Computers Final
How do IoT and Big Data interact with sustainable competitive advantage?
The ability of a firm to use technology to record vast amounts of data is paramount to sustainable competitive advantage
Will there be Google / Waymo branded cars? Apple branded cars? Facebook branded cars?
Yes it's possible for all of them (except maybe Facebook) because the others have been researching autonomous cars for multiple years now.
Do you think there are limits on the intelligence of computers?
Yes, assumption is a power of human thought that cannot be replicated or created for computers
Does it contribute to a sustainable competitive advantage? (Rewards Program)
Yes, because there will always be customers who start out with Gold and want to get to the next level
Insider View of Auto Industry Disruption
thinks the automobile industry will evolve naturally, keeping the current structure and changing in an orderly fashion
The Profit Formula
- Revenue - Cost - Margin (target) - Resource Velocity (amount of turnover in inventory)
Where does disruptive tech come from?
(TECH INDUSTRY) - can occur in a wide variety of industries - occurs when the forces of fast/cheap technology enable new offerings from new competitors - examples: Telephones, Cellphones, digital cameras, cloud computing, cars, etc.
What is the conventional wisdom on how to start a company?
- "5-year plans" for a non-existent business," a program is perfected before it is rolled out: write a business plan, pitch it to investors, assemble a team, introduce a product, and start selling as hard as you can - Includes size of opportunity, problem to be solved, and provided solution - Setbacks can be fatal (75% of all startups fail)
ICO
- "Initial Coin Offering." - essentially lets a firm raise capital from multiple sources. Instead of issuing shares of ownership, the offering company sells digital tokens, or "coins," created through blockchain technology
What is the company's "VPC story"? Value proposition? (Blue Nile)
- "Know what you're buying, expect lower prices, and always have the best." - provides an easy an educational purchasing process, and it has many awards recognizing its uniqueness and helpfulness - has very little overhead costs w/o stores (13% of revenues compared to 30-40%) - large share of the diamond market, so it can get cheaper wholesale prices from suppliers and also has pull with suppliers that allows it to operate with negative working capital
What was the concept of the SPOT Watch?
- "Smart Personal Objects Technology" - In 2003, Microsoft released the SPOT watch - their take on the Smart watch that was discontinued in 2008 - used MSN and broadcast over FM frequencies
Substantiating your value claims
- "We can save you money!" is not an effective customer value proposition. - Need to back your CVP claim up in accessible, persuasive language that describes the differences between your offerings and rivals' - Most importantly, need to show how that difference translates into monetary value for customers - e.g. Precisely calculate efficiency benefits of your product using industry-specific metrics and language
What is 'demand shaping' and how was this used at Dell?
- 'Demand shaping' is a strategy where they would put an item on sale whenever a similar item was short on supply
Societal benefits related to the future of mobility
- 40-90% decrease in automobile emissions - 32K lives saved - 100B hours of productivity gained.
What is a value proposition?
- A statement of the value that a business will create for a consumer and why it is unique/superior to competitors' value delivery mechanisms; - makes a particular offering attractive to customers.
"cognitive technologies"
- Abilities of computers and IoT devices fostered by machine learning - Used to transform business models and assist businesses in management
Value Proposition of Airbnb
- provide guests with a genuine, flexible, and affordable stay anywhere in the world - range of types of dwellings and locations highlight their focus on accessibility
Airbnb and Marriott in terms of tech diffusion
- Airbnb: early majority - Marriott: laggards
What different types of value propositions do the authors in the HBR article describe?
- All benefits - Favorable Points of Difference - Resonating Focus
Where did Dell assemble PCs? What about its rivals?
- All of Dell's rivals have offshored their operations to manufacturers overseas - Dell's biggest assembly plants are in Austin and Nashville.
What is Zipf's Law?
- An empirical law formulated my mathematical statistics, - refers to how many types of data discovered in the sciences can be approximated with a Zipfian distribution, a power law, ie in a ranked frequency distribution, the 1st ranked value will be twice as high as the 2nd ranked, three times as high as the 3rd ranked, and so on. - This inverse relationship exists among city populations, frequency of words in linguistics, etc.
What is their future? (digital assistants)
- Artificial intelligence will replace jobs, but also work with us Digital assistants will make us more efficient and better at our jobs by handling mundane tasks Advancement of conversational platforms...could be put in your head (earbuds w/ mics, sensors for nerve activity - no speech) brain implants are a very real possibility Agents can act as middlemen, planning out deliveries, telling you if you're allergic to a product, augment reality via visual overlays (Google Glass) Digital assistants will collaborate with you - composing/editing movie trailers, writing novels, etc. Digital assistants will be able to rationalize why they make certain decisions (Chose a certain route because the user likes the backroads) Emotion AI allow agents to understand us humans - read users' faces and analyze context, tone, personality, user history...devices will read your emotions Partner with life-long virtual companions Products like Gatebox are good examples of the future of digital assistants. Gatebox is a holographic home "robot" - a 3D cosplay character programmed to positively interact with you and automate your home.
How can these laws be used to predict the future capacities of computers and transmissions?
- As time goes on, technological advancements are no longer sticking to Moore's law, and instead are moving at a more rapid pace.
What automobile companies will no longer be in existence?
- Automobile companies who refuse to move into the future with autonomous cars will start to phase out - Companies in the first wave of autonomous car release to the market will have competitive advantage and will do much better than cars not in that first wave - companies who are "late" will have a hard time catching up
3 types of sales
- B2B — business to business - B2C — business to consumer - C2C — consumer to consumer
What is the value proposition for each? (BN, Local Store, Tiffanys, Walmart, Amazon)
- BN: "Know what you're buying, expect lower prices, and always have the best." - Local Store: support your community, get personalized attention and unique products - Tiffany's/Zale's: Trust the companies with such reputable and established names - Walmart: Buy everything here - Amazon: We're a trustworthy company that has taken many other industries by storm, so we think we'll be good in this industry too
What will "TV" look like in 10 years? 20 years?
- Barriers to entry are low - more and more competition will keep entering the market - more inventions and progress will be made, which will drastically change the way we watch TV - Streaming- is cable dead
What is Bell's Law?
- Bell's Law: Roughly every decade a new, lower priced computer class forms based on a new programming platform, network, and interface resulting in new usage and the establishment of a new industry. - Every 10 years a new class of computer evolves that dominates the market - Describes how types of computing systems form, evolve, and (may eventually) die - Corollary of Moore's Law (followed it) - b/c of Moore's Law, computers evolve with increasing functionality - more transistors per chip, more bits per unit area, or increased functionality per system - Unlike Moore's Law, a new computer class i usually based on LOWER COST COMPONENTS that have fewer transistors or less bits on a magnetic surface - New classes evolve in lower prices and higher performance to take over/disrupt an existing class
Which individuals were most responsible for the current state of the SPOT initiative (as of the writing of the case)?
- Bill Mitchell led the project and collected data for people - Larry Karr developed the project as the president of SCA Data Systems - Karr was the one who proposed FM broadcasting at the method of information transmission - Bill Gates wasn't quite satisfied with the relatively small-minded ideas proposed by Kerr and Mitchell and suggested that they unveil it all over the country
first application of blockchains
- Bitcoin--with the creation of bitcoin came the creation of blockchain - initial purpose was to be able to maintain a secure, transaction recording mechanism for Bitcoin.
What effect has Blue Nile had on small retailers?
- Blue Nile has driven many "mom and pop" shops out of the market because they have taken the diamond market by storm, and diamonds account for a very large amount of sales for those types of jewelers. - Big retailers, on the other hand, have only been affected "on the margin."
What are the advantages and disadvantages of buying diamond jewelry through Blue Nile vs. through a local retail jewelry store vs. through Zale's vs. through Walmart vs. through Tiffany's vs. through Amazon?
- Blue Nile: cheap, informative, easy, wide variety... no physical product to hold/view, no cleaning store service - Local Store: personal service, local, knowledgeable... expensive, could go out of business more easily (not necessarily lifelong service), not as many choices - Tiffany/Zale's: reputable, standard, widespread... expensive, not as personal, cheesy salesmen, fancy attire (more pressure/stress) - Walmart: big, convenient... not very knowledgeable/important to business, not a great price, brand isn't associated with diamonds/finer things - Amazon: big, easy... no physical sample, not as knowledgeable/important to business
Netflix's sources of competitive advantage
- Brand - Scale - Distribution Centers - Customers - Selection - Data and Switching Cost
Brand Equity
- Brand equity is the value of having a well-known brand name - based on the idea that the owner of a well-known brand name can generate more money from products with that brand name than from products without that name or with a lesser-known name
What are the benefits of these advantages? (Netlfix)
- Brand helps to attract customers and skips critical steps in the purchase funnel - good reputation goes a long way for subscribers - Scale - Distribution centers everywhere helps get the movies out quickly - Customers- more customers more profit and ability to expand and control industry - Selection- long tail- more videos and more less popular videos such as Bollywood films allows for more profits as it is the only place for these fans to rent their videos - Data (collaborative filtering) allows the website to recommend movies based on the customer's previous ratings - Switching Cost- made the claim that you can cancel anytime so customers don't feel like they are trapped. However, most customers don't want to go through the process of canceling and finding a new streaming provider.
What is a Brand?
- Brand: the symbolic embodiment of all the information connected with a product or service - Can also be an exceptionally powerful resource for competitive advantage - Brands help consumers lower search costs - A strong brand proxies quality and inspires trust
What is Capital One's reputation? Is it in line with ING Direct?
- Capital one has a reputation and association with mainly credit card work, and poor support staff - This was not in line with ING Direct, who's loyal customer base from their fame as a customer friendly bank (acquisition caused many customers to cancel accounts) - Stigma of catering to cardholders with lower than average credit, and using increased demand for credit to push through rates and terms unfriendly to consumers
Why are ICO's occurring?
- want to accumulate fund to kick-start and develop new blockchain-based ventures and startups.
Documenting Value Delivered
- Create written accounts of cost savings or added value that existing customers have actually captured by using your offerings - Conduct on-site pilots at prospective customer locations to gather data on your products' performance
What resources might contribute to a sustainable competitive advantage for Capital One 360? What factors work against it?
- Creating a similar firm loyalty that ING Direct had - Creating/Maintaining ING Direct reputation within Capital One 360 to create positive consumer experience to encourage word of mouth marketing
What products does the firm offer? What products does it avoid? How does it make money?
- Credit cards, saving accounts, car financing, and investing - mortgages - Makes money off credit cards, lending out their savings account cash, and charging interests on loans.
What does the formula V > P > C mean?
- Customer buys something if value he or she places on it is greater than price he or she has to pay to get it (V>P = consumer surplus) - Company makes money if price its product is sold at is greater than cost the company incurs in providing it (P>C = profit) - Thus V > P > C is a good framework for the relationship in which customers will buy a product and companies will make money
Research and Familiarity (PF Stage 3)
- Customer has decided they need the category of product you're offering (purchase intent trigger) - want to research product, reading reviews, learning features, making comparisons. - Time spent doing this will vary on relative value of product (baked beans vs. computer)
What is meant by the DNA of a company? What is Dell's DNA? How has Dell's DNA affected its recent performance?
- DNA of a company determines the company's approach to the market and the company culture - a logistics company and as a result cannot invent products and markets - losing customers to companies who offer cheaper products.
How did the original Netflix business model work?
- DVD-by-mail - Pay monthly fee and receive movies by mail (number of movies depends on plan) - Can hold movies as long as you want before mailing them back
What is Netflix's new business model?
- Delivering in Bits - Streaming service - Monthly fee to stream movies - At first, $9.95 for streaming and one DVD at a time - New: $8 for streaming and $8 for one DVD at a time (Qwikster)
What is on the mind of the Marriott CEO?
- Despite recent declines in revenue, the CEO is not attributing the losses to competitors such as Airbnb - we should be cautious about extending the millennial mindset beyond the millennials themselves (basically saying they aren't the only ones who dictate the market)
How much inventory did Dell carry? How much did it carry 11 years before?
- Eleven years ago, carried 20 to 25 days of inventory in a sprawling network of warehouses - Today, it has no warehouses - it assembles nearly 80,000 computers every 24 hours - carries no more than two hours of inventory in its factories and a maximum of just 72 hours across its entire operation
"agile development"
- Eliminates wasted time and resources by developing the product iteratively and incrementally (process by which companies come up with minimum viable products which they then test)
Secondary Components Value Chain
- Firm infrastructure—functions that support the whole firm, including general management, planning, IS, and finance - Human resource management—recruiting, hiring, training, and development - Technology / research and development—new product and process design - Procurement—sourcing and purchasing functions
What are the three key principles of the Lean Startup?
- For a tech company 1. Marketing (business development, "know the customer") - Test hypotheses - Gather early & frequent feedback 2. Engineering - Come up w a minimum viable product 3. Finance
What is "market segmentation"?
- For any different product, people will assign different values. Thus, you have a value vs. frequency curve, which can look like a bell curve, or have several humps. - Each hump represents a different market segment. As a business, you want to move people to the market segment that places high value in your product through marketing - And then your target market makes you a "high V" supplier for these folks. They're all the way to the right
What do Iansiti and Lakhani say about Foundational Technologies and how they take hold?
- Foundational technologies have the potential to create new foundations for our economic and social systems - They take hold in four phases, each defined by the novelty of the application and the complexity of the coordination efforts needed to make them workable
What is the founding story of Marriott? What is the basis of the Marriott experience? Do different generations view the hotel staying experience differently?
- Founders of Marriott wanted a perfectly predictable hotel experience anywhere in the world, providing familiarity, comfort, and safety which attracted the baby boomer generation who valued planning and organization - The millennial generation values an authentic experience of wherever they are staying - Millennials also see the value in an entrepreneur trying to make a living, and see their raw talent above a large chain with a lot of money and a big name
Why is Adidas opening factories in Germany and Atlanta?
- Germany = test run for the "Speedfactory," where shoes can be produced in days instead of months - Saw great success → expanding efforts to new cities, ability to create different models for different cities + quickly "test" to see if models will be successful/unsuccessful and adjust business strategy in real-time (keeping up with the latest trends like fast fashion companies)
What is meant by taking a company private?
- Going private is when publicly traded company is converted into a private entity - Once private, its shareholders are no longer able to trade their stocks in the open market
What is a "VPC story"?
- Good things can happen if V>P>C. Working out your VPC story is basically developing your business model - VPC story = business model
What outside forces are impacting the shift to driverless and shared cars?
- Government regulation - social attitudes - technology - privacy and security - wall street - impact to stakeholders.
Disadvantages of blockchain?
- Hacks and manipulation can still occu - scammers and criminals can use the anonymity factor to do evil - transactions are irreversible - if you lose your private key (in the case of digital currencies) - you can lose all of your money you previously had.
What is the Hit Culture?
- Hit-driven economics is a creation of an age without enough room to carry everything for everybody. - The past century of entertainment has offered an easy solution to these constraints. Hits fill theaters, fly off shelves, and keep listeners and viewers from touching their dials and remotes so they are the only media readily available
"stealth mode"
- Idea kept a secret from competitors in order to keep a monopoly on the intellectual property, product, and/or methods
Why is this important for management?
- If one can better understand how technologies diffuse, one can better predict and manage that diffusion - adept management of disruptive technology is critical for maintaining market share, especially as disruption increasingly occurs more rapidly and more frequently
In 2004, how did the Dell model differ from its competitors with respect to how it dealt with its customers? Its suppliers?
- In 2004 there was a 10 day labor lockout that shut down 29 West Coast ports - Dell had been in constant communication with its part makers, as well as its U.S. based shipping partners (had been alerted 6 months in advance that there was a possibility of a lockout) - they moved fast and charted planes far before other companies, saving them a lot of money - continued to work with their Asia based suppliers to make the process smoother (such as loading Dell parts on last, so that they would be the first things taken off) - was able to continue selling its products to its customers, not having to worry about delayed shipments.
Relationship between Disruptive technology and corporate DNA
- In the corporate DNA of many firms, the focus is on the current customer and the bottom line, so managers fail to respond to the threat of disruptive technologies, - existing customers aren't requesting these innovations and the new innovations would often deliver worse financial performance (lower margins, smaller revenues)
How was diamond jewelry sold up until 2000?
- In the very traditional sense - customers dressed up to go to a fancy jewelry store and consulted with a salesman to purchase diamonds - Large amounts of information asymmetry between buyer and seller - Information asymmetry = difference in knowledge [about diamonds and all the nuances/specifics associated with them] between consumer/customer and seller
Primary Components of Value Chain
- Inbound Logistics - getting needed materials and inputs from suppliers to the firm - Operations - turning inputs into products or services - Outbound Logistics - delivering products or services to consumers, distributors, retailers, etc. - Marketing and Sales - Support
What makes a product a commodity?
- It is a good that can be easily interchanged with nearly identical offerings by others - The more commoditized an offering, the more its competition is likely to be based on price
What is the key difference between an existing business and a start-up?
- Key difference existing companies execute a business model, while startups look for one - Don't know the VPC, trying to design and discover - There is no "stealth mode" - Know your customer → Turns into "discover your customer"
Who will be winners in the industry in ten years?
- Large automobile companies that have already been researching autonomous cars (such as GM) have a nice advantage since they have capital to work with and have researched this for a decent amount of time already - Car companies with a history of innovation (Tesla) also have a good shot at being a winner because they have bright minds working on cutting-edge technology
Switching Costs
- Learning costs: Switching technologies may require an investment in learning a new interface and commands. - Information and data: Users may have to re-enter data, convert files or databases, or even lose earlier contributions on incompatible systems. - 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. - Contractual commitments: Breaking contracts can lead to compensatory damages and harm an organization's reputation as a reliable partner. - Search costs: Finding and evaluating a new alternative costs time and money. - Loyalty programs: Switching can cause customers to lose out on program benefits.
Factors hurting Netflix's Competitive Advantage
- Lost investments in warehouses and other distribution centers - Netflix's dependence on Amazon's cloud service - Netflix's price is increasing due to licensing costs
What is Blue Nile's founding story?
- Mark Vadon was searching for an engagement ring and was frustrated that salesmen told him to "buy the ring that speaks to [him]." - Vadon, an MBA Stanford grad, found a website that gave him more education/information and bought a similar ring for $5,800 (as opposed to Tiffany's $12,000-$17,000) - He bought that website/company from Mr. Williams (85% for $5 mil).
What is Dell's founding story?
- Michael Dell founded Dell in 1984 - in college, at University of Texas, when he began an informal business of assembling and selling upgrade kits for personal computers - After continuing to make money, due to low production costs, he created the company "PCs Limited", selling upgraded PCs, kits and computer add-ons - This company soon developed into "Dell Computer Corporation" - Michael began selling computers over the web, taking advantage of a new form of customer - business continued to grow until it became the world's largest PC maker.
How does the "value chain" relate to the SPOT watch?
- Microsoft didn't produce the watches themselves, but they ran the communications of the watches themselves through MSN, which allowed them to maintain control of the communications and the service of the watches
How does "technology diffusion" pertain to the SPOT watch?
- Microsoft was one of the early innovators/early adopters of smart technology - so early that it failed because it was way before its time.
How does Moore's Law interact with Dell's business? Bell's Law?
- Moore's Law = Dell was able to continue producing computers with faster processing power, while keeping or lowering their prices - held strongly to its core offering of client computers - company missed the shift to mobile phones and tablets, missing the new computer class brought by Bell's law
What was ING Direct's value proposition?
- More affordable savings, convenience of online saving - Simplicity - No fees - No minimums - ING Cafes ("opening an account is as easy as getting a cup of coffee") - Same service for account of any size
What is "5G"?
- New generation of wireless technologies - Goal = offer users the 'perception of infinite capacity' - Most all things will be wirelessly connected - Still forming: different demands = media companies want bandwidth, IoT firms want low power consumption, online-gaming firms want latency, info-tech firms want wireless networks (mmWave) - Improved connection speeds (up to 10 Gbps) and response times (<1 millisecond)
Could the Sharing Economy work to the extent it does without current technology?
- No, especially since the majority of the Sharing Economy's transactions occur online - Some even use sharing economy to refer to any online ordering/exchanges - Without the internet, airbnb's would just be bed and breakfasts, ebay would just be an auction house, etc.
How does the pivot from "atoms" to "bits" affect Netflix's business? Did the pivot go smoothly?
- No, tried to separate its plan into two different plans - streaming service would be called Netflix while their DVD service would be called Qwikster. - Qwikster tanked and their reputation took a hit - in competition with one another and since customers didn't want to sign up for both, Netflix won out
What has happened to it in recent years?
- Now, with online distribution and retail, we are entering a world of abundance "misses" usually make money, too. - because there are so many more of them, that money can add up quickly to a huge new market. - popularity no longer has a monopoly on profitability - with no shelf space to pay for and, in the case of purely digital services like iTunes, no manufacturing costs and hardly any distribution fees, a miss sold is just another sale, with the same margins as a hit - A hit and a miss are on equal economic footing, both just entries in a database called up on demand, both equally worthy of being carried
How are employees trained and rewarded? (Harrah's)
- linked employee rewards with customer satisfaction - All employees were trained to be great at customer service, and that their goal was to persuade one customer to make one more visit a year with us per shift - Employees receive bonuses based on the property's overall customer satisfaction score.
Resonating Focus
- One or two distinct, succinct points (points of difference) - List the benefits that matter most to customer - Know what customer wants (**this is the best) - Include point of parity-- eg. We give more value at same price - A reference point for customer to show that they are at the very least equal but often even more after that - Stressing a point of parity that a customer may mistakenly believe to a be a point of difference in favor of competitor
What is the difference between operational effectiveness and strategic positioning?
- Operational effectiveness refers to when a firm performs the same tasks better than its rivals - strategic positioning means a firm that performs different tasks than its rivals - important for firms to ground competitive advantage in strategic positioning rather than operational effectiveness
How does The Lean Start-Up differ from conventional wisdom?
- Opposite of the "old way," - Experimentation > elaborate planning - Customer feedback > intuition - Iterative design > traditional "design up front"
What makes an imitation-resistant value chain?
- Others struggle to replicate - Technology usually plays a key role
What is going on in the automobile industry?
- Over the past few years, automobile manufacturers have increasingly been researching the idea of self-driving cars. - - There has been major progress, but no car on the market is fully self-driving yet.
What factors work in favor of Lending Club? Against it?
- Peer to peer lending is more casual - Less pressure/intimidation without banks watching over - Investors are not really known - Could be risky
Could a small retailer compete with Blue Nile on the web? Could Zale's? Could Walmart? Could Tiffany's? Could Amazon? Could a start-up?
- Potentially, but it would be difficult because of channel conflict (Companies that have stores and then open online versions struggle with pricing) - Blue Nile is already so well established with the suppliers and is huge, so companies without a big share would struggle to get prices so low and probably wouldn't be able to convince suppliers to hold diamonds for them aka they would not operate with Negative Working Capital
What is the purchase funnel for Blue Nile?
- Pre-awareness— before diamond search process - Awareness— see ads/hear from people who bought from Blue Nile - Research & familiarity — check out the Blue Nile Website and its diamonds - Opinion & short-list — list different products (and companies) - Consideration — price, quality, hem and haw - Purchase — buy diamond Brand ambassador
Why did customers choose ING Direct and what sorts of customers did the firm prefer?
- Prefered lower and middle class customers (preferred 270 million middle class people vs 30 million of the rich) - they can offer low cost simple services at a high margin - 43% of customers came from word of mouth - Offered high interest rates - ING was known for being consumer friendly and on the forefront of internet technology
Repurchase intention (PF Stage 8)
- Product will need to be upgraded or replaced at some point. - Depending on their experience with your product, they may stay with your brand and go back to stage 3, research and familiarity, or may defect to a different brand
What is the relationship between the new generation of smart watches and the SPOT Watch? What are the winning features? Products?
- SPOT watch was definitely a predecessor to the new Apple watches, but the new generation is better in that it has so many more features - big improvement from the SPOT initiative, but the SPOT watch could certainly be seen as the precursor - Other companies have popular smart watches too, like Fitbit, Samsung, and Android, but Apple has far exceeded the others
Why is the high frequency trading industry suffering?
- Stocks are becoming less volatile - HFT used to exploit structural flaws which have now been cleaned up - beginning to cost more, requiring microwave networks and later millimeter-wave and laser tech.
What determines whether an existing customer switches to another product or service?
- Switching Costs - Companies wanting to win customers away from rivals must demonstrate that an offering provides more value than the incumbent AND that the value added exceeds the incumbent's value plus any perceived switching costs
What is the 80-20 rule?
- The 80-20 rule, also known as Pareto's principle (after Vilfredo Pareto, an Italian economist who devised the concept in 1906) stating that only 20 percent of some industry will be successful (hits) - 20% of the invested input is responsible for 80% of the results obtained. - examples: 80% of revenue comes from 20% of customers, 80% of sales go to 20% of customers, 20% of friends account for 80% of posts, managers spend 80% of time managing 20% of employees (4 examples).
What are the major components of a Business Model?
- The Customer Value Proposition (CVP) - The Profit Formula - Key Resources (resources necessary to drive you processes) - Key Processes (manufacturing, purchasing, and delivery systems)
Bell's Law and SPOT Watch
- The SPOT watch was one of the first of these, and then in 2015, just over ten years later, the Apple Watch was released - This was the next generation of smart watch and it does far more than the SPOT watch could have hoped.
How does Airbnb work? Is Airbnb legal?
- The owner of the house/apartment/etc. lists their house online, and the consumer purchases however many nights they want - Airbnb charges guests a 6-12% fee and homeowners a 3% fee, making money off of both parties - debatably illegal - Many areas have restrictions on businesses running in rural areas, and/or do not have the property zoned for businesses - health and safety laws governing hotels usually require things like sprinkler systems, exit signs, and clean linens
Advantage of technology in HFT
- The rapid speed technology allows them to trade at means that they can take advantage of minute variations in stock prices to make a profit
What is the relationship between the value proposition and the purchase funnel?
- The value proposition is often used in the awareness stage; presents the "spike" for the company, the narrative for why it should be bought. - Essential in triggering purchase intent (tells consumer why they need this), and then guides the consumer in the research & familiarity stage. - Value proposition pushes customers further into purchase funnel
What is the relationship between algorithmic trading and Amazon pricing? What has happened to the prices of Duracell batteries? How about Amazon's own brand of batteries?
- Third party vendors on Amazon often use algorithms to set their prices to maximize profits but also get featured as the lowest price which brings in a lot more sales - results in a lot of price variation on products like Duracell as the various sellers all compete with one another - Amazon recognized the potential for selling batteries based on the success of third party vendors and released their own brand at a lower price.
Startup of You
- Top companies have very few employees - Employers have become more productive by employing more automated technologies - Employers looking for people who have critical thinking skills, can invent, adapt, and reinvent their jobs everyday - Rising trend in Silicon Valley is to evaluate employees quarterly - Speed of products being phased in and out - No career is a sure thing anymore - Approach career strategy the same way an entrepreneur approaches starting a business - Use your network to pull in information about where growth opportunities are - Find a way to add value to a company in a way no one else can - Be resilient - Build up your personal brand
What is Harrah's customer loyalty program?
- Total Rewards Program. Customers - split into three levels: Gold, Platinum, and Diamond, based on annual theoretical value - higher tiers received faster service (no lines) that were clear to see. - created customer incentive to spend more in the casino to achieve the next tier.
What are the keys to successful value propositions?
- Understand customers' businesses - requires customer value research. - Must invest time and effort to really understand your customers' businesses and see what their unique requirements and preferences are, as well as problem points that you can capitalize on - e.g. Focus groups, surveys, etc. etc. - Substantiate your Value Claims - Document Value Delivered - Make Customer Value Propositions a central business skill (Improve and reward managers' ability to craft compelling customer value propositions)
What is the role of technology in the Long Tail?
- Unlike the CD, where each bad track costs perhaps one-twelfth of a $15 album price, online it just sits harmlessly on some server, ignored in a market that sells by the song and evaluates tracks on their own merit. - Allows for niche media and "misses" to be abundantly available online at little to no extra cost - Digital retailers make up the entirety of the long tail
What was the "killer app" for personal computers? for internet? for blockhains?
- VisiCalc, the first spreadsheet computer program for PCs - email for the internet - blockchain - not sure yet, maybe bitcoin? maybe more applications to come
How close are we to self-driving cars?
- We are fairly close to self-driving cars -- however it is hard to put a number on it - there are so many hurdles left to jump for automobile manufacturers, such as legal issues (liability), moral issues (hit the Dad and daughter OR hit the teenage dog walker and dog).
How does price elasticity interact with Moore's Law?
- When technology gets cheap, price elasticity kicks in. - As they become cheaper, consumers buy more tech products. - As chips and other components become cheaper, entire new markets open up. - - Falling chip prices encourage additional purchases of tech products; whereas, falling food prices, while they might encourage substitution of more costly items, rarely encourage the purchase of additional items.
Favorable points of difference
- Where we are better than competition - May lead to value presumption where you think something is valuable but it isn't - Know competition's product
What vulnerabilities exist in Dell's super-efficient operating model?
- With almost no stocks to fall back on, a very slight delay or contingent disruption in supplies from just one supplier could force production to cease at very short notice - vulnerable to any problems its suppliers face - Inventory can be looked at as security, something that Dell has decided to get rid of, so they are more vulnerable to anything that could disrupt their production
Will car ownership decline? What would be the consequences?
- Yes, people wouldn't need cars as readily. It is likely that car ride services such as Uber or Lyft would thrive. - This would cause a lower demand for cars due to less people owning cars - Many new issues arise such as liability and insurance
Is Airbnb a threat to Marriott and traditional hotel companies?
- Yes, since the millennials will soon become the age bracket purchasing hotel rooms, the millennial mindset is the one that needs to be tracked - At the end of the day, for the non-luxury consumer, the decision will come down to price - as long as airbnb can offer this genuine local feel that millennials crave while keeping costs low, they will be a threat to Marriott
The Purchase Funnel and SPOT watch
- You'd buy the watch from retailers, and it needed advertisements to get the word out so people would know to buy it - Microsoft partnered with Timex to make the watch, which gave it some name recognition - watch had value once you already owned it, but that value wasn't apparent while the watch was in the case - it was difficult to get people to actually purchase them.
What is an "algo"or "algorithm"?
- a method of doing something - In this case (HFT) it's a computer program that can predict which stocks to buy and sell and then acts on its predictions to make the trades without human oversight
What is the Sharing Economy?
- a system wherein money is made through renting or selling what is already owned by another person - Also known as collaborative consumption, the sharing economy is seen as a peer-to-peer system
What is a blockchain?
- a type of ledger - Each transaction or digital record shows up on a blockchain - technology links each block to a specific participant, and all blocks are time-stamped - creates an unchangeable record of transactions - Anybody can use it, but nobody controls it - eliminates the need for a third party, like a bank.
What is the cause of the Hit Culture?
- alternatives have been pushed to the fringes by pumped-up marketing vehicles built to order by industries that desperately need them. - retailers will carry only content that can generate sufficient demand to earn its keep. But each can pull only from a limited local population (perhaps a 10-mile radius for a typical movie theater, less than that for music and bookstores, and even less (just a mile or two) for video rental shops.) - an audience too thinly spread is the same as no audience at all - There is plenty of great entertainment with potentially large, even rapturous, national audiences that cannot clear that bar - the curse of broadcast technologies is that they are profligate users of limited resources - result is yet another instance of having to aggregate large audiences in one geographic area - another high bar, above which only a fraction of potential content rises.
Why was Microsoft developing the SPOT initiative?
- an attempt to make home devices smarter - Microsoft was doing exceptionally well financially at the time and they had the money to drop the $50 million on it.
What is a "quant"?
- another name for a high frequency trader that relies heavily on data and mathematical modeling
What are some of the consequences of "Know your customer" taken to the extreme?
- arguably promotes gambling addiction by targeting repeat customers who aren't the high rollers who can afford to constantly lose money - Gambling addiction is a serious concern that drives some people on the brink of suicide.
advantages of stealth mode
- avoids alerting potential competitors to a market opportunity - ability to keep a monopoly on intellectual property, software, etc
Where does Harrah's draw its income?
- best customer is the repeat, loyal customer who comes to gamble every-so-often after work, usually middle-class - 87.2% of revenue is driven from their casino as opposed to restaurants, shows, etc. - rely on the loyal gamblers who come back for their great service
Hype Cycle
- branded graphical presentation developed and used by the American research, advisory, and information technology firm Gartner - represents the maturity, adoption and social application of specific technologies
pivoting
- change in direction of development - Speed as a competitive advantage -- if you're going to fail, better to fail fast
disruptive technology
- come to market with a set of performance attributes that existing customers don't value - over time the performance attributes improve to the point where they invade established markets.
Why is carrying inventory such a sensitive issue in Dell's industry?
- companies carry it as a security, but because of their short product lifecycles computer components depreciate anywhere from a half to a full point a week
Negative working capital
- company gets paid for product before they have to pay their suppliers - More beneficial for companies than positive working capital
"product view" of the diffusion of innovation
- considers characteristics of products which have been linked to the diffusion process - takes into account Rogers' Five Factors, which are suggested to explain much of the variance in innovation adoption rates
"people view" of the diffusion of new technology
- considers the different propensities of different types of people to adopt a new technology - Rogers groups people into 5 main groups: innovators, early adopters, early majority, late majority, and laggards - Differences in propensity to adopt may be very rough between these groups - implementers of new tech must consider this people view - Bass groups people into only two groups, innovators and imitators - both the Rogers and the Bass view consider people and their propensity to adopt -- NOT products and their characteristics. - Rogers bell curve: Innovators (2.5%) -> Early adopters (13.5%) -> (The Chasm) -> Early majority (34%) -> Late Majority (34%) -> Laggards (16%)
Do you think high frequency traders have an unfair advantage? How could they be dangerous? Should they be banned? Regulated? Taxed? Left alone?
- could be said to have an unfair advantage because their use of technology enables them to trade much faster than any human stock trader - could also argue that the downsides to algorithms mean they don't have an advantage or that their advantage can easily be imitated by those who want to (for a price) - can be dangerous because the algorithms that control trading lack common sense and instead just follow rules set for them in their programming, which can result in things like the "flash crash" where they get out of control and hurt the entire stock market
How does the Rewards Program help Harrah's
- driving more revenue by incentivizing people to come back more frequently and to spend more money in order to achieve the next tier
Where are we in Technological Diffusion for blockchains and digital currencies?
- early adopters phase of the innovation adopters graph - more people than just initial innovators use these currencies on a daily basis now - many people are still ambivalent and uninformed about digital currency and its use, therefore we would not be in the early majority stage yet
founding story of Airbnb
- event in town near Brian Chesky and Joe Gebbia's apartment, who were struggling to meet rent - all the hotels for travelers were booked, so they blew up air mattresses and rented them off for $80 a night - put together a website to offer bed and breakfast like services to the saturated hotel market
What did they do wrong?
- expensive and only had one-way information stream - not a very good match for its intended audience - worth way less than the price. -- Microsoft didn't design the physical watch, manufacture the watch, or well the watch.
Walmart (Agile Development/Lean Start Up)
- experimenting with new products and services in certain areas - takes information on the success levels of the product/service and customer feedback in order to decide whether to roll out nationally, tweak, or scrap the idea entirely - Ex: Scan & Go, same day delivery, 3D printing
All Benefits
- list all benefits they believe they can deliver to customer - Drawbacks: Some benefits are irrelevant/deliver no value - Some benefits are actually points of parity instead of points of difference (others do same thing) → so customers decide based on price concession, which lowers profits - Know your product
Why is Moore's Law important?
- explains the speed at which manufacturers competing in the competitive CPU market need to maintain in order to release their products on time - demonstrating a performance improvement in the industry of 1% per week, releasing a new product a few months late could lead to the product being 10-15% slower, making it unsellable. - links strongly to most advancements in digital electronics (memory capacity, sensors, pixels, etc.), describing a driving force of technological and social change, productivity, and economic growth.
What has happened to Dell recently?
- faced with growing competition - More companies are able to sell Dell's same products, but for less - tied close to Microsoft, but is having a difficult time looking beyond that towards new innovations.
What is a "killer app"?
- feature, function, or application of a new technology or product that is presented as virtually indispensable or much superior to rival products
What aspect of the business has Harrah's concentrated on?
- focused on pleasing the customer, focusing on service instead of fancy fountains, entrances, etc - name recognition to make everyone feel special
How has Netflix achieved customer focus?
- found the needs and desires of their customers - fulfill them to the best of their abilities - Customers found it gruesome to go to their local blockbuster and search the shelves for a movie that might not even be there - have to pay heavy fines when they returned the movie - Netflix found a way to make this process easier and more practical - provide more titles and ship them directly to your home where you can keep them for as long as you want
What did they do right? (SPOT Watch)
- great idea but it was a bit ahead of its time - new, trendy, mobile, and had quick connectivity - Microsoft designed the watch interface and ran the communications for the watch
What was ING's business model?
- grow organically with a high-volume, low-margin business. - had no branches (usually 50% of a bank's total costs). - - Customers would have no minimums, but would have maximums - can focus on the low cost low needs and keep to a cheap business model.
How did ING Direct differ from a traditional bank?
- has no branches - has a maximum deposit - has very rigid and uniform service offerings - Goal = bring savings to ordinary Americans - Mission = Encourage ordinary Americans to save
Why do companies spend so much money to get a slightly quicker connection between New York and Chicago? Give an example. New York and London? New York and Singapore? Suppose all the exchanges were open 24/7?
- having even a minute advantage in speed allows them to make money of the difference between stock trading that happens in New York and futures/options trading that happens in Chicago - same reason they pay for any other connection, they want to take advantage of the differences between markets or information from one market that helps them know which stocks to buy and sell - If all exchanges were open 24/7 there would be more demand for connections between New York and Asian markets that currently don't have a lot of overlap in the times they are open
What will be the consequences of these changes for the transportation system?
- highways - readily used because people still need to get the places they need to get to - garages - (only car owners (service companies) will need to park cars, less cars personally owned = garages less important) - Mass transit - (People will still rather avoid the roads due to traffic, cheap so people will continue to use it) - Real Estate - (Spaces won't be needed for parking garages so homebuilding will change) - Oil Companies - will take a hit - Insurance Companies - (Car ownership decreases, so car insurance ownership decreases) - Urban planning - (No worries aboutparking spaces, Need pick-up/drop-off spaces instead) - Work habits (Will need to alter when you get up to go to work if you don't own a car)
How does technology play a role?
- increase customer loyalty by conducting heavy database marketing and decision-science-based analytics to figure out customer incentives - analyzed the data for every slot machine and could see how popular it was on certain days, at certain locations in the casino, etc.
What resources might contribute to a sustainable competitive advantage for Netflix?
- increasing familiarity with their brand - Incredibly easy access to context
What are the four shifts the auto industry is currently experiencing?
- incremental change - car-sharing - the driverless revolution - accessible autonomy.
disadvantages of stealth mode
- inhibits customer feedback - no way to tell if there is real need in the market
Why did Dell purchase EMC?
- intent of remaining competitive and relevant in its industry - EMC was built on engineering innovation and high-touch sales - Dell knows how to run a big business in a low-cost way - Together, Dell hopes to compete with other IT giants.
What are the characteristics that lead to sustainable competitive advantage? What is the 'resource-based' view of competitive advantage?
- it must control a set of exploitable resources that have four critical characteristics. - These resources must be: Valuable Rare Imperfectly imitable (tough to imitate) Non-substitutable - Examples of Competitive Advantage: imitation-resistant value chain organization, brand, scale, data (differentiation and switching costs), network effects, distribution channels, alliances, patents)
How would you define the success of the SPOT initiative in one year? Three years? Five years?
- lasted four years, from release in 2004 to its discontinuation in 2008 - When it was first released, the watch was a mild success; it sold plenty of watches to those people who had the money and recognized its utility - novelty wore off and sales began to drop
Problems with Price Differentiation
- leads to loss of profits - want to differentiate your product through something other than just price.
Dell's VPC story
- lower the price of its computers by cutting out resellers and warehouses - By getting rid of inventory, suppliers became the ones financing the cost of operations. - offer high quality computers for a lower price, while still keeping their profits high - large database that allowed them to track purchase patterns and budget cycles (helped Dell better satisfy the wants of the customer)
relationship between the Sharing Economy and the Long Tail
- majority of the listings on Airbnb are average people who are simply trying to make a little more cash, only listing their homes for a few days or weeks out of the year, leading to a market renting a lot of rooms, but only a few per "seller".
Why is a value proposition important?
- makes a particular offering attractive to customers and thus what draws them to buy your product. - An offering may actually provide superior value, but if the supplier doesn't document and demonstrate that claim, then it'll be dismissed as marketing puffery - distinguish propositions on the basis of value. This is important because it is what allows for profits; distinguishing products based on price (which is what happens in the absence of value differentiation) leads to money left on the table. - lead to superior business performance. - Force companies to rigorously focus on what their offerings are actually worth to customers. - make smarter choices about where to allocate scarce company resources in developing new offerings
How might data contribute to a sustainable competitive advantage for Harrahs'?
- marketing strategies are highly data-dependent, and they use data to "know their customer" better than many other casinos - Knowing your customer allows them to market them to bring them back to Harrah's in the future - tracking of customer activity through loyalty cards is how they uniquely collect data.
What is high frequency trading?
- method of stock trading where the trader buys and sells large amounts of stock very rapidly in an attempt to make very small profits on each trade - make up for the small profit margin by having a very high volume
What is the purchase funnel?
- model describing theoretical customer journey from moment of first contact with brand to ultimate goal of a purchase - Shape and number of stages and duration will vary on customers, nature of product, etc. - Funnel shape - narrows because natural loss of potential customers at each stage (not everyone will buy) 1. Pre-awareness 2. Awareness 3. Research and Familiarity 4. Opinion & Short list 5. Consideration 6. Decision & Purchase 7. Brand ambassador 8. Repurchase intention
What are cryptocurrencies or digital currencies?
- money used on the internet - a decentralized type of digital currency - an asset used as a means to exchange, but since it is based on cryptography (which is basically a lot of codes and math), it is seen as secure because these currencies use blockchain as a ledger
How did Dell's business model differ from, say, Apple's? What was Dell's value proposition? Apple's?
- more directed at selling directly to the customer and just-in-time manufacturing - Apple's business model = directed at innovation, aesthetic appeal, and an in-store experience - Dell offers you a reliable computer with standardized features, appealing to large businesses - Apple appeals more to the individual selling the experience that new features that comes with new products
The Customer Value Proposition (CVP)
- most important, drives rest of the story - Making a promise to your customer that's different from what others are offering, and then designing your manufacturing, purchasing, and delivery systems around this promise.
What forces are encouraging the Long Tail? Give some examples of companies and industries that are affected by the Long Tail.
- most successful businesses on the Internet are about aggregating the Long Tail in one way or another - Google makes most of its money off small advertisers (the long tail of advertising) - eBay is mostly tail as well - niche and one-off products - By overcoming the limitations of geography and scale, just as Rhapsody and Amazon have, Google and eBay have discovered new markets and expanded existing ones. - As fast as Rhapsody adds tracks to its library, those songs find an audience, even if it's just a few people a month, somewhere in the country.
Where are we on the Hype Curve?
- moving towards the peak of inflated expectations - still closer to the technology trigger part of the cycle - Digital currencies have had a breakthrough and they are gaining mass media coverage now - working towards making the vision of the future of digital currencies clearer - some notable companies are actually looking into these currencies now, proving that its moving towards the peak.
What is the Long Tail?
- niches by the thousands, genre within genre within genre of obscure and not typically popular media - Combine enough nonhits on the Long Tail and you've got a market bigger than the hits. - Mostly made up by purely digital retailers - cultural benefit of all of this is much more diversity, reversing the blanding effects of a century of distribution scarcity and ending the tyranny of the hit
Are there industries and companies that are not affected by the Long Tail? If so, give some examples.
- online retailers benefit while traditional retailers are hurt by it - Market lies outside of the reach of physical retailers - Industries not affected ??? (mostly everything has been affected by technology)
What did Blue Nile do differently?
- operates online only - one office/warehouse (but most of its suppliers hold Blue Nile Diamonds for Blue Nile). - Able to provide larger variety of diamonds at lower prices - Gives customers who are unfamiliar with diamonds information and guidance in their buying process
What are disadvantages digital currency?
- possibly based around a bubble - can be seen as risky because it is not backed by a government - major price volatility and regulatory intervention soon
What is a commodity? How can a commodity be distinguished?
- product that doesn't have any/many difference between different brands - people will buy it based on the lowest price.
What is the Value Proposition of digital currencies?
- provides anonymity to its users, it is not bound by exchange rates, interest rates or transaction charges, and transactions take place at the same speed regardless of where the sender and receiver are located - it cannot be counterfeited
Scale Advantages
- related to size - Economies of Scale: the cost of investment can be spread across increasing units of production or in serving a growing customer base
Differentiate between the buy side and the sell side of investment banking.
- sell side = investment banks sell a division of a company or do an IPO (help the company to set a share price by determining the value of the company - buy side = the investment bank works with the company to look to buy a company or a division of a company (the bank evaluates the company's worth and gives the company interested in buying advisory assistance in evaluating the company of interest and deciding the merger/acquisition approach that they want to take)
Disadvantages of Going Private
- shareholders are often tied to the company and can't get rid of their shares even if they see the company is losing money - can't get any money by selling shares to the public, making it harder to raise capital
How did Dell revolutionize the computer business when it first emerged?
- skipping the middle-man and selling computers directly to customer at home - innovated PC manufacturing by developing a process to mass-produce individually made-to-order computer
What was the longest step in this process?
- software burn and testing takes several hours (depending on the amount of customization that's required)
"end-to-end enterprise provider"
- supplier of an application program or system will provide all the hardware and/or software components and resources to meet the customer's requirement - no other supplier need be involved - When looking towards their future, Dell views PCs as an end-to-end solution.
How do suppliers earn Dell's business? What are the criticisms of this approach?
- suppliers have to be willing to hold inventory for anywhere between 8 and 10 days in warehouses close to Dell factories - rates all of its vendors on their ability to compete on cost, technology, supply predictability, and service, and posts their scores daily on a password-protected Website - Suppliers are ranked against their competitors - Based on that comparison, they are awarded a percentage of Dell's purchases for the upcoming quarter - criticized for being cold-eyed in these assessments, unflinching and unsentimental.
Disadvantages of technology in HFT
- the reliance on computer programs to execute trades means that there is limited oversight of the algorithms - can lead to negative effects such as the "flash crash" which some people blame on high frequency trading
What is the 'cash conversion cycle'? In 2004, what was Dell's cash conversion cycle?
- the time between an outlay of cash for parts and the collection of payment for goods made from them - Dell achieved a cash conversion cycle of negative 36 days - it was operating with negative working capital, eliminating the need to finance operations
How does "sustainable competitive advantage" relate to the SPOT watch?
- there was very little that could have compared to the SPOT watch, but at the same time nothing was trying to duplicate it because it was not a huge success - Since then, Apple has achieved substantial competitive advantage, as their watch is far more versatile and wildly popular
What would it mean if cars communicated with each other electronically?
- there would be a mass collection of data - data could be used to re-route away from hazards and call for help when an accident occurs
How does Tesla plan on releasing their self-driving service? What other topic does this answer relate to?
- through an over the air software update - Over the air software updates are a part of the new business model that accompanies the Internet of Things.
Advantages of going private
- time required to make long-term strategic plans, free from the storms and many short-term considerations of being public - no longer have to spend large amounts of time being transparent and catering to wants of their shareholders
What is unique about Lending Club, compared to traditional loans?
- traditional loans are usually provided to consumers by banks or other financial institutions - Lending Club provides and peer-to-peer or consumer-to-consumer platform for loans - Individuals can borrow and invest on Lending Club, with each loan being divided into a number of "investors'" money.
How did Dell's inventory turns (the # of times inventory is sold and replaced during a year) compare to its rivals?
- turns its inventory 107 times per year (at least in the 2004 article). - Its competitors, like HP and IMB, turned their inventories 8.5 and 17.5 times a year.
How do high frequency traders make use of technology?
- use algorithms to predict when a stock is going to increase in value and when it is going to lose value so they can buy and sell stocks at times that will maximize their profit - use communication technology such as fiber-optic cables or microwave relays to increase the speed of their transactions
Benefits of blockchains?
- use can go well beyond digital currencies - eliminate the need for intermediaries like banks, lawyers, and even the government - Anything of value can be transferred and saved safely and confidently, transactions are verifiable by a large network of people, and transactions are irreversible
Collaborative Filtering
- uses the browsing and purchasing patterns of users to guide those who follow them
How long did it take to manufacture a Dell PC?
- veteran builder can put together a Dell PC in three minutes - factory in Austin was making more than 700 PCs in an hour
Why does Marriott have so many different hotel brands?
- want to be able to provide a service for anyone, no matter the environment/program desired - Therefore, they have different classes of hotels, each offering different programs depending on the desire of the targeted consumer - for every potential type of consumer, they want to have a perfectly matched hotel.
What has happened to Blue Nile recently? Why?
- was acquired by Bain Capital Private Equity for $500 Million - was public, but shareholders received $40.75 per share and now is private - hopes to continue to innovate in an evolving and competitive industry
What are the weak points of its purchase funnel? (Blue Nile)
- weakness lies in the consideration portion - Customers cannot physically see/inspect/hold a ring or diamond before purchasing it - does not have stores that will clean/refurbish the ring for its customers
what are five forces of industry competitive advantage?
1. intensity of rivalry among existing competitors 2. threat of new entrants 3. threat of substitute goods 4. bargaining power of buyers 5. bargaining power of suppliers
five factors affecting the adoption of new products under the product view
1- Relative Advantage- The degree to which a product is better than the one it replaces 2- Compatibility- The degree to which a product is consistent with existing values and experiences 3- Complexity- The degree to which a product is hard to understand and use 4- Trialability- The degree to which a product may be experimented with on a limited basis 5- Observability- The degree to which product usage and impact are visible to others
Five Parts of Hype Cycle
1-Technology Trigger- The media triggers publicity even though there is no usable product, and commercial viability is unproven 2- Peak of Inflated Expectations- A few success stories start to arise. Some companies face failure, while others do not. 3- Trough of Disillusionment- Interest wanes as experiments fail to deliver. Producers fail, and investments continue only if producers are able to improve. 4- Slope of Enlightenment- More examples of the technology's benefit begin to surface. Second and Third generation products appear. More enterprises fund pilots. 5- Plateau of Productivity- Mainstream adoption takes off. Criteria for assessment are more clearly defined. Broad market applicability pay off.
What are the two phases of the adoption of new technology?
1. Gestation - a new platform is introduced but is either incomplete, expensive or confusing 2. growth phase - those problems are solved causing exponential growth
What are the three rules of the Long Tail?
1. Make Everything Available 2. Cut the price in half. Now lower it (wholesale price is set to roughly match the price of CDs, to avoid dreaded "channel conflict." The labels fear that if they price online music lower, their CD retailers (still the vast majority of the business) will revolt or, more likely, go out of business even more quickly than they already are) 3. Help me Find it (you need both ends of the curve, Great Long Tail businesses can then guide consumers further afield by following the contours of their likes and dislikes, easing their exploration of the unknown , Collaborative filtering, Use recommendations to drive demand down the Long Tail)
Four Phases of Foundational Technologies
1. single use, where the technology is of low novelty, low coordination applications 2. localization, where innovations have high novelty but still low in coordination 3. substitution with low novelty but high in coordination because there are now broader and more public uses 4. transformation which is of high novelty and high coordination
What types of computers have emerged in the past?
1960's: Mainframe 1970s's: Minicomputer 1980's: Personal Computer 1990's: Notebook computer/Internet 2000's: Mobile (cell phone, iPod, smart phone) 2010's: Internet of things/smart devices/wearable/ubiquitous/intelligent home devices, cloud computing
What is a unicorn
A private startup company that is worth $1 billion or more.
What implications does that have for the future?
AI will continue to become more integrated to assisting and not replacing human function
What are the lessons from the Libratus poker playing program?
Artificial Intelligence is powerful enough (in a competitive lens) to understand an opponent's strategy and calculate ways to counter it effectively.
How does Moore's Law affect Netflix?
As computers (technology) get faster and cheaper, Netflix can stream at a faster rate and give access to more titles
Bell's Law?
Bell's Law = new device platform every 10 years = new ways for Netflix to be watched
What type of player is the best Freestyle Chess player?
Centaur - Human + Machine
How did it help customers? (Rewards Program)
Customers aspire to reach the next tier and have fun at the casino while doing so
What is NOT an example of a HFT strategy? A. Market making operations B. Event arbitrage C. Statistical arbitrage D. Leveraged buyout operations
D
What firm was ING Direct modeled after, and why?
Dell, because of their low-margin, high volume business model
Netflix value proposition
Easiness and practicality of streaming videos without ever having to leave your house
What will emerge as the dominant energy source for automobiles?
Electric based fuel-cells seem to be possibly the future dominant energy source for vehicles, because of lower emissions.
Decision & Purchase (PF Stage 6)
Final decision on brand, product, affordability, then take the plunge!
What is sustainable competitive advantage?
Financial performance of a firm that consistently outperforms its industry peers
The HBR article was published in May 2003; what has happened since at Harrah's?
Harrah's model worked well in the United States, but they suffered economically for not expanding internationally like some of their competitors.
What is Freestyle Chess?
Human chess players playing with AI support.
What will emerge in the future?
Implanted, robots, etc.
relationship between the Internet of Things and Big Data
IoT creates new streams of Big Data to be analyzed
How is success within the company measured? (Harrah's)
It is measured by how satisfied customers are and how likely they are to come back.
How did this compare to rivals?
Its rials didn't say their exact cash conversion cycle, but it was positive (compared to Dell's negative).
What are some of the likely effects of Artificial Intelligence on jobs and the economy?
Jobs may become more scarce, but the economy will continue to drive forward.
What company famously imploded after technological errors stemming form the adoption of a new trading system?
Knight Capital
Is there a corresponding law for disk drives?
Kryder's Law - disk areal storage density was increasing much quicker than Moore's Law
What is the biggest problem for a high-frequency trading firm?
Latency
What is one industry which will be greatly affected by driverless technology?
Long-Haul trucking or Cargo Delivery
What risks does the firm face? (ING Direct/Capitol One)
Losing ING customers during the acquisition (switching costs) - bad reputation - now, most banks feature online offerings that compare to Capital One 360
Business Model of Marriot
Marriott has both company owned hotels and franchised hotels
With Dell we are talking about cycle times of days or hours. With High Frequency Trading what unit of time is used?
Milliseconds (1/1000 of a second) or microseconds (1/1,000,000 of a second)
Opinion & Short list (PF Stage 4)
Narrow down to most likely purchases
AI and Moore's Law
New Artificial Intelligence is faster, and as technology improves, machines will learn faster
AI and Big Data
New Artificial Intelligence works over hundreds of iterations over the cloud, so large amounts of data can be scaled and analyzed efficiently
Pre-Awareness (Purchase Funnel(PF) Stage 1)
No previous contact with brand
Should gambling casinos be illegal? Regulated more? How? Should consenting adults be allowed to do what they want?
Opinion question: Should be illegal because we should protect customers' well being by not subjecting them to the possibility for gambling addiction. OR Consenting adults should be allowed to make their own decisions and Harrah's should be able to benefit from these conscious decisions.
What is strategic positioning?
Performing different activities from those of rivals, or the same activities in a different way
What is operational effectiveness?
Performing the same tasks better than rivals perform them
Artificial Intelligence
Powerful computation through machine learning
Why are most HFT firms based out of Chicago?
Proximity to options and futures exchanges that allow for the trading of a large array of highly liquid asset classes
What do quantum computers use instead of bits?
Qubits
What is the "fast follower" problem?
Savvy rivals watch a pioneer's efforts, learn from their successes and missteps, then enter the market quickly with a comparable or superior product at a lower cost
AI and Search
Search firms can better train their computer intelligence systems with more individual searches
Who are the company's core customers?
Slot players who are middle-class people that enjoy gambling in their free time
What is the value chain?
The set of interrelated activities that bring products or services to market
Consideration (PF Stage 5)
Taking test-drives, talking to people who have it already
How does Moore's Law pertain to the memory of computers?
The data storage of computers will double every 12 months
How does IoT differ than the internet of the past?
The internet of the past only found physical application through computers, laptops, and phones.
How does big data and search improve the performance of Artificial Intelligence?
The more searches there are, the more the Artificial Intelligence learns what is correct and what is not correct
What is Moore's Law?
The number of transistors that can be placed on an integrated circuit per dollar doubles approximately every two years. Chip performance per dollar doubles every two years. Computing performance per dollar doubles every two years.
How do IoT and Big Data interact with Moore's law?
The power of computing technology is becoming increasingly powerful to analyze all the new data.
What is Metcalfe's Law?
The value of a telecommunications network is proportional to the square of the number of users of the system. (the more users you have, the more valuable your service/product is)
Who will be the winners?
Those who offer the easiest most and complete viewing package.
Awareness (PF stage 2)
Through marketing/word of mouth/independent discovery, find out about product
Why is Moore's Law and Bell's Law important for managers?
To ensure they are using the most updated technology to please consumers and work as efficiently as possible
What effect has computer chess programs had on Human players?
Training, support
Brand ambassador (PF Stage 7)
Will quickly form opinion on product after having it, and will spread it, whether it be negative or positive
What is "price elasticity"?
a measure of the responsiveness of demand or supply of a good or service to changes in price - measures the ratio of the proportionate change in quantity demanded to the proportionate change of the price
What does exponential improvement mean?
a system grows relative to the amount already present. The bigger the system is, the greater the increase.
What different technology does Tesla use for monitoring the surroundings of its self-driving cars?
cameras
Business Model of Airbnb
community based online platform with personal profiles and rating systems that enable advanced security and certainty
windowing
content is available to a given distribution channel for a specified period of time
Big Data
exponentially-increasing stream of data from current and new sources
Disrupter View of Auto Industry Disruption
hinks that the automobile industry will reach a tipping point that will change the whole system (leading to autonomous cars that people share on demand)
Viral Marketing
leveraging customers to promote a product or service
What is volatility?
measure of how much the stock market varies
Nielsen's Law
network connection speeds (in bits per second) for high-end home users increase 50% per year or double approximately every 21 months
crowdsourcing
outsourcing a task to a large and undefined population in the form of an open call (Netflix competition)
Technological Diffusion
process by which innovations (be they new products, new processes or new management methods) spread within and across economies
What is "News Analytics"?
process of turning news stories into data that can be understood by a computer and incorporated into the algorithm that is making trading decisions
How does Moore's Law pertain to the speed of computers?
processor speeds or overall processing power for computers will double every 9 months
minimum viable product
product with the smallest set of features that will still be purchased by customers
Value Proposition Of Marriott
provide predictable, reliable, and affordable hotels for any client looking for any program
Apple's DNA
rapid innovation
churn
rate at which customers leave a product or service
What is the company RavenPack's product?
service that turns 100,000 news articles a day into computer ready data for traders to use in their algorithms
How is employee performance measured?
speed and friendliness
Internet of Things
the network of physical devices, vehicles, home appliances, and other items embedded with electronics, sensors, actuators, and network connectivity which enable these objects to connect and exchange data
Is there a corresponding law for transmission capacity?
transmission capacity increases exponentially, faster than Moore's Law