Digital Tech Final Questions and Exercises

What are the risks and challenges of running a business like Airbnb?

- New, niche-orientated competitors are beating the company at its own game - (Still) lack of trust among guests and hosts - Regulation and legal challenges

What are the three pillars of firm focus in Jeff Bezos's "Wheel of Growth"?

1.) Low prices 2.) Customer experience (convenience) 3.) Vast selection

What is A/B testing? How is it used at Amazon?

- A/B testing is a randomized group of experiments used to collect data and compare performance among two options studied (A and B). - Amazon uses this to understand various patterns related to recommendations, preferences, customer segments, price tolerance, and more.

Why Google offers many digital products/services for free?

- Advertising drives profits and lets the firm offer most of its services for free - Those free services have propelled Alphabet into a multifront war that includes mobile, browsers, cloud infrastructure, e-maul, office apps, social media, maps, e-commerce, payments, and more.

Describe Airbnb's tech-enabled business model

- Airbnb charges a 3% service fee to the hosts, but give them a new market. These hosts fill out a profile of themselves and their homes. - The visitor requests a room from Airbnb that is from a host. Airbnb also gives the visitors access to a new market, but they charge a rental fee and a 6-12% service fee. - Visitors are in communication with the host who provides them with a home.

Understand Amazon's inconsistent financial performance as well as their long-term outlook with respect to investing in initiatives and commitment to building scale and growing a profitable business

- Amazon financials suggest that the firm is deferring profitability due to its increased investment in capital expenditures such as its warehouse and data center buildout. - Amazon's scale is a significant asset. Scale gives Amazon additional bargaining leverage with suppliers, and it allows the firm to offer cheaper prices in many categories than nearly every other firm, online or off.

How is Amazon Marketplace offer two-sided network effects? How else does Amazon benefit from goods sold via Marketplace versus those goods of which Amazon takes inventory control and sells directly?

- Amazon gets a cut of each sale, maintains its control of the customer interface, and retains the opportunity to collect customer data that would be lost if users went elsewhere for a purchase - Around 40% of products sold on Amazon are offerings sold through Amazon Marketplace by third parties.

Why Google become Alphabet?

- Breaks many of the new, smaller, riskier but potentially growth-oriented efforts into separate businesses. - The firm chose the name alpha-bet as a bet on the financial term alpha, which refers to "investment return above benchmark." - Google is hoping to be the first (alpha) big player to double-down (bet) risky but promising new markets.

Describe the technology-enabled business processes in Amazon's fulfillment center.

- Customers placing an order set the robots in motion. - Robots locate and move the right shelves to fulfillment associates. - Computer software chooses right box for associates to package an order. - Machines weigh, scan, and label packages for final shipment to customers.

How does Amazon use data to improve operational efficiency and personalized shopping experiences?

- Fuel personalization - Amazon tracks your surfing behavior and buying history to create a home page based on Amazon's best guess of what you'll want to see

Recognize firms often categorized as part of the "sharing economy" or participating in "collaborative consumption."

- Goods (ex. Craigslist, Chegg, Custom Made) - Services (ex. Upwork, Angie's List, DoorDash) - Transportation (ex. Uber, Zipcar) - Space (ex. Wework, Airbnb) - Money and Finance (ex. LendingClub, gofundme)

Interpret the Lift ratio from market-basket analysis (Lift>1,=1,<1).

- If Lift > 1, the sales of product A lifts the sale of product B. - If Lift = 1, the sales of product A and B are independent. - Lift < 1, product A and B are substitutes!

What are the objectives of SEO?

- Improve the ranking of a website in the list of search results for targeted keywords. - Improve the volume and quality of traffic to the website.

What are some strategic reasons that Amazon offer Prime membership?

- Instant streaming of movies & TV shows - Instant access to thousands of Kindle books - Free two-day shipping - Loyalty among customer base - Make switching costs extremely high

Recognize how Amazon uses tech and systems in fulfillment operations to get products from suppliers to customers quickly and with minimum error; provide or recognize a few specific examples of technology that Amazon uses for efficiencies / advantages in the growing warehouse and logistical system

- Local deliver is coordinated in several ways, including Amazon's Uber-style recruitment of contract drivers. - Algorithms decide which path is most effective from both a cost and customer service perspective. (USPS, UPS, FedEx, or itself) - 40 cargo planes - Amazon Key: Amazon delivery service to homes even when customer is not home. Acquisition of Ring allows Amazon to do this.

Identify some companies that use data to create competitive advantages.

- Netflix - Amazon - Airbnb

Understand how Google makes money by matching buyers with potential buyers.

- Search advertising and display advertising (96% of Google's revenue) - Adsense (60% of Google's ad revenue)

What are the characteristics of the sharing economy / collaborative consumption?

- Tech-powered marketplaces - Supplier/consumer pooling - Fuel more efficient matching of supply and demand - Enable more efficient resource use - Lower costs - Provide a level of reach and services heretofore unavailable

What are the objectives of doing clustering analysis/market-basket analysis in business? What are some applications of these two techniques?

- The objective of clustering analysis is to assign a set of objects into groups. - The objective of market-basket analysis is to identify co-occurrence patterns which shows products customers tend to buy together. -Amazon uses this to recommend new items based on what is in the customer's cart already.

What are millennial travelers looking for when deciding where to stay?

- Travelers are increasingly searching for a tailored, personal experience - They are looking for the most convenient, instant experience, straight from their mobile - They rely on their social network and friends. - They are looking for the best offer that would maximize the value of their money

What is the role of network effects in sharing economy markets?

- Two-sided network effects are at work in collaborative consumption marketplaces, and in order to be successful, firms must offer value to both buyers and suppliers - Firms that move early may get a jumpstart on the creation of key assets, such as network effects, brand, scale, and financial resources

What are the four criteria necessary for a crowd to be "wise"?

1.) BE DIVERSE- so that participants are bringing different pieces of information to the table 2.) BE DECENTRALIZED- so that no one at the top is dictating the crowd's answer 3.) Offer a COLLECTIVE VERDICT that summarizes participant opinions 4.) BE INDEPENDENT- so that each focuses on information rather than the opinions of others

Understand how search engines work.

1.) CRAWLING THE WEB - Automated programs (bots or spiders) - Follow links to find websites, pages, and documents 2.) INDEXING DOCUMENTS - Index the contents in a giant database of documents 3.) PROCESSING QUERIES - Search engine receives search request ("query") - Engine retrieves all matching documents from its index 4.) RANKINGS RESULTS - Engine's search algorithm scores each result on potential relevance - Results displayed in order of relevance

What are the three components in the Stool Model of Analytics?

1.) INFORMATION TECHNOLOGY- helps you capture, store, and manipulate a large volume of data 2.) QUANTITATIVE ANALYSIS- such as statistics and data mining, helps you identify patterns hidden in the data 3.) BUSINESS DOMAIN KNOWLEDGE- enables you to ask relevant questions and understand the meanings of data and hidden patterns.

What are some strategies for competing in markets with network effects?

1.) Move early (Yahoo! auctions in Japan, Netflix) 2.) Leverage viral promotion (Skype, WhatsApp, Uber, Airbnb, Blue Apron) 3.) Expand by redefining the market to bring in new categories of users (Nintendo Wii) or through convergence (iPhone) 4.) Form alliances and partnerships (Didi/Ola/GrabTaxi/Lyft global ride-sharing alliance vs. Uber) 5.) Establish distribution channels (Java with Netscape; Apple embedding Apple Music in all Macs and iOS devices) 6.) Maintain backward compatibility (Apple's Mac OS X Rosetta translation software for PowerPC to Intel)

What are the key characteristics of Web 2.0?

1.) Social media: creating, sharing, curating, and commenting on content 2.) Peer production: when users collaboratively work to create content, products, and services, which includes social media as well as user-created services like Skype and BitTorrent. 3.) Collaborative consumption: participants share access to products and services rather than having ownership

What factors drive the growth of online digital advertising?

1.) increased user time online 2.) measurement & accountability 3.) targeting opportunities

What roles do trust and reputation play in the sharing/collaborative economy?

Although incidents are rare, safety of the public and safety of service providers remains a concern in the sharing economy. Having a trustworthy brand and reputation is key to build trust with service providers and customers.

What are Airbnb's strategic resources? Why are they important?

BRAND: important to maintain because this is how they can attract new customers and maintain a trustworthy reputation TWO-SIDED NETWORK EFFECTS: important because Airbnb relies on homeowners and customers looking to rent a home for their entire business DATA and SWITCHING COSTS (review/reputation data for hosts/guests): important because hosts can gain a reputation on Airbnb and then are less likely to move away to a competitor business.

Give one or two examples of brand construction/destruction in the era of Web 2.)

Brand construction example: ALS Ice Bucket Challenge Brand destruction example: United employee drags passenger off of plane

What are some of Amazon's critical resources that sustain its competitive advantage?

CUSTOMER BASE: more customers allow the firm to provide more products, creating scale. CUSTOMER EXPERIENCE: exceptional customer experience fuels a strong brand that makes Amazon the first place more consumers shop online. - Three pillars reinforce one another to create additional assets for competitive advantage that include scale, brand, network effects, data, and an imitation-resistant value chain

Understand Google's AdWords and AdSense

Display Ads (AdSense): - Content providers make money offering advertising on their sites. - Pay by click or/and Pay by impression

Know some examples of Web 2.0 applications:

Facebook, tumblr, Linkedin, Quora, Instagram, Yelp, or stackoverflow

What are some strategic reasons that Amazon prices Kindle & Fire below cost?

Its overall costs for things like real-estate, energy, inventory, and security will be lower than costs for brick-and-mortar rivals. ??? Amazon wanted to make money from these products over time instead of from the initial purchase of the physical product. They wanted to do this by the purchase of e-books and digital media.

What kinds of products and services are subject to network effects? Which are not?

Subject to network effects: Social media networks, video game consoles, VR platforms, and Blu-ray video players Not subject to network effects: Socks, pancake syrup, or trash bags

What makes network effects so valuable for creating sustainable competitive advantage? What are the three sources of network effects?

When network effects are present, the value of a product increases as the number of users grows; more users = more value. Three sources: 1.) Exchange opportunities 2.) Staying power 3.) Complementary benefits

How are market where network effects are present different than markets without network effects?

With network effects, products or services become more valuable as its installed base expands. Market characteristics: - early, fierce competition (positive-feedback loop leads to biggest networks growing even bigger) - bandwagons form once a clear leader becomes clear - monopolistic tendencies arise as these markets are often winner-take-all or winner-take-most. - "Best" products do not always win.

What is cloud computing?

the dynamic provisioning of IT capabilities (hardware, software, or services) from third parties over a network Cloud computing moves computing processes or resources from the user's machine onto the Internet.