by other companies other than Apple are credible because of the licensed sticker "Made for iPod". This strong platform encourages exchange among consumers, a lock-in with iPod owners, and complimentary benefits.

What was the overall end result from rangers over feeding elk at the national park?

A) The elk got sick and died B) The elk became domesticated and stopped eating unless fed by humans C) Elk got over-populated D) Beavers got over-populated **E) The amount of fish in the streams was reduced drastically

Envelopment:

Apple leveraged a strategy known as envelopment, where a firm seeks to make an existing market a subset of its product offering. Apple deftly morphed the iPod into the iPhone, a device that captures all of these product categories in one device.

How do cultural lock-in and people's mental models prevent a company from being innovative or moving towards progress? What does this have to do with the fear of cannibalization? In your opinion, could the iPad cannibalize Macbook sales and is that reason to stop making either?

By having a cultural lock-in, you believe in staying with the status quo because you are fearful of change and if you fear change, you have a mental model of the resistance to adapt to new strategies/ideas. This has to do with the fear of cannibalization because then you'll fear that any new product your company comes up with will take over your current successful product, you are unwilling to take that chance of having multiple successful products. I do not think the iPad cannibalizes the Macbook because they cannot do the exact same things. The iPad was made to be the first great tablet that would be better than most other current PC laptops because of its speed and iOS software. Macbooks have way more processing power for bigger duties and are more compatible with other software so that more work can be done in a more efficient way.

How have low marginal costs, network effects, and switching costs combined to help create a huge and traditional industry? How could OSS be a threat to the traditional SW industry?

By having low marginal costs, network effects, and switching costs, software generates $300B per year and leads to "cash cow" businesses. By having consumers having to pay for software, this leads to "barnacle" consumers who have a high switching cost in changing software, leaving a vast profit for the creators to obtain. OSS can be a threat to the traditional SW industry because it makes big firms question "How can we compete with free? How can we make money with free? How can we fuel innovation on free?" They view OSS as socialism and cancer to the industry.

Consider the three parts the make up network effects and then use this to assess why people use Facebook more than Google+. What could Google do to increase network effects? How did Netflix help increase it's own? Consider barriers to entry and how you want barriers to exist (i.e. high or low) when you are trying to attract and then when you are trying to retain customers.

Facebook has high exchange, staying power, and complimentary benefits. You want low barriers when you are trying to enter the market, and high barriers if you are already in the market so that another company doesn't take your customers. -• probable reasons why peoples use FB > google cuz of the vast number of FB users that exist (exchange), burden of switching cost of re-adding all your friends (staying power), and apps/games/FB groups/links to twitter/instagram/etc that are on FB (comp benefits) google could increase its networks effects by getting more users to join for one example or get more products/services to add value to having google+ or etc • Netflix increased its networks effects by creating TV shows exclusive to Netflix (orange is the new black, house of cards, etc) so this would prompt more users to find additional value in subscribing to Netflix

How is the economics of the semi-conductor industry unlike analog or physical product industries? Note cost/performance relation but also discuss other concepts like rate of adoption, investment in IT trends, evolution of big data and metrics, and how Moore's law relates to transmission speeds and storage.

It is not a product that customers directly buy but are buying indirectly through all the technology that encompasses it. I'm not sure about the price but its performance is necessary for many functions of today's society, and is being adopted in all aspects of technology, like refrigerators and cars and even in our pets. It is being invested in by IT firms everywhere because, relating to Moore's law, is becoming better and better yet at the same time becoming cheaper.

What is the difference between Open and Closed standards when looking at the potential for new entrants, the potential for rivalry, and the potential for profit.

Open -More growth = more competition = less risk = but less profitable • e.g. Android • Closed -Less growth = less competition = more risk = but more profitable • e.g. Apple

Platform

Products and services that allow for development and integration of software products and other complimentary goods. -Want to play your iPod somewhere? NO PROBLEM! There's literally thousands of options! Also iPod gets paid more for each compliment! -Apple has lowered the barrier and decided to not control the system but embrace self-organizing bottom-up approach.

Example of Strategy:

Southwest Airlines: -only fly 737. (all pilots can fly it, maintenance people can fix it) •short-haul, low-cost, point-to-point service between mid-cized cities & secondary airports in large cities. •avoid large airports: does not fly great distances; only 737 •fast turnarounds at the gate of only 15 minutes. •LOW COST-HIGH VOLUME

Staying Power and Switching Cost are talking about the same thing essentially except it depends on whose perspective you're considering. Please explain what is meant by this statement.

The different views are dependent on the consumer and the business. Consumers see switching costs as what they would be giving up to switch to a new product (PC to Mac). Businesses want to give consumers high switching costs so that they have higher staying power.

Blue Ocean Strategy:

The idea—instead of competing in blood-red waters where the sharks of highly competitive firms vie for every available market scrap, firms should seek the blue waters of uncontested, new market spaces.

What does it mean for something to be "open source"? What are some examples of open source software and even some non-software related things?

To be open source means to be open to the public essentially. Something is created for anyone to use and edit to better the community. Wikipedia and Linux are perfect examples of OSS. Contributing music snipets and even contributing different ways to cure illnesses are other non-software examples of being "open source."

congestion effects:

When network effects are present, more users attract more users. That's a good thing as long as a firm can earn money from this virtuous cycle. But sometimes a network effect attracts too many users and a service can be so overwhelmed it becomes unusable. These so-called congestion effects occur when increasing numbers of users lower the value of a product or service. This most often happens when a key resource becomes increasingly scarce.

Monopoly

a market where there are many buyers but only one dominant seller.

Scalability:

ability to either handle increasing workloads or to be easily expanded to manage workload increases. In a software context, systems that aren't scalable often require significant rewrites or the purchase or development of entirely new systems. It allows a firm to scale from start-up to blue chip without having to significantly rewrite their code, potentially saving big on software development costs

TCO (Total Cost of Ownership)

an economic measure of the full cost of owning a product (typically computing hardware and/or software). TCO includes direct costs such as purchase price, plus indirect costs such as training, support and maintenance.

Mental Models:

are the core concepts of the corporations, the beliefs & assumptions, the cause-effect relationships, the guidelines for interpreting language & symbols. They are invisible in the corporation, they are neither explicit nor examined, but are pervasive.

While thinking of the relation between a theory and a strategy explain how RAS relates to CAS:

business must create robust, adaptive STRATEGIES to survive in a CAS. You have to keep moving and mix short, medium, and long jumps (take adaptive walk on the landscape).

Continuity/Discontinuity:

capital markets, and the indices that reflect them, encourage the creation of corporations, permit their efficient operations (as long as they remain competitive), and then rapidly - and remorselessly - remove them when they lose their ability to perform. Corporations, which operate with management philosophies based on the assumption of continuity, are not able to change at the pace and scale of the markets. As a result, in the long term, they do not create value at the pace and scale of the markets. Continuity is basically staying the same, going the status quo.

One-sided markets:

derive most of their value from a single class of users

Cannibalization:

is more specific to a single company, and its when a new product overshadows all the other products of the company. For example, when the iPhone and iPod touch came out, it detracted from the sales of the iPod shuffle, nano, etc.

Cultural Lock-In:

is the inability to change the corporate culture even in the face of clear market threats. It dampens a companies ability to innovate or shed operations w/ a less-exciting future. It signals the corporations inexorable decline into inferior performance. • It manifest itself in 3 general fears: o the fear of cannibalization of an important product line o the fear of channel conflict w/ important customers o the fear of earnings dilution that might result from a strategic acquisition.

An adaptive population of strategies:

keeps an array of options over time, minimizing long-term & irreversible commitments.

Theory:

model of how the world works.

The pace of change has been accelerating continuously since the 20s, there has been 3 great waves:

o 1st Wave: came shortly after WWII, when the nations military build up gave way to the need to rebuild consumer infrastructure. Many new companies entered the economy at this time & rose to economic prominence in the 40s & 50s. o 2nd Wave: began in the 60s, the rate of turnover in the S&P 90 began to accelerate and the aerospace programs stimulated the economy, providing funds for the development of logic & memory chips and later the microprocessor. Hot stocks were called "one-decision" stocks: buy them once & never sell them, your fortune was assured. The bubble burst in 68, the NYE stock exchange rose almost to 100, did not return to those levels til the 80s. o 3rd Wave: In the 1980s, the S&P began substituting new high-growth & high-market-cap companies for the slower growing & even shrinking market cap older companies. When the markets collapsed in the late 80s a shortlived recession hit the US economy in the 90s, the rate of substitution in the S&P 500 fell off. But again, even at its lowest point, the turnover was higher than it was during the 1970s decline. By the end of the 90s, we were in the Age of Discontinuity.

Prediction Markets

one technique for leveraging the wisdom of crowds, where a diverse crowd is polled and opinions aggregated to form a forecast of an eventual outcome. The stock market is arguably a prediction market, with a stock price representing collective assessment of the discounted value of a firm's future earnings. But Internet technologies are allowing companies to set up prediction markets for exploring all sorts of problems.

Strategy:

plan, method, or series of maneuvers for obtaining specific goal or result ~Tactics - specific actions for reaching strategic goals ~ Actions - detailed, day-to-day steps for achieving tactics

Feedback Loops

positive feedback loop is when there are more buyers, there are more sellers, and when there are more sellers, there are more buyers.

Disruption

something that interferes with our daily lives and makes us change how we usually do things.

Disruptive technology

states that technology has a way of disrupting our daily lives, and makes us change the way we do things. For example, now most people get their news online or through their phones, instead of newspapers, which puts the newspaper industry almost out of business.

Path Dependence

the idea that the butterfly flaps its wings and rain comes down. Napster led to the legitimate line of music, then iPod came out, then so forth and so on. Napster didn't create today's iPad or tablet, but it changed and contributed to the present market. Small things can evolve and become something big.

Innovators Dilemma:

the major question every company faces when deciding if they should keep the status quo by keep producing the same product or if they should venture into a new world and risk taking a hit to try to succeed in the future of the company.

Market Capitalization:

the value of the firm calculated by multiplying its share price by the number of shares.

Corporations are built on the assumption of continuity;

their focus is on operations.

Capital markets are built on the assumption of discontinuity;

their focus is on the creation and destruction.

Cross-side exchange:

when an increase in the number of users on one side of the market (console owners, for example) creates a rise in the other side (software developers).

Discontinuity thrives on divergent thinking;

which focuses on broadening the context of decision making. It places an enormous value on getting the questions right, then relinquishes control to conventional convergent thinking processes. Divergent thinking focuses on the skill of reflection as on the skills of swift decision making. -We refer to these 3 skills - conversation, observation and reflection, as the COR skills of divergent thinking.

Corporate control systems limit creativity through their dependence on convergent thinking:

which thrives on focus on clear problems and well-known solutions.

A robust population of strategies:

will product positive results under a wide variety of circumstances, even tho it ay not be optimal in some circumstances.

The Five Waves of Computing:

• 1960s, room sized computers. • 1970s, fridge sized minicomputers • 1980s, personal computers • 1990s, networked computing • 5th wave:, Wave V. Ubiquitous: Computing is in everything. • (MOORES LAW IN ACTION)

Apple's Competitive Advantage:

• Compatibility o Works with Intel chips so you can run Windows o Virtualization means OS may not matter, run whatever kind you want o Office suite - nearly 100% compatible o More software is moving to web (SaaS) o Proprietary environments (esp. OS) o Buyer Loyalty to Strong Brand and Price Premium o Closer to Customer • e.g. Stores o Digital Hub Creates lock-in for all Apple devices

Criteria necessary for a crowd to be smart:

• be diverse, so that participants are bringing different pieces of information to the table, • be decentralized, so that no one at the top is dictating the crowd's answer, • offer a collective verdict that summarizes participant opinions, • be independent, so that each focuses on information rather than the opinions of others

Economics of IT is unusual:

• performance increases in 18 months, but not seeing the price increase. Price stays constant, performance is increasing when price overtime is decreasing. WEIRD. the tech we all have in our lives is becoming cheaper while the performance is going up.

A complex adaptive system has 3 characteristics:

•1st: is the system consists of a number of heterogenous agents, and each of those agents makes decisions about how to behave. The most important dimension here is that those decisions will evolve over time. •2nd: is the agents interact w/ one another. That interaction leads to the third.. •3rd: something scientists call emergence: the whole becomes greater than the sum of the parts. -The key issue is that you cant really understand the whole system by simply looking at its individual parts.

The Danger of Relying on Strategy:

•According to Porter, the reason so many firms suffer aggressive, margin-eroding competition is because they've defined themselves according to operational effectiveness rather than strategic positioning.

"The Osborne Effect:

•Preannouncers, beware. Announce an effort too early and a firm may fall victim to what's known as "The Osborne Effect." It's been suggested that portable computer manufacturer Osborne Computer announced new models too early. Customers opted to wait for the new models, so sales of the firm's current offerings plummeted.

Causes of Cultural Lock-In:

•The heart of the problem, is the formation of hidden sets of rules or mental models that once they are formed are hard to change. •When mental models are well crafted, they allow management to anticipate the future & solve problems. But when they become out of sync w/ reality, they cause management to make forecasting errors & poor decisions.

Difference based on PRICE and Scope: ( Porter's Model of Competitive Strategy)

•cost approach VS differentiated approach (its high end, diff from cost model) & industry wide scope VS focused scope ~Industry wide scope & cost focused company = WALMART, Target ~Industry wide scope & differentiated approach = Neiman Marcus ~Industry wide scope & differentiated approach = Neiman Marcus ~focused scope & differentiated approach - Audi, Mercedez.